Fundamentals of Web3: Blockchain Protocols

Fundamentals of Web3_ Blockchain Protocols - Blog

For the last decade, blockchain technology has kept changing our view about finances, banks, financial institutions, and our role in it. Blockchain transformed the concept of owning money when banks or other financial institutions are not involved and financial operations are taking place only between users. Web3 users can get access to their online wallets by applying mathematics and cryptography, as well as send and receive assets anonymously. Right now over 1000 blockchains are building the world of web3. Let’s discuss what is a blockchain protocol and what are the principles blockchain protocols operate on.

What is a Protocol?

Protocols are not something new in the modern world of technology. Each computer operates multiple protocols to be able to exchange data safely. Protocols came into existence more than 30 years ago. The well-known hypertext transfer protocol defines how to structure online packets and what type of data can be placed there. Other examples of protocols could be HTTP, SSH, FTP, etc.

What is a Blockchain Protocol?

The blockchain protocol is the essence and the heart of the web3 ecosystem. Similar to standard computing protocols, blockchain protocols provide algorithms, rules, and guidelines defining and controlling how the blockchain network is functioning. They enable blockchain nodes (computers building the network) to exchange data that can be read and understood across all web3. One more very important function of blockchain protocols is to safeguard participants of web3 interaction from malicious players, who can cause damage.

4 Principles Blockchain Protocols Address

1. Decentralization

Blockchain technology, or distributed ledger was created having no central authority in mind. It doesn’t have a Single Point of Failure (SPOF) because it does not have centralized server management. People host blockchain nodes on their computers and if at least one computer node is working, the blockchain can be accessed from anywhere around the world. At the same time, having no central authority means that protocols should authorize the network transactions on their own.

2. Security

As we have mentioned before there is no central authority that’s why blockchain protocols are the ones that safeguard the security of the web3 crypto world. Keeping in mind the fact that web3 involves cryptocurrency transfers, blockchain protocols provide the rules for data structure and secure data transfer. 

3. Scalability

Blockchain protocols are supposed to be scalable, which means that they should allow an increase in transactions. First blockchains have some transaction limitations: set number of transactions in a defined time period. Nowadays, modern blockchains are more flexible. There are various ways to increase the scalability of blockchain protocols: add new nodes, increase the size of the block, etc.

4. Consistency

Based on the fact that there is no central authority regulating the consistency and automated update of cryptocurrency networks, blockchain protocols are the ones in charge of it. The creation of every new block should be written into the database and synchronized with all computers that host the nodes of a blockchain.

Summing Up

The importance of blockchain protocols cannot be undermined. They build the structure of the web3 ecosystem and allow safe and protected cryptocurrency transfers. To be able to start your journey in web3, make sure you have a secure and easy-to-use crypto wallet to protect your digital assets.

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