Blockchain protocols have revolutionized all the industries in which they are used. The technology is the basis for cryptocurrencies as it allows for fast transfers and clear records that prevent mistakes and erroneous transfers.
In this article, we’ll go over the most important blockchain protocols that investors should be aware of and how they differ. The basic technology behind all of them is the same, but there are different uses, leading the crypto protocols to find quite distinct user bases. An investor, however, should look into the whole field and diversify their investment by both use and value.
Bitcoin – Proof of Work
Bitcoin is the first and the largest cryptocurrency out there. It’s the gold standard for the industry and the first cryptocurrency that has gone truly mainstream and was accepted by traditional financial institutions, such as banks and ETFs.
However, traditional financial institutions have also criticized one of the features of its protocol – how decentralized it is. For some users, however, the fact that no centralized institution controls Bitcoin is the whole point.
The Bitcoin network uses a proof-of-work consensus mechanism. It requires the users to provide computation power to the network and validate transactions while providing security.
Ethereum – Smart Contract
Ethereum is the second-largest crypto protocol and has managed to find its way to traditional financial markets and create its own ETFs. Ethereum network is especially well-designed to run and build applications based on smart contracts.
Smart contracts have found their application and use in almost every industry, as they allow automated transfers and self-executing arrangements. For complex industries with a lot of moving parts, such as logistics and shipping, smart contracts enable the users to send the payments when each point of the process is completed. It reduces loss and makes the process smoother.
Binance –Proof of Stake
Binance is a blockchain network launched by the crypto exchange of the same name. It’s one of the largest crypto exchanges in the world, measured by the amount of funds traded and the number of cryptos that use it.
This protocol allows for transferring large amounts of data within a short time. This makes the network very scalable and allows it to grow. It’s a key feature now when there’s a wide crypto adoption. Proof of stake is also much more energy efficient than the alternative proof-of-work.
Cardano – Eco-friendly Protocol
Cardano is a blockchain platform mostly used for decentralized applications and smart contracts. It’s based on the proof-of-stake mechanism called Ouroboros. A mechanism such as this allows the users to validate their transactions simply by holding and using their tokens.
It’s the most energy-efficient protocol out there and, therefore, the most eco-friendly. It’s one of the most important features for crypto users who are tech-savvy and otherwise care for their carbon footprint. Cardano also uses a modular architecture that allows it to change and adapt to new apps.
Polcadot – Using Multiple Chains
Polcadot is a unique protocol that focuses on multi-chain uses. The network is built for interoperability between different blockchain systems. Users see this feature as one that’s oriented towards simplicity and ease of use. There are plenty of blockchain networks in use, and investors and everyday users are looking for the ability to transfer funds between different blockchains.
This is done using a security model that works equally well regardless of which blockchain is used. It’s a smaller protocol but one that will expand in the years to come as the need for multi-chain transfers becomes more important.
Solana- Proof of History
Solana has one of the most powerful proofs of stake protocols. It allows for thousands of transactions per second to be processed at any time. With the new interest in crypto and wide adoption, such platforms are much needed, and they gain new users every day.
Solana is also a crypto protocol that places special emphasis on developer adoption. It provides several tools and resources to help developers build on the platform. The network uses both proof of stake and proof of history consensus mechanisms. It’s an innovative mechanism developed by Solana Hub.
Chainlink (LINK) & Oracle Network
Chainlink is what’s called an Oracle network that is somewhat similar to Bitcoin. Oracle systems connect data from the outside world (off-chain) with the blockchain world (on-chain). It uses the data to supply smart contracts with a wide array of information. Data includes weather reports and predictions, stock prices, and public ledgers. All of these are used to inform financial decisions.
For a while, users have been trying to utilize the automation that comes with using blockchain networks to process a lot of information at once quickly. The network is built on Ethereum and utilizes zero-knowledge proof.
Cosmos (Atom) – Decentralized Finance
Cosmos is a decentralized network that uses independent blockchains. It enables easy transfer of assets and information between different blockchains. The network provides a common security network with a shared security model. The transactions made using this protocol are safe and secure.
Cosmos is especially well-liked in the industry that focuses on decentralized finance projects. Cosmos focuses on scalability and interoperability, which are the features that are most needed in the world of decentralized finance. The Cosmos exchange platform has a coin called Atom. It’s on the rise, as is the case with most altcoins, but it’s not widely used.
Tron (TRX) and Smart Contract
Tron is a decentralized crypto platform that’s used to create decentralized applications and smart contracts. Ethereum is the most popular crypto in this field, but there are many altcoins on the rise that work based on the same principles and provide a unique service. Tron is one such altcoin that focuses on the entertainment industry applications. It was first based on Ethereum, and in 2018, it switched to its own network.
It’s a platform on which content creators can publish, store, and monetize their digital content. The creators can use a crypto coin called TRX to make payments and the Tron blockchain to automate payments.
Hive (HIVE) – Proof of Stake
Hive is a blockchain protocol that uses a design similar to that of decentralized social media. It allows for fast and safe transactions. It also features a strong community of creators and curators. Hive is focused on community collaboration and engagement among users.
The network uses proof of stake, which means that it uses ownership of coins to verify transactions and networking. It often calls itself a cryptocurrency for Web 3, and it’s made for decentralized networks and smart contracts. The HIVE crypto itself isn’t among the most widely used coins.
Conclusion
There are many different crypto protocols out there that investors should be aware of. The rise and wide adoption of cryptocurrencies have also led to increased interest in smaller and niche altcoins. Now, when traditional finance institutions use Bitcoin and Ethereum, they are also getting a spotlight.
When investors are looking for cryptos to focus on, they should look for something more than price and value. How a protocol is used and what market it covers are also important indicators of how sound the investment is.
