Blockchain Infrastructure
- August 19, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Blockchain Infrastructure
Subject: Economy
Context:
We need resilient digital platforms, which may be based on the Web 3.0 architecture.
Web 3.0
- The concept of Web3, also called Web 3.0, used to describe a potential next phase of the internet
- World Wide Web, which is also known as a Web, is a collection of websites or web pages stored in web servers and connected to local computers through the internet.
- These websites contain text pages, digital images, audios, videos, etc. Users can access the content of these sites from any part of the world over the internet using their devices such as computers, laptops, cell phones, etc.
- Web 3.0 is a decentralized internet to be run on blockchain technology, which would be different from the versions in use, Web 1.0 and Web 2.0.
- Example– blockchain, NFT, DeFi etc
- In Web3, users will have ownership stakes in platforms and applications unlike now where tech giants control the platforms.
- Significance of Web 3.0-It establishes a new version of the Internet protocol incorporating token-based economics, transparency, and decentralisation.
- Decentralized and Fair Internet-Web3 will deliver a decentralized and fair internet where users control their own data.
- Eliminates Intermediaries: With block chain, the time and place of the transaction are recorded permanently.
- Thus, Web3 enables peer to peer (seller to buyer) transactions by eliminating the role of the intermediary. This concept can be extended to
- Decentralization and Transparency: The spirit of Web3 is Decentralized Autonomous Organization (DAO).With DAO, there is no need for a central authority to authenticate or validate.
Blockchain
- Blockchain is an innovative distributed/ decentralised ledger technology that was first introduced in the design and development of cryptocurrency, Bitcoin in 2009 by Satoshi Nakamoto.
- It uses a unique data structure where verification data related to the transactional records is cryptographically secured against tampering and stored in blocks.
- It offers a singular combination of permanent and tamper-evident record keeping, real-time transaction transparency and auditability.
- An exact copy of the blockchain is available to each of the multiple computers or users who are joined together in a network.
Adoption of blockchain infrastructure across the Globe:
- Estonia-the world’s blockchain capital, is using blockchain infrastructure to verify and process all e-governance services offered to the general public.
- China –BSN (Blockchain-based Service Network) to deploy blockchain applications in the cloud at a streamlined rate.
- Britain-National Digital Twin program (NDTp) to foster collaboration between owners and developers of digital twins in the built environment.
- Brazil-Brazilian Blockchain Network to bring participating institutions in governance and the technological system that facilitates blockchain adoption in solutions for the public good.
Layer-1 vs. Layer-2:
- Layer-1 refers to the underlying main blockchain architecture which forms the main structure of a blockchain network.
- Bitcoin, Ethereum, and BNB Chain are examples of Layer 1 blockchains.
- Layer 2 refers to networks built on top of other blockchains.
- For example, if Bitcoin is Layer 1, the Lightning Network that runs on top of it is an example of a Layer 2.
- Hence, a Layer 1 solution will change the rules and mechanisms of the original blockchain directly while a Layer 2 solution will use an external, parallel network to facilitate transactions away from the mainchain.
- Need for Layer-2:
- For instance, Initially, Bitcoin was intended to be a decentralized payment system where the users could remain anonymous and access it from anywhere. However, over time owing to its popularity, transactions became much slower and more costly.
- Thus, developers created cryptocurrency layers, where the first layer was the primary blockchain. Each layer beneath that complements the layer above it and adds functionality.
- Lightning Network is a second layer for Bitcoin that uses micropayment channels to scale the blockchain’s capability to conduct transactions more efficiently.