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Blockchain Protocol: All You Want to Know!

Dec 28, 22  |  Bakhtain Afzal

More than a decade back, Bitcoin was introduced as a white paper written by a pseudonymous group or, perhaps, a person- Satoshi Nakamoto. This paper laid the groundwork for computational rules, a distributed database now known as the Blockchain. 

The purpose of this distributed database was to record every Bitcoin transaction. It only offered viewability, keeping the risk of alterations to minimum. For bitcoin’s transactional security, they were checked and secured by a network known as "Miners."

In return, these miners were rewarded with Bitcoin for maintaining the chain. In short, forming the rules that govern the Blockchain Bitcoin operations, aka Bitcoin protocol.

While the concept of digital assets came with high risk for users, Blockchain proved Internet as a safe place for digital money. Since a decade of digitalization, decentralized computation has now opened up new blockchain protocol possibilities. And, that’s exactly what we’ll be discussing in this article, blockchain, protocols, the best protocols from the huge list of all blockchain protocols and so much more. Keep reading as we explore the intricacies and functions of protocols.

How Does Blockchain Work?

Most cryptocurrencies are built on blockchain technology, and this exact technology is being applied in various fields. 

To give a simple explanation of how Blockchain works, here's a step-by-step process: 

  1. When any crypto transaction is performed, it first gets recorded. This transactional record lists digital signatures from the different parties and includes all relevant information. 
  2. Trade validity is then checked, ensuring that it's a real trade transaction. 
  3. Once transaction validity is confirmed, it gets added to a block with its particular hash – a unique block ID. 
  4. Right after a block is completed, the hash that carries it ensures it's in chronological order.

To facilitate these transactional procedures, blockchain network protocols come with layered protocols architecture that supports its function. Let's first understand blockchain protocols and then move toward layers of protocols in a Blockchain.

What Are Blockchain Protocols?

The above headings had quite a mention of blockchain protocols, to explain that further, here’s a brief explanation of that. 

Blockchain security protocols are a set of protocols used for governing the blockchain network. Blockchain protocols define the interaction between computers, the type of data, the interface of the network, etc. Here's a list of concerns that blockchain protocols aim to address: 


While Blockchain is a decentralized network, the blockchain network protocols make sure there isn't any involvement of a central authority. And the authorization is handled by protocols. 


A crypto network's security is maintained by blockchain protocols. Blockchain security protocols ensure data and digital asset security. 


Crypto transactions are increasing, and that brings in the issue of scalability. To deal with that, blockchain protocols handle the increasing transactions. 


Protocols update the database at every step after a transaction occurs. This helps the user to get a know-how of the crypto network. 

How Many Blockchain Protocols Are There?

Blockchain is now evolving at a rapid pace where its application has spread across niches and industries including the health, finance, supply chain, etc. And, the expanding use of blockchain is due to the introduction blockchain lending protocols

On the other hand, various types of blockchain protocols keep popping up now and then, having their own set of pros and cons. But, we'll only be covering the main ones since we can't possibly cover the ever-expanding list of all blockchain protocols and provide a protocol overview.

Enterprise Ethereum

Ethereum is one of the protocols in the public blockchain suite. It describes the platform for apps that don't have a central server. It is the Blockchain that developers and businesses use the most. 

Based on it, they are making new technologies that will change how many industries work. But blockchain protocols Ethereum is mostly employed in private networks which are accessed by limited and authorized people. It is mostly used to protect privacy, to make things easier to scale, and improve performance. Also, Ethereum stands to be the best in the list of all blockchain protocols.



  • It has a high risk of becoming a victim of online hacking. 
  • It comes with high transaction fees and volatility.


Hyperledger was developed in 2015, mainly with the purpose of enabling international business transactions. Blockchain protocols Hyperledger is an open-source framework developed by Linux. This helps enterprises for providing blockchain solutions. 

Plus, it supports various libraries, one of which is Python. Simply put, it offers universal blockchain implementation guidelines. 


  • It's open source, i.e., it allows different contributions. 
  • It helps international transactions. 
  • It offers enhanced services with the presence of a large number of libraries. 



This was mainly developed for private blockchain networks, and similar to blockchain protocols Hyperledger, it's an open-source blockchain protocol. The main development objective of Multichain was to help profit-making enterprises as it allows setting up of private blockchain networks.

Other than that, Multichain as one of the top 10 blockchain protocols also lets users swap tokens between different blockchain networks via a blockchain bridge. 


  • It allows private blockchain establishment that different enterprises can use. 
  • It allows customization of token rules and control of transactions


  • It doesn't support smart contracts. 


This is another enterprise blockchain protocol developed by JP Morgan, coming with the objective of addressing issues related to finance. This open-source project comes with its association with Ethereum. 

It changes the functionality of financial enterprises with the implementation of Blockchain. And this remains to be a top enterprise blockchain framework. 


  • It's an open-source framework.
  • It can solve different financial queries.
  • It provides an enhanced transactional experience. 
  • It provides better performance.


  • Low security and privacy. 
  • Less scalable. 

Layers of Blockchain

There are five layers of Blockchain that facilitate the process of recording transactions. And all these layers come with their unique functionality. 

Here are the five main blockchain layers. 

  • Hardware infrastructure layer
  • Data layer
  • Network layer
  • Consensus layer 
  • Application layer

So, there you have it: blockchain's five layers that support its working. But if you've read about blockchains, you've probably also seen words like "layer 0 blockchain protocols," "layer 1," "layer-2," and layer 2 blockchain protocols mentioned frequently due to their significance. Wondering what these layers mean and what role do they play? Let’s find out what makes them important? 

Layer 0

Layer 0 blockchain protocols consist of hardware and other material required to run this consensus mechanism with no faults or glitches. Plus, it includes an internet connection as well.

Layer 1

Layer 1 blockchain protocols ensure security throughout the blockchain network. This layer encompasses consensus mechanisms, coding language, and all other rules embedded in blockchain code for the flow of operations in a blockchain. 

This is commonly known as "Layer 1," but in a few cases, the layer 1 blockchain protocols are known as the "Implementation layer." And, when users speak of “Bitcoin Blockchain”, they mainly refer to layer 1 blockchain protocols.

Layer 2 

For improving the overall blockchain operations, there's a requirement for processing power addition, meaning there must be an inclusion of more nodes, but that clogs the network. 

As mentioned before, the addition of nodes is important for maintaining the scalability of the decentralized nature of the network. Meaning if scalability, decentralization, or throughput get touched, it'll have a direct impact on layer 1. 

Conclusively, there's no possibility of layer 1 scalability if the processing is not moved atop the first layer, i.e., layer 2. This is made possible exclusively through enabling third-party solutions with layer 1. 

Meanwhile, layer 2 blockchain protocols handle transaction authentication and decongest layer 1. Whereas layer 1 mainly handles the creation and addition of blocks to the Blockchain. To summarize, layer 2 sits atop of layer 1 network and stays in direct communication with it at all times. 

Layer 3

dApps and Smart Contracts handle decision-making and execution of the follow-up actions from layer 3. Referring to the fact that the highest functionality of Blockchain comes from the innovation of dApps, layer 3 works as an interface for the real-world apps and other underlying layers that facilitate the overall functions. 

What Is a Blockchain Lending Protocol?

A blockchain lending protocol lets you deposit funds, and in return, you receive an annual yield. Other than depositing, you're also allowed to borrow tokens in contrast to your deposited tokens in the form of collateral. 

Which Blockchain Protocol Is Best?


The Ether token, which is built on the same technology as Bitcoin, is the most well-known part of the Ethereum protocol. Fees for transactions and computing services are paid with both of these. But cryptocurrency isn't the only thing that Ethereum has to offer. 

Compared to Bitcoin, the Ethereum protocol was made to be much more flexible and adaptable as a whole. Unlike Bitcoin or Hyperdleger, users don't have to choose from a limited set of rules or components. Instead, Ethereum gives developers a virtual machine to build their apps. Since Ethereum is a peer-to-peer network, smart contracts and decentralized apps never go down, the data is safe from being changed or censored.

Apart from being a digital currency, blockchain protocols Ethereum are considered the best blockchain protocol. 

What Are the Best Blockchain Protocols for NFTS?

We have been exploring concepts of blockchain network protocols, best blockchain protocols, blockchain layers, etc. and one thing that needs to be highlighted here is when we read all about blockchain and crypto protocols is that NFT stands on blockchain technology as well. In order to help you understand the role of Blockchain protocols used for NFTs, here are the ones that are most important. 


This Blockchain was introduced in 2015, and today, this stands as one of the most popular blockchains. As the first Blockchain that introduced smart contracts, Ethereum now stands as the inspiration to the introduction of all other blockchain privacy protocols.  

The Ethereum Blockchain protocol has an implementation of NFT token standards, i.e., ERC-721 (only for fungible tokens) and ERC-1155 (for both fungible and non-fungible tokens). 

Another feature that makes Ethereum stand out is that it's used by NFT marketplaces. For example, OpenSea, Nifty Gateway, Decentraland, etc.,. 

Binance Smart Chain

Launched in 2019, Binance Chain initially lacked the feature of supporting smart contracts. And instead of integrating smart contracts within the existing chain and risking the network speed, another blockchain option was introduced, called the Binance Smart Chain. 

Launched only 2 years back, Binance Smart Chain is now a part of the popular blockchain protocols used for NFT, standing right behind Ethereum. It comes with its own token standards, BEP-1155 and BEP-721, which are compatible with Ethereum Virtual Machine (EVM). These enable a smooth installation of projects from Ethereum while supporting BSC tools and other dApps. 


Polygon, previously known as Matic Network, involves its name in layer 2 blockchain protocols. The design of Polygon is Ethereum-native and comes scalable and compatible with EVM and other future Ethereum designs. 

What makes Polygon is its versatile framework, as it provides interoperability with different layer-2 blockchain solutions. In addition to that, Polygon allows a "lazy minting" of NFTs, i.e., there are no upfront costs of mining NFTs. Instead, the fee is applicable when any NFT is sold.


Solana stands on two different consensus mechanisms, Proof of Stake (PoS) and Proof of History (PoH). The main goal of PoH is to lower the load on validators instead of their need to communicate for verifying time. Plus, PoH lets timestamps be built within the Blockchain through a Verifiable Delay Function (VDF). 

This feature lets Solana reduce its validation times with a greater throughput of around 80k TPS. And it also enables less smart contract execution time and more network storage, in short, these features are what makes it one of the best blockchain protocols used for NFTs

Is a Crypto and Blockchain Protocol Same?

No, Blockchain and crypto protocol themselves are two different terms and vary significantly on their purposes. Blockchain technology is a DLT that records transactions on a cryptocurrency platform. 

In contrast, the protocol for crypto comprises borrowing, lending and staking services that get controlled by a smart contract. But, the lending part again stands on blockchain lending protocols.

A blockchain protocol is a set of protocols that govern a blockchain network and it maintains the entire crypto network's security. 

5 Best Crypto Protocols List


Bitcoin is one of the most popular cryptocurrency protocols and stands as one of the best protocols in crypto protocols list. It's a peer-to-peer cash system that lets users make financial transactions without any third part, i.e. a bank. 


Ethereum is another crypto protocol that is a bit different from Bitcoin since its main services come from smart contracts. This also runs without a third party interference and lets users make transactions, move funds and store registries of debts etc. 


Ripple, with its native currency XRP, was launched in 2012. Its main objective is to enable banks, digital exchanges and payment providers to transfer money globally. And, this open-source consensus mechanism supports a variety of currencies, making it one of the best options in the crypto protocols list

Open chain 

Openchain gives organizations a platform for issuing and managing digital assets. For example, equity tokens and security tokens. 


Corda itself doesn't have any native crypto currency and its primary use is in maintaining institutional records, overseeing and making sure financial agreements are standing. 

It's an open-source protocol that avoids conversion of Blockchain into situations which don't stand with banking protocols. 

The Significance of Protocols

Using protocols, the Blockchain makes it possible for cryptocurrencies to be decentralized. This is because they are spread out over a network of computers without a central hub or authority.

The most important thing that the Bitcoin protocol did was the creation of digital money which could be spent or traded without anyone having to worry that the money has already been used. 

Since the crypto protocol was created, other protocols have developed to cover a wide range of tasks. Each cryptocurrency has its own set of rules or protocol.

For example, the Ethereum protocol is built around "smart contracts," which are deals or transactions that happen automatically when certain conditions are met.

There are now a lot of new protocols that run on the Ethereum blockchain, for example, blockchain privacy protocols. These allow for a wide range of decentralized financial products that automate everything from lending and saving to insurance.


What Are the Top 10 Blockchain Protocols?

Here are the top 10 blockchain protocols:

  • Ethereum 
  • IBM blockchain 
  • Hyperledger fabric 
  • R3 Corda 
  • Tezos 
  • EOSIO 
  • Stellar 
  • ConsenSys Qourum 
  • Hyperledger Sawtooth 
  • Multichain

What Are The 5 Best Layer 1 Blockchain Protocols List?

Here are the best layer 1 blockchain protocols list

  • Ethereum
  • Cosmos 
  • Binance Coin 
  • Solana 
  • Avalanche 

Key Takeaway

  • Blockchain is a digital ledger that stores information. It's named as Blockchain because information is stored in blocks that are linked together in a chain.
  • Blockchain is the infrastructure and technology that most cryptocurrencies are built on.
  • Every transaction on a blockchain is checked, and it is hard to change the information stored on a blockchain.
  • Small businesses can use Blockchain to store their data securely, gain access to digital currencies, and try out smart contracts.
  • Blockchain operates on a set of 5 different layers, further classified in Layer 0, Layer 1, Layer 2 and Layer 3. And, layer 1 blockchain protocols list consists of best blockchain-protocol platforms.
  • Blockchain security protocols serve as a set of rules for operations performed within a network. 

Final Note 

In this article, we mainly covered blockchain privacy protocols, blockchain lending protocols, best protocols available recently along with the significance of protocols of Blockchain and its expanding use in different industries. While Blockchain still remains to be a thriving technology, top software development companies in the world can help you leverage this innovative technology and make your blockchain project a reality. 

But, finding the best software development companies in the world is never an easy task, there are hundreds of them, and you need to pick just the right one. So, to ease that out for you, we at Distinguished have a list of best software development agencies with a high clientele that speaks of their experience itself.

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