Protocols are crucial components of Blockchain technologies that enable information to be shared automatically across cryptocurrency networks securely and reliably. In the field of computing, protocols are essentially rules that define how data is allowed to be transferred between different computer systems. Protocols define the way that data must be structured to be accepted into a system, and they establish safeguards to prevent malicious users from causing damage.
In practice, protocols have been used since before the World Wide Web was even created. The widely known hypertext transfer protocol, for instance, defines how online packets are supposed to be structured and what contents they may contain. Protocols for Blockchain are similar because they enable server nodes to exchange information over the internet in a way that all systems in a network can understand.
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ESSENTIAL CONCEPTS OF BLOCKCHAIN PROTOCOL TECHNOLOGY
With the internet, a broad range of protocols are widely used, such as HTTP, HTTPS, FTP, and SSH. Likewise, many protocols have been developed for Blockchain. The differences between Blockchain protocols are significant, so various protocols will offer advantages and disadvantages that you will need to consider when creating an application.
The bottom line is that if you want to get the most out of Blockchain technology, you have to understand how protocols impact network performance and the limitations that they can entail. When seeking to understand protocols, you should start by understanding some common terms that professionals use to describe how Blockchains communicate.
Proof of Work
Although the concept of proof of work is now widely known because of the emergence of cryptocurrencies, the concept has been around for over half a century. A proof of work is a small string of data that is hard for a computer to create but readily verified by outside parties. Proofs of work are what make bitcoin mining difficult while allowing anyone to prove that new coins were created validly.
In conventional cryptocurrencies, proofs of work are also used to confirm the validity of transactions. Today, new technologies in finance, corporate governance, and other fields are being built on the concept of proofs of work to achieve innovation.
A distributed ledger is the publicly visible history of transactions that anyone can see in most cryptocurrency projects.
Smart contracts build on the proof of work system that bitcoin created to establish contracts that can be signed and created securely. The idea of smart contracts is to facilitate more efficient digital commerce by enabling parties to contract programmatically in a fraction of a second.
51 Percent Attack
Most distributed cryptocurrency projects rely on consensus being reached by anonymous network participants through a voting system. Each participant’s voting power is determined by how many coins they own. Therefore, all distributed cryptocurrency projects are theoretically vulnerable to an adversary who gains control of a network by obtaining control over a majority of available coins and using this control to damage the integrity of the network. For large projects, such as Ethereum and bitcoin, 51 percent attacks are infeasible, but these attacks have happened before with very small coins.
Coins vs. Tokens
Moving coins between wallets require technical knowledge and create security risks for users who are not experts in Blockchain protocols. Physically moving coins can also introduce regulatory issues. Therefore, most Blockchain services, such as cryptocurrency exchanges and trading platforms, use tokens to transfer value between users. In token-based systems, a provider holds a significant amount of coins, and ownership of these coins are then transferred between users when they transact. Tokens can make transactions easier, but the problem is that real ownership remains with the provider instead of individual users.
5 KEY BLOCKCHAIN PROTOCOLS YOU NEED TO KNOW
Now that you understand some of the basic terminologies that experts use to describe the available protocols, you are ready to learn about some of the protocols that are starting to be used in today’s business world. It is important to understand that there are hundreds of protocols in existence, so studying the full list of options in the marketplace would require an enormous amount of time. However, five major protocols are most significant, so an overview of the main protocols that are often used in Blockchain development services is detailed below.
Hyperledger is an open-source project that aims to create a suite of tools for enterprises to deploy Blockchain technologies quickly and effectively. The protocol is commonly used in Blockchain software solutions because it comes with its libraries that help to speed up development. The Linux Foundation is a strong supporter of Hyperledger, and it has supplied significant expertise to accelerate the creation of the protocol. Hyperledger is also highly compatible with Linux, so it is designed to work effectively on the same servers that are widely used in today’s business world.
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Multichain was established to help for-profit corporations create private Blockchains to facilitate more efficient transactions and to develop new applications for the proof-of-work systems that Blockchain technologies rely on. As a private company, Multichain can offer an API that can be used by Blockchain development services to streamline integration and accelerate deployment. What sets Multichain apart from its competitors is how it is designed to work alongside fiat currencies and physical stores of value. In contrast, most cryptocurrency projects are centered on the ultimate replacement of physical money with digital mediums of exchange.
3. Enterprise Ethereum
Ethereum offers a version of its software that is designed for business use cases. The goal of Ethereum Enterprise is to increase the business use cases of Blockchain software development. With Ethereum Enterprise, businesses can rapidly develop large-scale applications to exchange value. The major advantage of Ethereum Enterprise is that it allows businesses to create proprietary variants of Ethereum while still taking full advantage of the latest Ethereum code. Under ordinary circumstances, Ethereum’s license makes it difficult to build proprietary variants of the software, but the enterprise version gives businesses an option for getting around this issue.
Corda is a competitor of Multichain that offers a protocol designed for enterprises. Most applications that have been developed with Corda have been in the finance and banking field. However, a wide range of custom Blockchain solutions can make use of Corda’s technology. Corda is accredited by the R3 banking consortium, so it is a good choice for Blockchain development solutions in the finance industry.
As with many of the leading protocols, Quorum aims to help businesses in the finance sector. Quorum is significant because it has strong backing from the financial community. For instance, J.P. Morgan Chase is a primary financial backer of the protocol, and it has received additional resources from other leading banks. However, Quorum has managed to remain as an open-source project that can be utilized by anyone. Quorum is also strongly associated with Ethereum since the project started by modifying the Ethereum code.
WHY PROTOCOLS MATTER?
When launching a Blockchain software development project, the selection of a Blockchain protocol is one of the most important decisions that will have to be made. Protocols matter because they determine the scope of functionality that your software can provide. It is important to understand that the leading protocols contain highly sophisticated technologies that required the collaboration of thousands of computer scientists. Instead of reinventing the wheel, your project can be completed in less time and with fewer resources by taking advantage of a protocol.
Since protocols are highly complex, it usually makes sense to work with customized Blockchain development services that are experienced in delivering Blockchain development solutions. Professionals can help you to seamlessly integrate existing software with Blockchain technologies, and they can ensure that your software is deployed and maintained securely. Therefore, the most feasible path forward for companies looking to take advantage of Blockchain technologies is to start by finding a software development expert who knows how to comply with today’s leading protocols.
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