Bitcoin, Ethereum, and other popular cryptocurrencies are well-known. Bitcoin, created by Satoshi Nakamoto, was the first cryptocurrency to be introduced to the world. Although it was never confirmed whether Nakamoto was a single pseudonymous person or a group of programmers, it sparked the development of blockchain, a type of distributed database.
The blockchain would function as a ledger, tracking every Bitcoin transaction, and it would be self-verifying, with the entire network’s computing power constantly checking and securing it. Bitcoin would be awarded to “miners,” whose computers do the heavy lifting of maintaining the chain.
These miners and blockchain developers would need to follow some protocols to work in the network. These protocols aren’t just for cryptocurrency. They’re crucial to the internet’s operation, governing data transmission from one computer to another. Email, for example, is based on a number of protocols. So, what is the meaning of protocols? Let us go through that in detail.
What are Protocols?
A protocol is a set of rules or procedures that govern the transfer of data between two or more electronic devices in computer science. This protocol establishes how information must be structured in order for computers to exchange it, as well as how each party will send and receive it.
You must have seen “HTTPS” used before any URL while browsing the internet. This stands for HyperText Transfer Protocol and is one of the most common examples of protocols. Some other examples may include TCP/IP and DNS.
So, why are protocols important?
The blockchain allows cryptocurrencies to be decentralized, which means they are distributed across a network of computers with no central hub or authority.
Setting standards, or rules that all hardware and software manufacturers must follow, is critical for several reasons:
Standards define how information is transmitted in a precise and unambiguous manner.
If all of the products from the same manufacturer adhere to the same standards, they will work together successfully.
You’re providing a framework within which all manufacturers can design new, successful products by defining a set of standards.
Complex ideas are broken down into smaller, methodical, and easier-to-understand components by standards.
What is the Blockchain protocol?
A blockchain is a network of multiple devices (nodes) that are all connected to each other via the internet and are all equally important. In essence, a blockchain is a distributed p2p ledger that stores the record of what has come in and gone out after all participating nodes have verified the transaction.
Protocols are critical components of Blockchain technologies that allow information to be shared automatically, securely, and reliably across cryptocurrency networks. Protocols are essentially rules that define how data is allowed to be transferred between different computer systems in the field of computing.
The bottom line is that if you want to get the most out of Blockchain technology, you need to know how protocols affect network performance and what limitations they can impose. When learning about protocols, it’s helpful to know some of the terms that professionals use to describe how Blockchains communicate. The following are some terms associated with the blockchain protocol.
A distributed ledger is a database that is shared among multiple users, with each user maintaining and updating a synchronized copy of the data. Members of distributed ledgers can securely verify, execute, and record their own transactions without relying on a third party like a bank, broker, or auditor.
Blockchain and other distributed ledger technologies are peer-to-peer networks that allow multiple members to keep their own identical copies of a shared ledger. DLTs allow members to securely verify, execute, and record their own transactions without relying on a middleman, rather than requiring a central authority to update and communicate records to all participants.
Smart contracts are simply programs that run when predetermined conditions are met and are stored on a blockchain. They’re usually used to automate the execution of an agreement so that all parties can be certain of the outcome right away, without the need for any intermediaries or time waste. They can also automate a workflow, starting the next step when certain conditions are met.
There can be as many stipulations as needed in a smart contract to satisfy the participants that the task will be completed satisfactorily. Participants must agree on how transactions and their data are represented on the blockchain, agree on the “if/when…then…” rules that govern those transactions, explore all possible exceptions, and define a framework for resolving disputes in order to establish the terms.
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51 Percent Attack:
The majority of distributed cryptocurrency projects rely on anonymous network participants reaching consensus through a voting system. The number of coins owned by each participant determines their voting power.
As a result, all distributed cryptocurrency projects are theoretically vulnerable to an adversary who gains control of a network by controlling a majority of available coins and then uses that control to compromise the network’s integrity.
51 percent attacks are impossible for large projects like Ethereum and bitcoin, but they have happened before with very small coins.
Let us understand this concept with the help of an example of 51 percent attack:
A blockchain network’s nodes are supposed to broadcast the blocks they create to the rest of the network. If a node or a group of nodes gains control of more than 50% of the network, it can form blocks privately rather than broadcasting them to the rest of the network.
The network would continue to use the public blockchain, and nodes could engage in double-spending by first spending on the public blockchain and then on the private blockchain. They can then broadcast their private version of the blockchain and form longer chains because they control 51 percent of the network. The other participants will consider this to be the correct chain because of the longest chain rule, which considers the longest chain to be the most legitimate chain to mine on. Previous transactions that were not included in the chain (due to the fact that they were private) will be reversed, giving malicious nodes access to other people’s money.
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Coins and Tokens:
To keep the network running, every blockchain protocol requires a digital asset. These are also used as incentives for the network’s peers to participate. This necessitates the use of digital assets like coins and tokens.
Coins and tokens are the digital assets that allow a blockchain network to function. Their functions are, for the most part, the same. The only thing that distinguishes them is the protocol level at which they are defined.
The protocol defines coins at the most fundamental level. A blockchain network’s native digital asset is coins. The native currency of the bitcoin protocol, for example, is Bitcoin.
Tokens are digital assets that are defined at a higher level by smart contracts rather than the protocol. The Ethereum protocol, for example, has its own native coin, Ether.
Ethereum’s protocol allows developers to create decentralized applications (dApps), among other things. One dApp’s node-communication rules may differ from another dApp’s smart contract-defined node-communication rules. As a result, dApps’ native digital asset is tokens.
Five Blockchain Protocols:
It’s important to remember that there are hundreds of protocols available, so researching the entire list of options would take an inordinate amount of time.
However, five major protocols are the most important, so here’s a rundown of the most common protocols used in Blockchain development services. These protocols are also widely regarded as the most advanced blockchain platforms available.
In 2015, Hyperledger was released as an open-source enterprise framework. The Linux Foundation is in charge of it. It’s a big project with a lot of different frameworks and protocols. Anyone with the necessary expertise can contribute to the project because it is open-source. Hyperledger is also focused on permissioned blockchain. The main goal is to provide a universal framework or set of guidelines for blockchain implementation for enterprise blockchain solutions. Many tech behemoths are currently involved in the project, all with the same goal of developing a protocol that can be used by enterprise solutions.
Currently, over 260 firms are collaborating to develop an enterprise solution that meets industry standards. Hyperledger has a high-security blockchain system, and Hyperledger Fabric, one of its projects, is extremely popular among businesses.
Hyperledger has a number of advantages. Among them are the following:
Development of cutting-edge technologies
With the use of frameworks and technologies, productivity has increased.
Because of the open-source nature of the code, it is of high quality
Improved intellectual property management
Taking a cooperative approach
MultiChain technology is a platform that allows users to create private Blockchains that may be used for financial transactions by businesses. MultiChain gives us both a simple API and a command-line interface. This aids in the preservation and establishment of the chain.
To minimize misunderstandings and to preserve stability and control over which transactions exist, the Blockchain’s visibility should always be deliberately kept within the chosen participants. With the aid of evidence of work and the expense connected with it, the mining operation may be done more safely. This Blockchain architecture, on the other hand, only transacts accounts that have been verified by the chain’s members.
The Hand-shaking process in Multichain:
When the nodes in a blockchain interact with each other, the process of hand-shaking happens in MultiChain. When two Blockchain nodes link, MultiChain occurs. Each node’s identity is represented by an address with a set of permissions. As a result, each node it represents transmits a message to the other users. If they do not obtain satisfactory results from the procedure, the P2P connection is terminated.
Multichain was founded to assist for-profit businesses in creating private Blockchains in order to promote more efficient transactions and to explore new uses for Blockchain technology’s proof-of-work systems.
The way Multichain is designed to interact alongside fiat currencies and tangible stores of value set it unique from its competitors. Most cryptocurrency initiatives, on the other hand, are focused on the eventual replacement of physical money with digital mediums of exchange.
Corda is a rival to Multichain, which offers an enterprise-focused protocol. The majority of Corda-based applications have been in the financial and banking industries. Corda’s technology, on the other hand, may be used in a broad range of unique Blockchain solutions. Corda is a solid choice for Blockchain development solutions in the financial industry because it is accredited by the R3 banking consortium.
To enable transparency, traceability, and transaction validation, the Corda blockchain employs consensus methods. Smart contracts are also available, which implies that most financial solutions can be automated. The capacity to develop smart contracts, unique services and timestamping with notary pools, and a flow structure that allows corporations to design complicated protocols and make them interact with users are among R3 Corda’s main characteristics.
Corda is open source and permissioned, exactly like the other blockchain protocols we’ve explored so far. This makes it an excellent choice for businesses looking to get the most out of the Corda R3 architecture.
Ethereum is one of the most popular public blockchain systems. It has a lot of features, including smart contracts, dApp development, and a lot more. It did, however, need to be permissioned in order to be useful for business.
This is where Ethereum for business comes in. In practice, it allows businesses to establish private, permissioned networks that can scale to meet their demands. Enterprise Ethereum creates private chains that are distinct from public ones. Private chains, on the other hand, are fully capable of communicating with public chains if necessary.
Permissioning is the main distinction between Ethereum and Enterprise Ethereum. As a result, Enterprise Ethereum provides a higher level of anonymity while simultaneously improving efficiency and scalability.
Quorum, like many other popular protocols, attempts to assist financial institutions. Quorum is noteworthy since it has the financial community’s support. J.P. Morgan Chase, for example, is a major financial sponsor of the protocol, and it has garnered additional funding from other major financial institutions.
Quorum, on the other hand, has managed to remain an open-source project that anybody may use. Quorum is also closely linked to Ethereum, as the project began by altering the Ethereum code.
The choice of a Blockchain protocol is one of the most critical considerations to make when starting a Blockchain software development project. Protocols are important because they limit the functionality that your software can offer.
It’s vital to remember that the most popular protocols use very advanced technology that need the participation of thousands of computer scientists. Using a protocol instead of reinventing the wheel will allow you to finish your project in less time and with less resources. Here is a detailed article on the meaning and types of Blockchain Protocol