How Protocols Are Interconnected on the Blockchain

What is a Blockchain Protocol

Wegner[150] stated that “interoperability is the ability of two or more software components to cooperate despite differences in language, interface, and execution platform”. The objective of blockchain interoperability is therefore to support such cooperation among blockchain systems, despite those kinds of differences. The benefits of using blockchain protocols include increased transparency, security, and efficiency. The key components of a blockchain protocol are the consensus algorithm, validation mechanism, network protocol, and data structure. As the technology continues to evolve and more use cases emerge, it is clear that blockchain protocols will continue to play a significant role in shaping the future of business and society as a whole. It is not a single blockchain but a collection of blockchain frameworks and tools that can be used to develop customized blockchain solutions for businesses.

  • This not only reduces risk but also the processing and transaction fees.
  • Each and every transaction is verified by the developers and is stored so that each individual can have access to the transaction and protocols helps to maintain this transparency.
  • The above diagram shows how these protocols work together in a blockchain node.
  • Blockchain protocols are now being used to process securities, documents, and accounting, and manage liability.
  • Because nodes are considered to be trusted, the layers of security do not need to be as robust.

The node which didn’t follow protocol is now unable to take part in the chain. In a blockchain, every transaction that takes place must be processed by every participating node. By using the protocols, every node will process the transaction identically. This means that at the end of every transaction the state (record of the blockchain) of each node will be identical.

Consortium blockchain

On the other hand, most cryptocurrency projects aim to replace physical money with digital forms of exchange in the long run. This also implies that different types of blockchain attempt to do things differently, depending on what they hope to achieve from their efforts. Blockchain technology is also well-suited for payments, as evidenced by bitcoin, bitcoin cash (BCH), litecoin (LTC), and numerous other payments-focused cryptocurrencies. Blockchain is in many ways more efficient and globally accessible than traditional third-party payments providers.

Some countries may be war-torn or have governments lacking any real identification infrastructure. Citizens of such countries may not have access to savings or brokerage accounts—and, therefore, no way to safely store wealth. Even if you make your deposit during business hours, the transaction can still take one to three days to verify due to the sheer volume of transactions that banks need to settle. Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with.

Private blockchains

Play-to-earn games are a set of blockchain-powered games that allow players to earn in-game rewards represented by Non-Fungible Tokens (NFTs) and tokens. Also known as the “first layer,” it requires changes in the code base of the blockchain network. They focus on improving the main features and characteristics of the blockchain network like increasing the block size limit or reducing the block verification time. The Proof of Burn protocol is best used for transactions that generate burn hashes, which are similar to the hash values used to determine PoW block leaders.

What is a Blockchain Protocol