What is blockchain?
A blockchain is a type of distributed ledger technology that consists of growing lists of records, called blocks, that are securely linked together using cryptography. Blockchain facilitates the process of recording transactions in blocks of several cryptographic databases and tracking assets in a peer-to-peer network. The distributed database is managed by multiple participants, called nodes. All network participants can access the digital ledger and its immutable record of transactions. With this shared and public ledger, transactions are recorded only once and constantly checked and secured by the computing power of the entire network.
What is a blockchain protocol?
A blockchain protocol is a set of rules that allows data to be shared across the network of nodes. Protocols serve as guidelines that help exchange information in a simple and secure way.
Blockchain protocols play a crucial role in the blockchain ecosystem by providing the underlying infrastructure for blockchain-based applications and digital assets. They are the backbone of blockchain technology and cryptocurrencies. Along with the previously mentioned set of rules, they also provide the consensus mechanisms, also called consensus protocols, such as Proof-of-Work (PoW) on the Bitcoin blockchain and Proof-of-Stake (PoS) on the Ethereum blockchain. Consensus algorithms govern how transactions are validated and added to the ledger, and help avoid malicious uses of the blockchain such as double-spending.
The set of rules which is a protocol, defines the interface of the network, interaction between computers, incentives, type of data, etc. Scalability and validation are two key challenges that blockchain protocols aim to address. Scalability refers to the ability of a blockchain network to handle a large number of transactions, while validation refers to the process of ensuring that transactions are legitimate.
Another important aspect of blockchain protocols is decentralization, which refers to the distribution of power among the nodes in a blockchain network. Public blockchains, also called permissionless blockchains, such as Bitcoin and Ethereum, are fully decentralized and open-source, while private blockchains (permissioned) have a more centralized structure and are often used by businesses and organizations.
There are many different types of blockchain protocols, each with their own unique features and use cases.
What are some well-known blockchain protocols?
There are hundreds of blockchain protocols, but here are a few of the most common protocols used in Blockchain development services, and widely regarded as the most advanced blockchain platforms available.
Hyperledger, developed by the Linux Foundation, is an open-source and permissioned framework that helps enterprises provide blockchain solutions. It supports Python and aims to provide universal guidelines for blockchain projects.
Multichain Technology allows users to create private blockchains that can be used for financial transactions by businesses. It provides both a simple API and a command-line interface, which aids in the preservation and establishment of the chain.
Corda offers an enterprise-focused protocol, making it Multichain's rival. The majority of Corda-based apps have been related to finance and banking, but the technology can be used in many blockchain solutions. Corda employs consensus methods as well as smart contracts, enables interoperability and is open-source and permissioned.
The Ethereum protocol has its own native token (Ether, also called ETH) and many features including smart contracts, dApp development, NFTs and more, but is a public blockchain and needed to be permissioned in order to be useful to organizations. That's where Enterprise Ethereum comes in. Ethereum for business allows organizations to establish permissioned networks (private) that can scale. While its scalability and privacy are big advantages of this protocol, it is volatile and has high transaction fees. Permissioning is the main distinction between Ethereum and Enterprise Ethereum.
Quorum is another enterprise blockchain that also assists financial institutions, and has managed to remain open-source, for anyone to use. As the project began by altering Ethereum code, it is closely linked to it.
In addition to the protocols mentioned above, there are also a number of other blockchain protocols and projects worth mentioning, such as Polkadot and Solana, a high-throughput protocol that is optimized for decentralized applications and DeFi.