Blockchain technology has gained widespread adoption across industry segments in recent times. Some of the main reasons driving this trend are the fundamental characteristics of blockchain protocols and the ability to automate various processes in a trustless manner.
Established by Bitcoin, soon followed by Ethereum and hundreds, if not thousands of decentralized applications (dApps) that came later, blockchain technology has proven its ability to replicate or augment existing processes in a decentralized environment. The capabilities of smart contracts to automatically trigger functions based on specified conditions on a distributed network that rarely fails makes it even more attractive for businesses to incorporate blockchain technology into their workflow.
By now, the majority of the population have realized that blockchain technology is more than just crypto transactions. But to know the exact reasons why decentralized ledger technology continues to enjoy the patronage of crypto communities and businesses, it is important to understand the fundamental features that make them special. These very features also decide the suitability and reliability of the blockchain protocol for the project or dApp development.
Fundamental Aspects of Blockchain Protocols
The three fundamental aspects of blockchain protocols are speed, decentralization, cost, each of which play a crucial role in the sustenance of any project. As a result, project creators and developers must carefully evaluate each of these factors before deciding upon the ideal blockchain protocol to build their dApps.
Almost all blockchain-based applications deal with storage and transmission of value in the form of crypto tokens as a part of their operations. At the same time, many projects predominantly cater to the Decentralized Finance (DeFi) side of things, where the monetary aspect of crypto assets play a much larger role. The security of any protocol also decides the integrity of applications built over them. The security aspects of a blockchain are derived from the adopted cryptographic hashing technique, consensus mechanism, number of network participants and of course the codebase.
A highly decentralized protocol based on a sound source code, having a large number of network participants/nodes validating transactions over the platforms contributes to a robust security infrastructure for blockchain protocols. While most blockchains are inherently secure by themselves, certain cybersecurity threats emerge from poorly designed smart contracts and other dApp components.
Security is one important factor and so is decentralization. In fact, both properties are like two sides of the same coin. A highly decentralized protocol is one with a strong community of network participants spread across geographies such that no single person or a small fraction of the community can accumulate majority hashing power to hijack the network. A completely decentralized network doesn’t have any centralized entities or third-party intermediaries exerting influence on network operations, effectively making them resistant to censorship and other external factors that could disrupt the network.
Transaction costs is a sensitive aspect of any blockchain protocol as it has a direct implication on adoption. Each transaction on any protocol usually incurs a charge which is used to incentivize miners and validators while discouraging users from spamming the network with unnecessary transactions. At the same time, token transactions play an important role in triggering smart contracts utilized in blockchain applications.
While the protocols are generally designed to keep transaction costs low, increased transaction volumes and network congestion can trigger higher fees. As a result, the rise in transaction costs also serve as an indicator of underlying scalability issues faced by the protocol. Ethereum is a good example to describe the relation between scalability and transaction costs.
Scalability of the network and low transaction costs helps projects operate efficiently, irrespective of the generated transaction volumes while encouraging more people to use the dApps without worrying about exorbitant unnecessary costs. It also contributes towards the speed of transactions on the network.
Pick One, Or Maybe Not!
“Always understand the fundamentals when building something on the blockchain”, says Zhuang, the CEO and Founder of ShuttleOne Network.
In his recent interaction with the crypto community on ShuttleCast, he mentions once a user understands the fundamentals of blockchain protocol, they should pick a protocol that strikes a balance between the decentralization, security, and speed.
The chosen protocol should guarantee higher data accuracy, sufficient bandwidth, and enough decentralization to prevent anyone from disrupting the network. However, there is a catch as the Blockchain Trilemma continues to affect almost all the protocols that are out there today. Accepted that each of these fares well in either one or two out of three aspects, but the legacy issues that first appeared on Bitcoin and Ethereum protocol still prevails.
There might not be one perfect protocol, but now there is a way to exploit the best of all available protocols with Metachain. ShuttleOne Network’s blockchain agnostic multichain aggregator ecosystem, Metachain allows project owners and developers to build dApps that can work on any of the supported blockchains. Powered by the first of its kind multichain, two-way smart contract bridge, Metachain allows projects to create and operate cross-chain native tokens on almost all leading protocols. Combining the prowess of Metachain with other allied ShuttleOne products, projects get the flexibility of choosing the most suitable protocol for a specific function without worrying about the effects of blockchain trilemma on long term sustainability of their business.
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