Blockchain Protocols

The world of cryptocurrency is changing fast, with new developments helping it grow. It's important to understand the basics of this field before investing in digital assets. The core of the crypto industry is blockchain technology, which allows transactions between people without a middleman. Since Bitcoin started in 2009, both blockchain and cryptocurrencies have grown a lot. These technologies let people lend, borrow, trade, and invest directly. Blockchain also helps create decentralized applications, expanding its uses and impact.

In this article, we will look at five key blockchain protocols that every crypto fan should know about. Learning more about this basic technology can help you make better decisions.

What is a Blockchain Protocol?

A blockchain protocol is like a rulebook that tells a blockchain how to work. Blockchains are networks of computers, called nodes, that are connected to each other. These protocols set the guidelines for how these nodes share information with each other and the whole network.

Each blockchain has its own set of rules that guide the actions of miners, stakers, voters, and investors. These rules cover things like how the network reaches agreements (consensus mechanisms), how the blockchain is developed, and other important activities. Understanding these rules can help investors make smart choices when investing in blockchain projects.

Additionally, protocols affect how well the network performs and how secure it is. These rules are crucial for the blockchain's operation, so it's important to know about them. Below, you’ll find a list of well-known blockchain protocols for your reference.

Hyperledger

Hyperledger is a well-known protocol that helps businesses develop custom blockchain solutions. Big companies like JP Morgan and Samsung have used Hyperledger to create their own blockchain-based applications. Many Hyperledger projects have moved from the development stage to become popular. Some of these include Hyperledger Besu, Hyperledger Fabric, Hyperledger Indy, Hyperledger Iroha, and Hyperledger Sawtooth. Each of these versions offers different features and possibilities.

Hyperledger also has a large library of tools and resources to help developers build their applications. The solutions created with Hyperledger are crypto-agnostic, meaning they don't rely on the value of cryptocurrencies to function.

This flexibility and support make Hyperledger a highly sought-after solution in the blockchain industry. It provides a solid infrastructure for businesses looking to leverage blockchain technology for their specific needs.

Multichain

Multichain is a blockchain protocol designed for communication within organizations or between different organizations. It provides solutions for creating private blockchains, which are blockchains that are not open to the public.

Multichain offers an API that developers can use to build blockchain solutions quickly and efficiently. According to the Multichain website, it can reduce development time by up to 80%.

Unlike public blockchains, private blockchains built with Multichain offer complete control over who can access and use the blockchain. This makes Multichain especially useful for organizations that need high privacy and security, such as banks and other financial institutions.

By providing a flexible and efficient way to develop secure blockchain solutions, Multichain helps organizations manage private transactions and sensitive information with confidence.

Smart Contract & Ethereum

Ethereum is the second largest cryptocurrency by market value and is often called the "world computer". It's a decentralized platform designed for building and running applications, especially focusing on smart contracts.

A smart contract is a self-executing program that automatically enforces agreements between buyers and sellers. This means that when certain conditions are met, the contract automatically carries out the agreed actions without needing middlemen.

Ethereum has several features that make it attractive to developers. It has a built-in programming language called Solidity, which makes writing smart contracts easy. Additionally, the Ethereum network is scalable, meaning it can handle many transactions per second, making it perfect for applications that need to process large amounts of data.

The Ethereum blockchain is one of the most explored blockchains today. It supports the creation of decentralized finance (DeFi) platforms, non-fungible tokens (NFTs), and smart contracts. Ethereum is an open-source public blockchain that now runs on a Proof of Stake (PoS) consensus mechanism. PoS is much more energy-efficient, using 99.95% less energy than the older Proof of Work (PoW) version.

Decentralized Autonomous Organizations (DAOs) can build smart contracts on Ethereum. These DAOs have their own rules, voting methods, tokens, treasuries, and reward systems. They aim to create profitable businesses or add value to the Ethereum ecosystem while ensuring that all members have a say in decision-making.

There are many applications running on Ethereum. Some notable ones include Metamask, a crypto wallet, and Brave Browser, which competes with Google Chrome. These examples show the wide range of uses for Ethereum technology.

Proof-of-work Consensus Mechanism & Bitcoin

Bitcoin is the largest cryptocurrency by market value and is often called the “gold standard” of cryptocurrencies. The Bitcoin network is a decentralized digital currency system that allows users to send and receive payments directly, without needing banks or other intermediaries.

A key feature of Bitcoin is its decentralized nature, meaning no single entity controls it. This provides high security and makes it hard for governments or other organizations to interfere with transactions.

The Bitcoin network uses a proof-of-work (PoW) consensus mechanism. This means that participants, called miners, use their computers to solve complex mathematical problems. By doing this, they validate transactions and add them to the blockchain, securing the network. This process also creates new Bitcoins as rewards for the miners.

One downside of PoW is that it requires a lot of computational power and energy, making it less environmentally friendly compared to other methods like Proof-of-Stake (PoS). However, PoW has proven to be very secure and has helped Bitcoin remain a trusted and stable digital currency.

Bitcoin’s success has paved the way for many other cryptocurrencies and blockchain projects, making it a pioneer in the digital currency world.

Proof-of-stake Consensus Mechanism in Binance Smart Chain

Binance Smart Chain (BSC) is a powerful blockchain network created by Binance, one of the largest cryptocurrency exchanges in the world. BSC is designed for decentralized applications (dApps) and allows for fast and low-cost transactions.

A key feature of Binance Smart Chain is its ability to handle many transactions quickly, making it a great choice for dApps that need to process a lot of data. Unlike Bitcoin, which uses a proof-of-work (PoW) system, BSC uses a proof-of-stake (PoS) consensus mechanism.

In a PoS system, validators are chosen to create new blocks and verify transactions based on the number of coins they hold and are willing to "stake" as collateral. This method is much more energy-efficient than PoW because it doesn't require massive amounts of computational power.

Binance Smart Chain’s PoS system also helps in keeping transaction fees low and speeds high, which is beneficial for users and developers who want to build and use decentralized apps without high costs or delays.

BSC's success and efficiency have made it a popular platform for a wide range of applications, including DeFi projects, NFTs, and more, contributing significantly to the broader cryptocurrency ecosystem.

Chainlink (LINK) & Oracle Network

Chainlink is a unique network similar to Bitcoin but serves a different purpose. It acts as an oracle network, providing real-world data to smart contracts on the blockchain. This means that Chainlink allows smart contracts to access information from outside sources, like stock prices, weather data, and more.

This capability is important because it enables the creation of decentralized applications (dApps) that can interact with real-world events and data. For example, a smart contract on Ethereum can use Chainlink to get accurate stock prices and execute trades automatically.

By connecting blockchain technology with real-world data, Chainlink makes it possible to create a wide variety of new and innovative dApps. These applications can be used in many fields, such as finance, insurance, and supply chain management, providing reliable and secure access to external data.

Chainlink's ability to bring off-chain data onto the blockchain significantly expands the potential of smart contracts, making them more versatile and useful in everyday scenarios.

Smart Contracts & TRON (TRX)

TRON is a decentralized platform that allows users to create smart contracts and decentralized applications (dApps). It has its own cryptocurrency called TRONix (TRX), which is used to pay for transaction fees and computational services on the network.

TRON is especially focused on the entertainment industry. It provides a platform for content creators to publish, store, and make money from their digital content. This makes it a great choice for artists, musicians, and other creators who want more control over their work.

TRON also has a large and active community and has partnered with several well-known companies in the entertainment world. These partnerships help TRON grow and offer more opportunities for creators and users alike.

By using TRON, content creators can reach their audience directly without needing middlemen, keeping more of their earnings and having more control over their content.

Proof of Stake & Solana

Solana is a fast and scalable blockchain designed for decentralized finance (DeFi) applications. It uses a unique consensus algorithm called Solana Proof of Stake (PoS), which allows it to process thousands of transactions per second.

This speed and efficiency make Solana ideal for applications that need to handle a lot of transactions quickly and cheaply. Solana also focuses on making it easy for developers to build on its platform. It provides many tools and resources to help developers create new applications.

Solana’s PoS system works by having validators, who are chosen based on the amount of Solana tokens (SOL) they hold and are willing to stake. These validators help secure the network and validate transactions, making the network efficient and secure.

Because of its high performance and developer-friendly environment, Solana has become a popular choice for many DeFi projects and other blockchain applications. Its ability to handle high transaction volumes at low costs is a major advantage in the rapidly growing world of decentralized finance.

Polkadot (DOT) & Parachains

Polkadot is a multi-chain network that allows different blockchains to work together. This means developers can create decentralized applications (dApps) that can communicate and share data across various blockchains. This ability makes it possible to build more complex and interconnected applications.

Polkadot allows the transfer of assets and information between different blockchains, making it easier to use different blockchain technologies together. It also provides a shared security model, meaning all connected blockchains benefit from the same level of security.

A key feature of Polkadot is its parachains. Parachains are individual blockchains that run in parallel within the Polkadot network. They are customized for different purposes but can still communicate with each other and the main Polkadot chain. This setup allows for greater flexibility and scalability.

Polkadot's design helps create a more integrated and efficient blockchain ecosystem, where various projects and applications can interact seamlessly. This interoperability and shared security make Polkadot a powerful platform for developers looking to build advanced and interconnected blockchain solutions.

Why are protocols important?

Protocols are crucial because they allow cryptocurrencies to be decentralized. This means they are spread across a network of computers without a central hub or authority.

The major breakthrough of the Bitcoin protocol was that it created digital money that can be traded or spent without anyone worrying that the same money has already been used. This solves the "double-spend problem", which is like buying a concert ticket from a stranger and finding out it's already been scanned.

Since the creation of the Bitcoin protocol, many other protocols have been developed to do a wide range of things. There are now thousands of cryptocurrencies, each with its own set of rules.

For example, the Ethereum protocol is built around "smart contracts." These are transactions or agreements that automatically happen when certain conditions are met.

Many new protocols have been created on the Ethereum blockchain, allowing for various decentralized financial products. These products can automate everything from lending and savings to insurance.

Ethereum isn’t the only platform with smart contracts. Newer blockchain protocols like Polkadot have also been developed to offer similar and sometimes even more advanced features.

Protocols are the backbone of the cryptocurrency world, enabling innovation and a wide range of applications without centralized control.