Protocol - what is it in cryptocurrency?

A Protocol is a specific set of rules that apply to a specific system.

Any cryptocurrency system has its own specific device, which is based on blockchains. The way the Protocol determines blockchains and other elements of the system function. The protocol determines how data is verified, transmitted, and stored. This ensures network security, stability, and consistency at any stage of development.

Blockchain protocols in different cryptocurrency systems may differ depending on the intended use case. Such an algorithm is usually created by a group of developers who bring the data exchange standards taken as a basis to a common denominator.

A newcomer to this niche needs to understand that blockchain and protocol are not the same thing. In simple terms, the protocol functions as a framework, a structural set of rules that are followed to implement the development plan. And blockchain is the result of following a protocol.

Protocol functions

Since the protocol is the fundamental building block of any blockchain network, the implementation of the following functions depends on it:

  • coordination of the work of nodes their synchronization;
  • transaction processing - protocols determine the procedure for validating payments and the technology for adding them to the blockchain;
  • application programming interface.

It is through strict adherence to all the rules outlined in the protocol that the stability of the network and its security are maintained.


Blockchain technology was first introduced during the implementation of the cryptocurrency financial system project. However, protocols of this type are used in other ways:

  • for supply chain management;
  • to provide various financial services;
  • for anonymous and transparent voting;
  • to create the most reliable identifiers, which eliminates the risk of forgery.

Blockchain protocols are a modern format of unique digital technologies that are used to create decentralized networks with specific properties. The use of such a protocol makes it possible to improve the network security system and regulatory transparency.