Our blog has already covered various aspects and uses of distributed ledger technology. Today, we will return to the core concepts of distributed ledger technology, namely, the consensus mechanism. We will explain the concept and show you the important enterprise blockchain protocols.
Let’s start with the basics.
What is a blockchain protocol?
Let’s first look at the decentralized nature of blockchain. Blockchain application technology allows participants to communicate without the need for third-party control, such as a bank agent or agent. Users can vote, access financial services, and perform many other activities through secure, peer-to-peer, decentralized apps. All this is possible within a distributed network.
A blockchain network is a group of computers that collaborate to create and verify a new transaction in their shared system. One computer is called a “node” when it participates in the network. The term “blockchain network” can be used to refer to not only the software and devices but all the people, organizations, and institutions involved in the consensus process that creates a ledger.
The blockchain network is then a ledger that includes all contributors. A blockchain protocol, on the other hand, is the way the network creates a ledger. It’s the “how”. It covers:
- A set of rules that govern and validate transactions.
- An algorithm that determines the mechanism by which all nodes can interact with one another.
- In some cases, an Application Programming Interface (API) may be required.
There are many blockchain protocols that can differ in terms of their consensus mechanism, pros, and cons. They also have other limitations and network performance. When an entrepreneur wants to use a blockchain protocol for their application, they need to consider all aspects of it as these could have a significant impact on the product.
Understanding the basics of the blockchain protocol terminology is necessary to be able to identify the main characteristics of the protocols we will present in the next section.
A centralized blockchain application has a single authority that validates transactions and ensures data accuracy. A distributed network operates globally without the need for a governor. The consensus mechanism is instead the foundation for the legitimacy of the network. It’s a set rule that determines the legitimacy of the contributions made by various participants to the blockchain (e.g., nodes and transactors). There are several consensus protocols available, with Proof of Work and Proof of Stake being the most popular.
Proof Of Work
The consensus algorithm behind Bitcoin 1.0 and Ethereum 1.0 is Proof of Work. To solve a mathematical puzzle or mine a new coin, a computer must put in the significant effort (computing strength). This operation can be later verified by other nodes within the network to verify its legitimacy.
Smart contracts, which are based on proof of work enable efficient transactions. Smart contracts were first introduced in the Bitcoin protocol but then popularised by Ethereum. They can be used to replace traditional law agreements in the future. Smart contracts, for example, can greatly simplify the purchase of the real estate. This technology makes it possible to transfer property ownership in a matter of seconds, without the need for lawyers or bureaucracy. Smart contracts are very popular today in cryptocurrency networks and finance sectors. They allow for the avoidance of transaction fees associated with traditional banking.
Anybody can join a network on a public blockchain such as Bitcoin, Cardano or Ethereum. These networks make the most of blockchain’s decentralized nature and ensure that everyone has equal access.
Private blockchains are only available to those who have been invited by their owner and are verified by them. Operators have the right to edit, delete, or override the required entries. A private blockchain does not have to be decentralized. This network functions more like a secure database that is based on cryptography concepts.
Permitted blockchain protocols can also be used, which combine the best of public and private blockchains.
Open-source and enterprise blockchain protocols. What is the relationship between them?
Enterprise apps use open-source solutions more often than the average internet user would expect.
Collaboration with open-source developers supports technical progress and creates fail-proof software. The more developers who work on a project the greater the support network and the more trust they have. It’s no surprise that giants like Google and Facebook (now Meta), also use open-source solutions for their applications.
Open source is also common in distributed systems, and blockchain technology. This perfectly ties in with the idea of decentralization. Enterprises are open to using these open-source solutions for their commercial applications. Many blockchain protocols designed for private and enterprise blockchains are therefore open-source.
5 Enterprise Blockchain Protocols and Their Use Cases
There are thousands of blockchain protocols that have been created by individuals and organizations for different purposes. There are five main blockchain protocols that are worth learning. These protocols are all widely used in business projects.
Hyperledger is a project that unites several protocols and frameworks. It aims to provide businesses with a proven, efficient path for implementing Blockchain solutions. Hyperledger is a private blockchain. Users must first be invited to join a network that uses this protocol. Hyperledger’s unique feature is its ability to plug-and-play components. This makes it easy for developers to create apps. It is also an open-source blockchain protocol powered by the Linux Foundation, which offers high server efficiency.
The Ether token, which is built on the same technology that Bitcoin, might be the most well-known feature of the Ethereum protocol. These digital tokens can be used to pay transaction fees or computational service fees. But cryptocurrency is only one aspect of Ethereum. The Ethereum protocol is designed to be more flexible and adaptable than the Bitcoin protocol. Contrary to Bitcoin and Hyperdleger, there is no set of predetermined rules or components users can use. Ethereum instead offers developers a virtual machine that allows them to build their applications. Ethereum’s peer-to-peer network architecture ensures that smart contracts and decentralized apps are never down and data is protected from possible changes and censorship.
Corda is yet another enterprise-level blockchain protocol. Its website explains that it was specifically designed to create decentralized finance applications for the regulated market. It offers pluggable components, just like Hyperledger. These components allow for safe digital asset trading, business logic automation, and other useful features. Corda is an open-source and private blockchain.
MultiChain, as one can infer from the name, aims to address the incompatibility problem between different blockchain networks. The protocol’s APIs allow for easy integration of previously unrelated blockchain technology applications within one business or across multiple businesses. MultiChain, a private protocol, supports such collaboration by providing controlled permissions and flexible security. Data transfer between databases is also possible. MultiChain currently integrates with 30 chains and 1491 tokens. It makes perfect sense that MultiChain’s protocol owners call it “The Ultimate Router to Web3.0”.
This protocol’s compliance with fiat currencies is the most important feature. You can also find it on the supported token list. Participants can use traditional methods as well as cryptocurrencies to make financial transactions within the network.
JP Morgan, a multi-national investment bank, invented Quorum. It is believed to be the protocol that made the biggest change in decentralizing traditional finance. It is built on Ethereum’s Code and connects to all tools built on this protocol such as Truffle. MetaMask. Ethereum. Solidity.
Quorum is permission, a private blockchain that enables transactions to take place. It uses a consortium approach and must be authorized by a specific entity.
When you’re building your enterprise app, there are many options. Your choice will have a significant impact on the scope of your development work.
Errna has experience with more than 20 different blockchain protocols. Get in touch with us if you need blockchain development services for your dApp.