Runtime & Outer Node
The runtime is the heart of our blockchain. It defines precisely how our blockchain will handle new data, whether it will react to a change in the network's state, and communicates with storage and networking layers as needed. Each runtime is a Wasm Virtual Machine. It is possible to update runtime by modifying/replacing Wasm VM, which enables forkless upgrades on Substrate Blockchains to be possible.
It is also responsible for ensuring the validity of extrinsics, can compile Wasm code for forkless upgrades, and, most importantly for us — facilitates the usage of FRAME (Framework for Runtime Aggregation of Modularized Entities) to build and add pallets. You can think of the runtime as the engine that facilitates the outer node (that ends up interacting with other nodes over the network) and storage to communicate, process, then store changes.
Because the runtime compiles to a Wasm environment, it is also a no_std environment. For this
reason, not all external Rust crates will work with a runtime unless they can work in a no_std
environment.
The Outer Node
The outer node refers to the portion of a Substrate node that deals with peer-to-peer networking and receiving new incoming requests from nodes. Using host functions, it can pass this data as an opaque blob that is then decoded and processed by the runtime, where it is then stored in the underlying storage layer.