Blockchain protocols are the most crucial components in blockchain technologies that help maintain the blockchain networks and aspects. A protocol is a set of guidelines and rules which are being utilized to perform a specific task. To transfer the data over the internet there is a need to have a proper framework and protocols to create that framework. These guidelines and rules are mandated for efficient data transfer. There are different blockchain protocols such as consensus protocols, network protocols, and security protocols, and the combination of all these protocols is called the blockchain framework.
The blockchain protocols define how the data will be structured so that a system accepts it, as well, it also develops safeguards that help secure the data from malicious users. When a blockchain platform is developed, it is crucial to select the correct Blockchain protocol as it is liable to determine the functionality of the Blockchain Software. Thus, it is highly significant to have an in-depth understanding of the leading Blockchain protocols so that one can complete their project with fewer resources and in a limited time frame.
The primary focus of this article is to help readers gain knowledge about what are blockchain protocols, various types of blockchains, the concept of blockchain protocol technology, and the leading blockchain protocols.
Types of Blockchains
Blockchain technology has given rise to several centralized & decentralized platforms with advanced features. The businesses remain confused to choose which type of blockchain platform to meet their specific business needs and requirements. The following is a detailed analysis of the different types of blockchain platforms a blockchain app development company can develop and help you scale your business:
1. Public Blockchain
It is an open-source blockchain network where anyone can be part of the consensus mechanism without being limited by any sort of regulations and rules. Businesses that are connected to the internet can easily become a node. For joining a network, it is essential to download the software that supports it. The maximum number of blockchains that are present today are the public blockchains.
One of the globally recognized examples of the public domain is the bitcoin network. Because of the public network, the transactions can be viewed by anyone. The particular nodes which participate in the consensus mechanism of the Bitcoin network are given certain tokens as rewards. Some other worldwide famous public blockchains include Litecoin and Ethereum. No sort of central authority exists in a public blockchain, it is completely a decentralized network.
With the advantages, there are some pitfalls as well that come along with. Because of an extensive number of nodes present, it might lower the performance of the blockchain as the speed of the transactions get slower. To make any sort of the change in the network, there is a need that all the nodes get agreed, thus it gives rise to scalability issues. The consensus mechanism used for public blockchains is POW (Proof-of-Work) which itself is a complex issue.
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2. Private Blockchain
As the name suggests, a private blockchain is a private or permissioned blockchain network that does not allow direct access. To become a part of the private blockchain, it is essential to have permission and to be the network participant. The businesses that have these private blockchains do not want their data to get accessed by everyone and they want to keep it confidential only. Thus, they prefer something more centralized and so they choose a private blockchain.
All the entities have equal control over who is part of the network. There is a need for an invitation to join this private blockchain which is further validated by some set of rules or by the network starter. Certain restrictions can be imposed upon who would be allowed to participate in the blockchain network or not. The existing participants can decide on which members can be a part of the blockchain in the future. There is a central regulatory authority that is authorized to issue a license for the new entrants.
There are some well-known private blockchain networks such as Rippe etc. It helps improve the transaction speed as there is a smaller number of users which means it will take less time for validating the transactions. Enterprises look for a blockchain development company expert in developing private blockchains as these blockchains are extremely scalable and thousands of transactions can be performed in a second. To have a centralized network, there might be some trust issues that could be there in the private blockchain. As well, there is another drawback of using a private blockchain, because of the smaller number of nodes, there is a high risk of malicious attacks.
3. Hybrid Blockchain
Hybrid blockchain is one of the most famous and unique blockchain networks which has components of both private as well as public blockchain networks. There is a smart contract that is used to verify the participation of new members and validate transactions. The records can be accessed through a smart contract only. There are several advantages of using a hybrid blockchain such as it protects the privacy of the participants but also allows third-party communication.
There is a closed ecosystem within which these hybrid blockchains operate so that they can be saved from external hackers. From the scalability aspect, the transaction takes very less time and is cheap, so it offers a better and improved scalability in comparison with public blockchains. The reason behind low price transactions is that there are very few nodes to validate them. It can be reduced to even 0.01$ per transaction.
One of the major benefits of hybrid blockchain is that it can be fully customized providing a high level of transparency, security, and integrity. There are several hybrid blockchain use cases comprising supply chain, enterprise services, Hybrid IoT, banking, governments, and global finance and trade. This type of blockchain is considered to be the most ideal one as it is a great combination of free as well as controlled access. It is in the hands of the blockchain members to whom they want to make the blockchain participant and to make which transactions public.
In this dynamic business world, businesses need to have changes and amendments from time to time, the best part is, that a hybrid blockchain allows for changing rules. One cannot make changes in the user identity verification process but in some other areas. There are times when enterprises are confused about opting for a public blockchain network or a private blockchain, then they are likely to choose the hybrid blockchain network. XinFin is a popular hybrid blockchain network developed for Ramco Systems based on Quorum and Ethereum i.e. a private and a public blockchain network respectively. For having a hybrid blockchain network, one needs to hire blockchain developer who possesses knowledge of both private and public blockchains.
4. Consortium Blockchain
A consortium blockchain is also widely popular as a Federated blockchain. It is a semi-private form of blockchain where only the pre-selected participants are allowed to be a part of the network. There is an established structure in which participants can join and can get solutions to save the cost of development and also the time. There are numerous benefits associated with this blockchain network such as higher flexibility, cost-effectiveness, better control, improved security, and sound validation.
Various sectors such as banking and finance, logistics, insurance, and healthcare prefer consortium blockchain over other types of blockchain. Various organizations govern this consortium platform and so it is a permissioned platform. But still, they are different from the private ones in several ways. The motive behind the creation of the blockchain is to improve collaboration among enterprises. It allows different organizations to come together and make decisions to solve certain work-related issues. As a result, it shows the equal contribution of the enterprises and thus they are provided with an equal set of features and credits.
Another major advantage associated with this blockchain platform is an extensive level of innovation and exposure because of the presence of a collaborative environment. The transaction speed is also very fast as it is a permissioned network and the access is limited which makes the validation of the transactions speedy.
In a federated blockchain, the risk of 51% is negligible as multiple participants are there who make sure that participations and transactions go through adequate authorization. Enterprises cannot remain anonymous in consortium blockchain and thus it reduces the chances of any sort of criminal activity taking place within the platform.
Concepts of Blockchain Protocol Technology
Once you have understood what protocols are and what are the different types of Blockchain networks, now it is essential to know about the most used and significant terms of blockchain protocols used by professionals:
POW (Proof of Work)
With the digitization of the economies and the emergence of cryptocurrency, people worldwide are much more aware of the Proof of Work concept. It enables the recording and confirmation of Bitcoin transactions in the absence of any central authority. It can also be regarded as the original consensus algorithm that is used to produce the new blocks. It makes bitcoin mining a complex task and thus miners need to compete with each other to prove the validation of the new coins and transactions. To be innovative, technologies in corporate governance and finance take use of POW.
Distributed ledgers can be understood as a type of database which is publicly available so that anyone can check the history of transactions without any limitations. They are being distributed among multiple peers and are stored in the form of a ledger so that they can be accessed at any time in the future.
Smart contracts are the defined set of logic rules which are available in a coded script form. To govern a transaction, these smart contracts are imparted into the blockchain.
Tokens vs Coins
To run the blockchain platform efficiently, there requires a digital asset in every blockchain platform. Peers who participate in the network are provided with these digital assets in the form of incentives. These digital assets are worldwide available in the form of tokens and coins. These terms are used interchangeably in blockchain networks by enterprises.
These digital assets power a blockchain network. They are used similarly and just get differentiated based upon the level of protocol. Based on the smart contracts, the tokens are a form of digital assets that are defined on a higher level such as Ether, the currency, or the digital asset of Ethereum. Whereas, based upon the protocol, the coins are a form of digital asset that is defined on a lower level. They are native tokens or digital assets such as Bitcoin, the currency of the Bitcoin protocol.
There is a need for technical expertise to move coins between the wallets. The physical movement of the coins can be liable to regulatory issues and complexities. Hence, the blockchain platforms and cryptocurrency exchanges require a digital asset for transferring value among the users. There is a specific number of coins and tokens held by a provider and to make the transactions easy and less complicated these tokens or coins are used.
The 51 Percent attack concept can be understood as the ability of anyone to make changes, revise the transaction history and control more than fifty percent of the total network nodes. There is a consensus on which maximum of the distributed cryptocurrency projects are relied on and this consensus is achieved with the majority of the votes. The voting power an individual participant holds is based upon the number of coins that the individual owns. Thus, there is always a fear of a 51 percent attack because of the circumstances where one gains a majority of control by having the maximum coins.
In larger projects, there are very less chances of such attacks but in small projects, these attacks might take place. Once control of more than 51% of the blockchain network is attained by any participant then there is a terror that they can develop the private version of the blockchain. Hence, in most cases, there is a risk of a 51% attack.
Once having a good understanding of the concepts of blockchain protocol technology, the enterprises should also know how to create a blockchain protocol so that they can have better involvement in the project of blockchain platform development.
What are the Top 5 Blockchain Protocols?
To develop a blockchain platform, it is crucial to know which protocols are required to create the platform. Here are some of the leading and best crypto protocols which most enterprises prefer to choose for a secure blockchain platform:
To understand Hyperledger, it is essential to know about Blockchain technologies as its primary aim is to improve the cross-industry Blockchain technologies. The Linux Foundation came up with this open-source project for a particular reason. The main reason behind its introduction is to help enterprises address their complex and critical issues most efficiently.
It enables businesses to create custom Blockchain applications that are capable of meeting specific business requirements. It also supports better collaboration among the developers, businesses, and enterprises in DLT (Distributed Ledger Technology). With time, the number of organizations supporting and joining Hyperledger is increasing, it also includes some of the big brands such as JP Morgan, Samsung, Fujitsu, IBM, SAP, American Express, and many more.
There are currently an extensive number of Hyperledger projects that help developers to create effective Blockchain networks and applications. There are some of the most significant features that make Hyperledger so demanding such as it helps deliver efficient performance, access to users or members with permissions only, and is not publicly accessible, as well, it supports plug-in components.
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Ethereum is another world-famous open-source platform for building and deploying decentralized apps to support transactions and create agreements without any third-party involvement. It is also used as a computer programming language by several developers to create distributed apps.
The most significant use of Ethereum is to receive and send values worldwide. It also eliminates the involvement of any third party in decentralized applications and smart contracts. There are also several other apps in Ethereum that are utilized for gaming and financial services, these apps are highly safe & secure and do not steal users’ data.
Ethereum comprises Ether as a cryptocurrency that is used to pay the computational as well as transaction fees. Once the transaction is validated on the Ethereum platform, mining can be performed. With Ethereum, businesses can create large-scale applications in a very short time to exchange value.
One more significant benefit is that it helps enterprises to build proprietary variants of Ethereum along with utilizing the latest Ethereum code. There are a few key features that make Ethereum so popular such as it supports efficient data coordination, extensive peer-to-peer network, is highly compatible, and supports wide scalability.
Corda is an open-source project that offers interoperability. It helps enterprises to create blockchain networks that possess top-notch privacy. The platform allows synchronization, management, and record transactions and agreements. It also helps businesses to perform direct transactions with value.
The agreements made and transactions performed are extremely transparent without compromising privacy. It works on a smart contract logic that validates state transitions according to the contract note. Corda provides timestamping services to eliminate future complexities and issues. Therefore, it helps reduce the record-keeping costs and also effectively streamlines all the business operations.
There are certain characteristics of Corda that attract expert blockchain developers and businesses such as it works on point-to-point architecture, and helps scale business through its unique services and various algorithms. It offers advanced development services like regulated tokens, user interfaces, Corda App consulting, extensive interoperability, multi-layer ledger, etc. Blockchain platforms created with Corda help resolve complex business-related issues with ease.
Quorum is a leading Blockchain protocol that helps enterprises in the financial sector. It is one of the famous open-source blockchain networks launched by J.P. Morgan. Leading banks provide additional resources to back the protocol. It is a project built on the Ethereum framework that can be used by anyone. In the coming years, Quorum is forecasted to be the leading enterprise blockchain protocol across the world as it supports developing third-party applications as well as in-house tools.
Built with a consortium approach, the protocol can be accessed by users or members with permissions only to maintain the privacy of the transactions. The architecture of Quorum comprises the Enclave module, Transaction Manager module, and Quorum Node. It is maintained by a permissioned network for improved performance.
There are some of the most considerable features that make Quorum so approachable such as it helps maintain the privacy of the transactions, delivers efficient performance, facilitates voting-based consensus, regulates peer permission management, etc.
MultiChain is a protocol established to build private blockchains so that there can be developed new applications as well as to facilitate more secure and efficient transactions. The MultiChain protocol is widely used for accelerating deployment and streaming integration with its API. The biggest competitive advantage attained by using the Multichannel protocol is that it is compatible to work with physical stores of value as well as fiat currencies.
This is an open-source project that is also used to build non-public blockchains to have eco-friendly transactions. It allows the creation of ID databases for data sharing and timestamping. For performing financial transactions, businesses use MultiChain technology. It is essential to configure every node with MultiChain before transferring assets.
There are some of the most important features that make the MultiChain protocol so popular such as it supports rapid deployment, allows customization, allows unlimited access to assets, offers flexible security, and works on controlled permissions.
With time and digitization, blockchain protocols are gaining huge momentum and so the blockchain technology. It is crucial to select the correct protocol before the blockchain application development because it only defines the functionality of the platform. One should select the protocol based on the enterprise size and nature. Since there is a high level of complexity while selecting the protocols, it is advised to look for companies that provide the best blockchain development services and can help you with the secure deployment and maintenance of the solutions.
With extensive experience in blockchain development and with a team of expert developers, SemiDot Infotech offers reliable and affordable blockchain development services. The professionals are well-versed in how protocols are created, what are the leading protocols and how a secured and proficient blockchain platform can be developed.