What is a protocol?

A protocol is a set of rules that allow computers to share data. Protocols are important to the world of cryptocurrency, because they are a crucial component of  blockchains.

When Bitcoin was first conceived in 2008, the white paper posted to a cryptography discussion board outlined a set of computational rules that would create a new database called the blockchain. This would function as a ledger to track transactions. 

The rules included making the blockchain self-verifying under the monitoring and protection of the entire network’s computing power. The rules as a whole, formed the Bitcoin protocol.

Protocols ensure data transferred across the network is secure.

Protocols aren’t only for cryptocurrency. They are crucial to the functioning of the entire internet, because they regulate the flow of data from one machine to another. 

Email, for example, relies on multiple protocols. And, you’ve probably heard of HTTP – it stands for “hypertext transfer protocol.”

The Bitcoin protocol proved digital money could be safely traded over the internet. Thousands of new protocols for digital currency followed the original Bitcoin protocol. 

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Why do blockchains need protocols?

Blockchains are the technology that power cryptocurrencies. They consist of a series of blocks, each of which stores information. Blockchains act as a decentralized ledger that stores data and is shared  publicly among all nodes on the network. Each block has an unique address that is determined by hash. 

Protocols are needed to ensure data is transmitted across networks securely. 

Blockchain protocols typically include rules outlining how to govern and verify transactions; as well as an algorithm that defines how nodes interact with each other. 

For example, features of the Bitcoin protocol include a public and permissionless blockchain, cryptographic hash function, p2p network and proof-of-work consensus algorithm. Dencentralization is also key, every node has access to all the information on the blockchain.

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Why are protocols important to cryptocurrency?

Protocols are what allow cryptocurrency to be decentralized, which means there is no central authority. They also support security of the cryptocurrency network, consistency of network functioning and scalability.

The Bitcoin protocol allowed for the creation of digital currency. Since that time, thousands of cryptocurrencies have been launched – each with their own protocol.

For example, the Ethereum protocol uses “smart contracts” which see transactions executed automatically after certain criteria have been met.

How is a blockchain protocol different from a platform?

Blockchain platforms use blockchain technology but aren’t fundamentally a blockchain themselves. It is helpful for platforms to be “blockchain agnostic,” which means they can use any protocol. Businesses are often reluctant to use platforms that use only one protocol. 

STAMP is an example of a blockchain agnostic platform. It is supported by blockchain but uses other protocols and can stand on its own without blockchain technology. STAMP allows users to be flexible in the choice of blockchain they use, or opt to not use blockchain at all.

What are some of the major blockchain protocols?

These are the five protocols most frequently used in blockchain development. It can be helpful to understand how they work and how they compare to one another. 


Hyperledger is an open-source project that supports international business transactions and provides tools that allow blockchain technology to be deployed quickly and effectively. The Linux Foundation, a strong supporter and advocate of Hyperledger, has contributed expertise to help accelerate the protocol. Hyperledger is used frequently in blockchain software solutions thanks to its libraries, which can speed up development. Hyperledger is compatible with Linux, which makes it a good fit for the business world. 


Multichain was established to help non-profit corporations build private blockchains that facilitate faster transactions. Multichain also helps to develop new applications for proof-of-work systems that blockchain-based technologies rely on. Multichain is unique because it can work with fiat currencies, physical stores of worth, and other digital currencies. As a private business, it can also offer an API to help blockchain developers companies accelerate deployment. 

Enterprise Ethereum

Ethereum Enterprise is designed for business use, it allows businesses to rapidly create large-scale applications for exchanging value. Ethereum Enterprise lets businesses create customized versions of Ethereum while still utilizing the most current Ethereum code. In ordinary circumstances, Ethereum’s licence makes it difficult for businesses to create proprietary variants of the software. 


Corda is an enterprise protocol and Multichain competitor primarily used in the finance and banking sector. It is open-source and uses consensus algorithms to maintain transparency and security. Corda is accredited under the R3 banking consortium, making it a popular choice for blockchain solutions in the finance sector.


Quorum has financial backing from J.P. Morgan Chase, which is a major advantage.  Other leading banks have also contributed resources. Quorum remains an open-source project and is available for anyone to use. The protocol has ties to Ethereum because it was created by modifying Ethereum code. 


Protocols are an essential part of blockchain technology, because they allow for secure and reliable information sharing across cryptocurrency networks. 

Protocols are essentially rules that control how data moves between computers – and they act as a safeguard to prevent malicious users from causing damage. They are a key part of the infrastructure that allows blockchains to functions – and by extension, the world of cryptocurrency. 

Protocols aren’t just for cryptocurrency. They are crucial to the functioning of the entire internet, from email to HTTP. 

There are thousands of digital currency protocols – understanding some of the ones most commonly used for blockchain can be helpful for cryptocurrency users. 

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