Let’s start with a disclaimer: This article will not explain blockchain to you, but rather help yo to understand the different aspects and levels of it so you can systematically approach the topic. Afterwards, you will be able to go out and find the right resources for your needs, rather than get lost in the sheer amount of information and the breadth of the topic.

Blockchain, depending on your perspective, promises or threatens to affect a wide range of people, institutions, and businesses. Or maybe you’re not buying into the hype. Should you be informed about blockchain nevertheless? And if yes, how much do you really want (or need) to know? What are the preliminaries to knowing the details of blockchain?

Let’s take a closer look: Here is a way of breaking down the layers of blockchain. I often use them when planning articles or consulting on different aspects of blockchain.

3 horizontal levels of understanding blockchain

As I’ve written before, you don’t need to understand all the details of the underlying technology to understand blockchain and its implications. But it difficult to figure out the level of understanding you need. There are different layers to blockchain. Going from the top down:

1. Conceptual layer

There is the big picture view: What can it do, what was it designed for? What is its promise? Understanding blockchain on a high-level only requires you to understand its setting and the solution it offers.

Example: To understand cars, you neither need to understand how the engine works and why a differential is needed nor have a grasp of the laws of thermodynamic laws governing the processes in the engine. But it helps to understand its capacity for transportation and individual mobility. At the same time, it requires gas (or another form of energy) to be cheaply and readily available, and a certain level of sophisticated infrastructure such as roads and bridges, as well as rules of conduct in traffic.

What should you read: A few articles by reputable sources will provide you with an overview, although you might want to dig a bit deeper. Try to understand why and how blockchain is supposed to accomplish something, not just what the supposed outcome is.

2. Component interaction layer

Blockchain brings together cryptography, distributed systems, and databases. Each field brings its own components to the blockchain system. Some of them can be exchanged, replaced or modified to build a slightly different system. What is the impact of a change? Understanding the contributions of each technology to the blockchain system as whole helps to understand how all the properties we actually are interested in emerge from the parts.

Example: If you’re considering to buy a motor vehicle, it can be helpful to not only understand the concept of automotive mobility but your own requirements and how they match up with different vehicles. How do you distinguish and evaluate different vehicles? Which of your requirements do you need to asses to find the right one? Knowing the parts that make a vehicle will help you to get an answer.

What you should read: This is the most difficult layer. You will find a lot of the information you need in the resources mentioned below in the technology layer, but they won’t be very digestible. You can contact us over at alatus.tech if you need help. In my older articles I go over selected aspects of the components like consensus finding systems.

3. Technology layer

Blockchain uses insights from cryptography, e.g. one-way/trapdoor functions and public-key encryption systems. It also uses insights from distributed systems and networking, e.g. peer-to-peer communication protocols, consensus finding (read more about consensus in my earlier article). It also draws from the field of databases, e.g. immutable and persistent databases, and data structures like Merkle or Patricia trees. How do they work? How and how well do they do the job they’re used for?

Example: If you want to build a new, cutting edge motor vehicle (and ideally one that is not just a clone of an existing one), you probably want to look into aspects of science and technology. What makes the vehicle faster, better, more efficient, more versatile? What are its limitations, and why are they what they are?

What should you read: There are great resources for the IT crowd like the Bitcoin/Cryptocurrency course on Coursera, the different (white)papers (e.g. the original Bitcoin paper), or developer’s blog posts like Ethereum’s Vitalik Buterin. They are all very tech-heavy and you might want to consult with someone if you’re not into that. There are

Going vertical

Your use-case you might demand vertical, not just a horizontal understanding: Instead of broadly covering all aspects of blockchain, you can also drill down. Going from “non-falsifiable” blocks to the concept of public-key cryptography, further down to the math of the specific elliptic curve algorithms used in Bitcoin, you pass through all horizontal layers but ignore the aspects irrelevant to your specific interest. In our car example scenario from above, you might look at the mobility aspect, going to the engine, and looking at the fuel injection pump. How can it be improved to achieve better performance, or better fuel efficiency?

Especially regulatory scenarios demand going past the big picture: What does it actually mean to be an “immutable” or “persistent” data storage? Does it fulfill regulatory requirements, written down in ordinary language and not referring to specific technologies? Having some vertical knowledge will also help you to avoid common mistakes when designing your own blockchain project, e.g. figuring out where bottlenecks are when scaling it, checking how well the technology fits the requirements or how regulatory limitations impact the use of blockchain, etc.

So, how much do you really need to know? The short and simple answer: Just enough to figure out exactly when you reached your limit and need to read up on more details to protect or expand your business — and of course enough to satisfy your intellectual curiosity. If you or your organization need support to get your head into the blockchain game, check out our webinars and consulting services over at alatus sigma consulting.