Explaining Blockchains using Mailing Letters & Restaurants
Two analogy-like comparisons to explain core Blockchain functions and this whole "layer 1 layer 2" thing.
Hello Professionally Curious One!
I’m back with an actual explainer this time. I’m going to simplify everything you need to know about the blockchain into two things you are most likely familiar with: Mailing and Restaurant Ordering.
Enjoy!
P.S. Working on a Crypto Word Origin Piece. Maybe it’ll see the light of day.
In Case You Missed It
Sections You Can Skim To:
The Blockchain is a Huge Postal Service System
Layer 1 & Layer 2 Blockchains Mimic Restaurant Ordering Systems
The Blockchain is a Huge Postal Service System
TL;DR: The exact same thing you need to do to send a physical letter is the same thing happening for blockchain transactions.
All Blockchains mirror postal service systems.
Here’s how:
In order to send information you need…
From address - you need your own wallet address, or your own return address.
To address - you need the address this is going to.
Stamp / Gas - you need to be prepared to pay for a postage fee, or the transaction gas. Literally in some cases.
Contents - you need to have content inside that letter or packet of information.
When it comes to the security of your message-
Both sending letters and sending blockchain transactions come with their own tight set of security controls. How it maintains it manifests differently, but they do have security around your information.
All letters delivered by the United States Postal Service are protected federally, meaning opening someone else mail is a federal offense. Plus your letter looks pretty obvious when someone tampers with it.
All blockchain transactions are encrypted (something about Cryptography I’m told)
So there you have it. Blockchains mirror postal services. It is quickly evolving to mirror global shipping lanes. You know how many companies and destinations any product you buy on the planet has to go through before it gets to you? It’s insanely boring, but then again, that’s what the blockchain is about.
Layer 1 & Layer 2 Blockchains Mimic Restaurant Ordering Systems
TL;DR: Layer 1 is waiting in line to order, wait for food, and eat. Layer 2 is skipping the waiting in line part.
Ethereum is a very prominent and heavily used blockchain network. It’s so heavily used that it has trouble processing transactions. Unable to keep up with the demand to process transactions, people have created derivative blockchain networks that “sit on top of” Ethereum, without using much of the bandwidth.
These derivatives use Ethereum Technology and Infrastructure, but a bit differently.
Example of Layer 2 Blockchains derived from Ethereum:
To imagine Layer 1: Imagine going to a restaurant and it’s rush hour. It doesn’t allow for to go orders, phone orders, or mobile orders - you have to physically wait in line (30 minutes) and place your order, wait 30 minutes, and then eat it somewhere. Congrats you experienced Layer 1 Ethereum.
Layer 2 is mobile ordering (no waiting in line), pre-ordering (still no waiting in in line), even phone ordering (no waiting in line, but there could be a phone line.
Here’s another take:
Imagine you own a restaurant, have an infinite kitchen fully staffed, but only have one cashier and point-of-sale system.
Layer 1 = You process customer orders one by one, and it requires you to be there using your point-of-sale system. This includes getting orders down, handling tender, and serving it. This takes about 1 minute per customer, effectively 1 order per minute, or 60 per hour.
Layer 2 = You partner with a third-party food delivery platform such as Grubhub or Uber Eats. These partnered companies collect orders, collect the tender, and then give it to you, the restaurant owner. They bring you 10 customers per minute, or 10 orders per minute, or 600 orders per hour.
Layer 2 networks (ala Grubhub / Uber Eats) don’t have a complete infrastructure (The Blockchain / the Restaurant itself) but they do have the ability to do incredibly processing that doesn’t slow down how many orders you can take.
Important to note that Layer 2 solutions don’t have “a store” or a “Restaurant” that the customer at the very end of a transaction will be interacting with. Layer 2s instead provide the entire digital ordering experience on behalf of the restaurant, and for the customers, but the Layer 2 itself isn’t the restaurant.
Until next time!