This guide to blockchain protocols takes a look at the comparison of major protocol coins that are currently operational.
The cryptocurrency ecosystem is still in its early stages of development and thus, it follows that the community is strongly represented by engineers, blockchain evangelists and technology early adopters. This suggests that cryptocurrencies with the strongest immediate demand will relate to infrastructure and architectural innovation – since they provide the most utility to developers building the ecosystem. This is represented by blockchain protocols that possess their own custom blockchain.
Categories of Cryptocurrency
Before moving on, it is important to understand the different categories of cryptocurrencies and tokens. The cryptocurrency universe can be broadly divided into three main categories:
- Cryptocurrency Coins: Coins that are used as a transfer of value or a medium of exchanges, with the main purpose of being money (E.g. Bitcoin, Litecoin, Monero)
- Protocol-Level Coins: Coins that have their own custom blockchain (E.g. Ethereum, NEO)
- Tokens: Decentralised Applications (dApps) built on top of a blockchain protocol, usually issuing their own tokens through Initial Coin Offerings (ICOs)
Cryptocurrency Protocol Coins
As the ecosystem grows, the native protocol currencies stand to profit exponentially compared to application currencies. Protocols can be understood as the underlying infrastructure on which applications are built, and stand to profit from any growth in the ecosystem. Examples of current protocols in the industry include blockchains such as Ethereum, NEO, Stellar, Lisk, QTUM, and ICON amongst many others.
Since the birth of the first smart contract, the gold rush has migrated towards protocols – instead of dApps – that could bring us closer to real-world implementation and adoption. These projects aim to build a better, faster and stronger baseline for real-world use. Protocols also offer the prospect of transitioning from simple smart-contract interoperability, towards seamless sharing of information across blockchains. These agnostic protocols are able to inherently work freely and seamlessly with each other, rather than setting up additional layers of connectivity between different networks. AION, ICON, and Wanchain have recently established the “blockchain interoperability alliance”, dedicating research and resources towards setting a standard of interoperability for emerging blockchain networks.
Major Blockchain Protocols
Here is a comparison of the five most popular protocol that is currently operational, together with a brief introduction:
Launched in 2015, Ethereum is a decentralized software platform that enables the revolutionary function of Smart Contracts and Distributed Applications (ĐApps) to be created without any downtime, fraud, control or interference from any third party. Ethereum has its own native programming language, helping developers to build and publish distributed applications. The potential applications of Ethereum are wide-ranging. Ethereum is the second biggest cryptocurrency after Bitcoin, but unlike Bitcoin, it allows other dApps to build on top of its blockchain.
NEO is a blockchain platform designed for a scalable network of decentralized applications. The native currency of the NEO blockchain is the non-divisible NEO token, which generates GAS tokens used to pay for transaction fees generated by applications on the network. NEO is positioned as a “public cloud” and is part of a much bigger strategy by the Chinese government in establishing pre-eminence as a Blockchain platform industry leader.
BitShares is built to be fast, efficient and scalable in handling tens of thousands of transactions per second that go with being a decentralized exchange. There are two categories of cryptocurrencies on Bitshares exchange: stable assets – called smartcoin – and the digitized assets, called user-issued assets. BitShares is built to be autonomous in funding and employing its own employees.
Waves is a blockchain platform that developers can use to create their own custom token. Whether the incentive is to crowdfund a project, build out a loyalty rewards program, or create an in-app currency, the Waves platform may be the appropriate resource. According to their website, people can create their own tokens in as little as one minute. Waves also include a decentralized exchange (DEX) in which users can trade their newly created coin in a trading pair with any other Waves token.
Due to Ethereum’s scalability issues, the Singapore-based Qtum Foundation created their own blockchain solution which deploys on the Bitcoin chain while providing an app development environment akin to the capabilities Ethereum currently provides. The company is aiming to offer businesses an improved smart contract platform that extends functionality along with a more secure and transparent environment. At its core, Qtum is a cryptocurrency designed to simplify the use of smart contracts for inter-business and institutional operations. More than simply a coin, however, the foundation created a blockchain solution that combines several aspects of two major cryptocurrencies – Bitcoin and Ethereum – to facilitate interoperability between the two and take advantage of their major benefits. Qtum is built on a bitcoin core fork, but the foundation has created its own hybrid blockchain with the help of several key tools.
In order to further understand the differences across the top five protocols, we will look at the various characteristic of protocol-level projects that include the protocol's transaction speed, programming language, traction, consensus mechanism, and its coin economics in the upcoming articles.
Beneficial Resources To Get You Started
If you're starting your journey into the complex world of cryptocurrencies, here's a list of useful resources and guides that will get you on your way:
Trading & Exchange
- Crypto Guide 101: Choosing The Best Cryptocurrency Exchange
- Guide to Bittrex Exchange: How to Trade on Bittrex
- Guide to Binance Exchange: How to Open Binance Account and What You Should Know
- Guide to Etherdelta Exchange: How to Trade on Etherdelta
- Guide To Cryptocurrency Trading Basics: Introduction to Crypto Technical Analysis
- Cryptocurrency Trading: Understanding Cryptocurrency Trading Pairs & How it Works
- Crypto Trading Guide: 4 Common Pitfalls Every Crypto Trader Will Experience
- Guide to Cryptocurrency Wallets: Why Do You Need Wallets?
- Guide to Cryptocurrency Wallets: Opening a Bitcoin Wallet
- Guide to Cryptocurrency Wallets: Opening a MyEtherWallet (MEW)
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