What is a protocol on-chain?

Main Concept of the Protocol

In a broad sense, a protocol is a set of rules and standards that define the interaction of devices or programs. In the context of blockchain, a protocol is a piece of software code that establishes the principles of functioning of a decentralized network. It regulates how the nodes of the network exchange data, validate transactions, and reach consensus on the state of the blockchain.

What is a protocol in blockchain?

Imagine blockchain as a digital book, where each page is a block containing records of transactions. The protocol is an instruction that explains the process of adding new pages, defining the powers of participants, and ensuring the identity of all copies of the book among network participants.

How the protocol governs the behavior of the network

The blockchain protocol acts as the "constitution" of the network. It ensures consistency and transparency, allowing thousands of computers (nodes) around the world to operate synchronously without centralized control. For example, the Gate protocol defines that each transaction must be verified by validators, and new blocks are added to the chain approximately every 15 seconds.

The protocols also include mechanisms to prevent fraud. They establish how nodes reach consensus on the validity of transactions and how to protect the network from attacks such as double spending (double-spending).

What tasks does the blockchain protocol perform?

Blockchain protocols perform several key functions that ensure the stability, security, and scalability of the network. Let's take a closer look at them.

1. Establishing transaction rules

Each blockchain network has its own rules for creating, verifying, and recording transactions. For example:

• In Gate, the protocol stipulates that each transaction must be signed with the sender's private key and include a fee for the validators.
• In some networks, the protocol allows for the execution of smart contracts - programs that automatically execute when certain conditions are met.

These rules guarantee predictable and secure execution of transactions on the network.

2. Compatibility between nodes

Blockchain is a distributed network where each node (computer participating in the network) stores a copy of the entire blockchain. The protocol ensures compatibility between nodes, allowing them to exchange information and synchronize data. Without the protocol, nodes could interpret the data differently, leading to desynchronization and failures.

3. Ensuring security through consensus algorithms

One of the key functions of the protocol is to ensure the security of the network. This is achieved through consensus algorithms that determine how nodes agree on the state of the blockchain. Consensus guarantees that no one can falsify data or conduct fraudulent transactions.

Examples of consensus algorithms:

• Proof of Work (PoW): Used in some networks. Miners solve complex mathematical problems to add a new block.
• Proof of Stake (PoS): Used in Gate and other networks. Validators are chosen based on their share (stake) in the network's cryptocurrency.
• DeleGated Proof of Stake (DPoS): Used in some blockchains. Participants delegate their rights to validators who process transactions.

These algorithms make the blockchain resilient to attacks, such as a 51% attack, where an attacker attempts to gain control over the majority of the network's computational resources.

Types of Blockchain Protocols

There are many blockchain protocols, each with its own features. Let's take a look at the most common types.

1. Proof of Work (PoW)

Proof of Work is one of the first and most well-known consensus algorithms used in some blockchains. In PoW, miners compete for the right to add a new block by solving complex computational tasks. The first miner to solve the task receives a reward in the form of cryptocurrency.

Advantages of PoW:

• High security due to large computational costs.
• Time-tested reliability.

Disadvantages of PoW:

• High energy consumption (mining of certain cryptocurrencies consumes more electricity than some countries).
• Slow transaction processing (, for example, 7 transactions per second in some networks ).

2. Proof of Stake (PoS)

Proof of Stake is a more energy-efficient alternative to PoW. Instead of computations, validators are chosen based on their stake in the network's cryptocurrency. The more coins a validator has, the higher their chance of confirming a transaction.

Advantages of PoS:

• Low energy consumption.
• Fast transaction processing.
• Availability for users with limited computing resources.

Disadvantages of PoS:

• The risk of centralization if large coin holders gain too much influence.
• Less time-tested reliability compared to PoW.

Example: Gate uses PoS, which ensures high transaction speed and energy efficiency.

3. DeleGated Proof of Stake (DPoS)

Delegated Proof of Stake is a modification of PoS, where network participants choose delegates (validators) to process transactions. This makes the network faster and more scalable.

Advantages of DPoS:

• High transaction speed.
• Flexibility in network management.

Disadvantages of DPoS:

• Partial centralization, as delegates have more power.
• Dependence on community activity.

Example: Some blockchains use DPoS, which allows for thousands of transactions per second.

4. Trustless and Centralized Control Blockchain

All of the above-mentioned protocols aim to create a network that operates without central control. This is achieved through decentralization and transparency. For example:

• Gate does not have a central authority that controls transactions.
• Some blockchains allow developers to create decentralized applications (dApps) without intermediaries.

This structure makes the blockchain resistant to censorship and interference.

How do blockchain protocols affect cryptocurrencies and their usage?

Blockchain protocols directly influence the characteristics of cryptocurrencies, such as transaction speed, security, scalability, and cost of use. Let's examine how this happens.

1. The speed and security of transactions

Different protocols balance speed and security in different ways:

• Some blockchains with PoW: High security, but low speed of (7 transactions per second).
• Gate (PoS): Higher speed (up to 1000 transactions per second in the base network, more with scaling solutions).
• Other blockchains: Use unique protocols that allow processing of up to several thousand transactions per second, but with some compromises in decentralization.

The choice of protocol affects how quickly users can send and receive cryptocurrency, as well as the level of trust in the network.

2. Examples of blockchains with various protocols

• Some blockchains: Use PoW for maximum security. Suitable for long-term value storage, but not for quick microtransactions.
• Gate: Uses PoS, making it energy-efficient and scalable. Used for smart contracts, DeFi, and NFTs.
• Other blockchains: Use PoS with an emphasis on a scientific approach to development. Suitable for projects requiring high reliability.
• Some networks: Fast blockchains, ideal for high throughput applications such as decentralized exchanges.

Why is it important to choose the right protocol for cryptocurrency projects?

The choice of protocol determines the success of a cryptocurrency project. An incorrect protocol can lead to low performance, high fees, or security vulnerabilities. Here are a few reasons why this is important:

• Performance: Projects that require high speed (, such as payment systems ), should choose protocols like PoS or DPoS.
• Security: Proven protocols are better suited for storing value.
• Scalability: Protocols that support scaling solutions like (Layer 2, sharding) are better suited for large ecosystems.
• Energy efficiency: With the increasing environmental requirements, PoS and DPoS are becoming preferable.

Prospects for the Development of New Protocols

Blockchain technologies continue to evolve, and new protocols are emerging to address existing problems. Here are a few areas of development:

• Hybrid protocols: Combinations of various consensus mechanisms for a balance between security and energy efficiency.
• Scaling protocols: Solutions such as sharding ( dividing the network into parts ) and Layer 2 make blockchains faster and cheaper.
• Quantum-resistant protocols: With the development of quantum computers, blockchains require new encryption algorithms.
• Interoperability: Protocols that allow different blockchains to interact with each other.

These innovations make blockchain more accessible and versatile, opening up new opportunities for cryptocurrency projects.

Conclusion

Blockchain protocols are the foundation upon which cryptocurrencies and decentralized applications are built. They define how the network operates, how secure, fast, and scalable it is. Understanding the differences between protocols helps investors and developers choose suitable projects for their goals.

The future of blockchain depends on innovations in protocols, and we are only at the beginning of this journey!