6 Blockchain Protocols you should know

With the rising fame of digital coins, the new era of technology evolved which enabled people to create a trustless economy. The age-old mundane problem of trust got eradicated with blockchain technology. People or institutions, unknown to one another and residing in different countries are bound by different jurisdictions so placing trust on third parties like banks or other companies seem to be quite risky. Blockchain technology enables one to trust only the output, not on any intermediate channel. The workings of blockchain happen through a shared and immutable ledger that helps in maintaining transparency and recording the transactions while tracking any asset. Smart contracts, distributed ledger technology, and immutable records are key elements of blockchain. The popularity of blockchain has given rise to blockchain development companies not only in the western world but also in Asian countries. For example, there are plenty of Blockchain Development Companies in India who support the multiple services of blockchain-like handling DEFI, STO, Exchange, Wallet development, NFT development, etc. The rising number of blockchain development companies is further helping in increasing the number of Crypto Entrepreneurs in the Industry.

What is the Blockchain Protocol?

Protocol literally means a set of orders and in this case, the word ‘protocol’ indicates the norms, blockchain abides by. As we already know that blockchain functions through multiple nodes and some predefined rules are required to control the nodes smoothly. These rules are popularly known as Blockchain protocols. The areas that any blockchain protocol focuses upon are,

• Governing and authenticating the transactions
• Having control over the mechanism of the nodes or peers in the network
• The application programming interface.

Key components of Blockchain protocol

• Smart Contracts: These are a set of rules enveloped in coded script which can look over a transaction by integrating into blockchain.
• Algorithm: It is a definite set of logic that directs the way the network can verify transactions.
• Coins and Tokens: These are considered to be digital assets which provide power to blockchain networks. They are often used as incentives for the participants in the network.
• Proof of Work: It makes mining of Bitcoins difficult and confirms the validity of any transaction.
• Distributed Ledger: It is the history of transactions which are often publicly visible.

Why use Protocols?

While launching a Blockchain software development project, the selection of blockchain protocol is one of the crucial steps in order to decide the scope of functionality. Protocols also help in minimizing the completion time of any project. Protocols set the definite map of how any data should be structured and accepted into the system while preventing malicious elements. They help the server nodes to exchange information that can be easily understood by all the systems in that network. The aim of the protocol is to achieve the four main principles of cryptocurrency, which are consistency, scalability, security, and decentralization. The current workings of blockchain protocols can be categorized into three layers,

• In the first layer the fundamental system of blockchain is taken care of. Proof of stake and proof of work belongs to this layer.
• Layer 2 handles the speed of transactions and Bitcoin’s lightning network helps in this regard.
• Decentralization is the key function of the third layer. Examples are Uniswap, PancakeSwap  and NBA Top Shot etc.

Top Blockchain Protocols

Let’s have a look at the top blockchain protocols,

1. Hyper ledger: 

It is an open-source project aiming to provide tools for effective and quick services. An example of a popular user of the hyper ledger is the Linux Foundation. Businesses from different sectors use hyper ledgers to empower transactions and various financial services. In 2015 this project was first launched by the Linux Foundation. The objective was to support the global business by advancing cross-industry collaborations and further improving the performance and reliability of the systems.

2. Multichain: 

It helps in establishing private blockchains to be used by organizations for financial transactions. Multichain offers an API to accelerate deployment. The POW on the other hand ensures a safe process of mining. It also follows the Hand- Shaking process when the nodes in blockchain connect with one another.

3. Corda: 

It is almost equivalent to Multichain and often considered as the latter’s competition. The areas of focus are mainly finance and banking. The accreditation by the R3 banking consortium offers it the privilege to be considered as a fine choice for blockchain development solutions in the financial sector.

4. Quorum: 

This one focuses on the financial sectors and banks. It is an open-source project which can be used by anyone. J.P Morgan Chase is the biggest supporter of this protocol and it has close ties with Ethereum as well.

5. Bitcoin: 

It allows crypto payment transactions through a decentralized network. It is public and permission-less, hence anybody can avail. No third-party intervention is accepted and it offers complete transparency on transactions.

6. Ethereum:  

It is decentralized in nature and is designed for business cases. The protocol is based on a smart contract that allows automatic transaction facility once the terms and conditions of the network are met. The digital signature, P2P network, POW, etc are some of the key components of the Ethereum protocol.

With the rising popularity of cryptocurrencies, it has become essential to adopt blockchain protocols as well. Blockchain protocols work as the backbone of cryptocurrencies and are getting diverse with each passing day. Since dealing with protocols for a new crypto entrepreneur can be highly complex, it is always better to get help from blockchain development services that can provide experienced solutions.