The blockchain is a distributed database that allows secure, transparent, and tamper-proof transactions. This technology has been adapted for use in various industries, from banking and financial services to supply chain management and healthcare.
With so many different blockchain protocols available, choosing the right one for your needs is essential. The proper protocol can help you in multiple ways, including:
- Ensuring compatibility with existing systems
- Meeting regulatory requirements
- Supporting the scale and performance of your application
- Reducing development costs
In addition to the above benefits, there are so many other ways the suitable blockchain protocol can help your business grow at scale. On this note, let's look at how to pick the correct blockchain prototype.
Blockchain protocols are divided into three categories:
Blockchain is broad, and to simplify the categorization; all protocols are divided into these three categories:
A private blockchain is a permissioned network where only authorized nodes can participate in the consensus process. This type of protocol is usually used within an organization.
A consortium blockchain is a permissioned network where multiple organizations can participate in the consensus process. This type of protocol is usually used for cross-industry collaboration.
A public blockchain is a permissionless network where anyone can join and participate in the consensus process. This type of protocol is usually used for decentralized applications (dApps).
Choosing protocols based on your use cases
Which protocol is suitable for your business is entirely based on what you output you need from them. However, to make it easier for you to decide, below are some critical use cases of blockchain that you can consider while picking up the protocols.
With the rise in decentralized finance (DeFi) popularity, protocols such as Ethereum have become increasingly popular. Ethereum is a public blockchain that enables the development of dApps and smart contracts.
You need to think of speed, security, and compliance when it comes to financing. Ethereum 2.0 offers all three features with its proof-of-stake consensus algorithm. DeFi applications require more execution power and speed, which Ethereum 2.0 can provide. Along with speed, staking is an essential factor to consider as it can help you earn rewards. The need for smart contracts implementation is also necessary for DeFi applications. Thus, Ethereum seems to be the best blockchain for DeFi applications.
Supply chain management:
When it comes to supply chain management, enterprises usually look for a permissioned blockchain that can offer transparency and traceability. IBM's Hyperledger Fabric is a popular choice for enterprises as it provides a modular architecture and supports multiple programming languages.
Another popular choice is the Corda platform by R3. This permissioned blockchain is built on Java and offers a unique consensus mechanism. It's mainly used in banking, healthcare, and the supply chain. Corda can be a good choice if you're looking for a private or consortium blockchain that supports multiple programming languages.
The healthcare industry requires a blockchain that can offer privacy, security, and immutability. Ethereum is again a popular choice as it provides all three features. However, the public nature of Ethereum might not be ideal for the healthcare industry. In such cases, enterprise-grade solutions such as Corda can be used.
Corda again is built on Java and supports multiple programming languages. It also offers a unique consensus mechanism that can be ideal for the healthcare industry. In addition, this protocol can provide privacy, security, and immutability, which are three critical factors to consider for the healthcare industry.
Decentralized storage is another critical use case of blockchain. When it comes to storage, you need to consider cost, security, and scalability.
Filecoin is a popular protocol that offers decentralized storage. It's a public blockchain that's built on top of IPFS. Filecoin uses a proof-of-replication consensus algorithm that helps with security and scalability. The protocol also offers a native token that can be used to pay for storage services.
Another popular choice is the Storj protocol. This protocol is built on Ethereum and offers decentralized storage. It uses a proof-of-retrievability consensus algorithm that helps with security and scalability. The protocol also provides a native token that can be used to pay for storage services. Thus, when it comes to decentralized storage, you need to consider protocols such as Filecoin and Storj.
A value chain is a system of activities that adds value to a product or service at each production stage. A blockchain-based value chain can help reduce costs and increase transparency by eliminating the need for intermediaries.
For building a value chain system, you need to pick blockchain protocols that are compatible with existing systems and can support the scale and performance of your application. Blockchain protocols like OriginTrail and Multichain are well suited for this purpose. In addition, these protocols are also compatible with a variety of existing enterprise applications.
For NFT development:
Non-fungible tokens (NFTs) are digital assets that are unique and cannot be replaced by another token. NFTs can represent anything from art and collectibles to real estate and gaming items.
If you're looking to develop an NFT application, you need to choose a protocol that supports the creation of unique tokens. Ethereum is the most popular protocol for NFT development. However, other protocols like ERC721 and Flo offer better support for NFT development. In addition, other protocols like Binance Smart Chain (BSC) and Polkadot are also gaining popularity for NFT development.
Factors to consider while picking a blockchain protocol
Speed is one of the critical factors to consider when selecting a blockchain protocol for development. With blockchain technology, speed is often determined by the number of transactions that can be processed per second. For example, Bitcoin can handle around 4.6 transactions per second, while Ethereum can handle 30.
Another essential factor to consider is bridging. Bridging refers to the ability of different blockchain protocols to interact with each other. It is necessary because it allows for greater flexibility and interoperability between different systems. Ethereum, for example, has built-in bridges that will enable it to interact with other protocols such as Bitcoin and Hyperledger Fabric.
Another critical consideration is energy efficiency. It is essential for projects looking to use blockchain technology for energy-intensive applications such as smart contracts. Ethereum, for example, is estimated to utilize around 62.56 kWh of electricity per year.
Finally, the cost is another essential factor to consider. Blockchain development can be expensive, so selecting a cost-effective protocol is vital. For example, Ethereum's gas fees can be costly depending on the application. On the other hand, Bitcoin is often more affordable due to its lower transaction fees.
There are various factors to consider when selecting a blockchain protocol for development. The most important factors include speed, bridging, energy efficiency, and cost. In addition, it's also essential to consider the use case of your application and the compatibility of the protocol with existing systems. You can choose the right blockchain protocol for your development needs by considering all these factors.
Seven Bits is a future-focused blockchain development company that helps you in your every blockchain project. With the support of more than eight public and private protocols, we offer end-to-end blockchain development services to help you build innovative decentralized applications. We've got you covered whether you need smart contacts development, legacy system migration, or third-party integration. Contact us at [email protected] to know more.