Protocol

Protocol Definition: A set of rules governing data transmission and sharing within blockchain networks, smart contracts, or dApps.

In blockchain technology and cryptocurrencies, a protocol is a set of predefined rules and standards that govern how entities in a network interact. These rules ensure consistency, security, and adherence to the principles of decentralization.

Protocols define consensus mechanisms, such as Proof-of-Work (PoW), where miners solve complex puzzles to validate transactions and add blocks to the blockchain. They also outline how transactions are verified, recorded, and protected against double-spending or malicious attacks like denial-of-service.

In decentralized finance (DeFi), protocols enable financial services such as lending, borrowing, trading, and asset management without intermediaries. Governed by smart contracts on platforms like Ethereum, DeFi protocols offer users global access to transparent, efficient, and secure financial solutions. Examples include Compound (lending), Uniswap (decentralized exchanges), and yield farming platforms.

By ensuring reliable and transparent network operations, protocols build trust among participants and drive the growth of blockchain ecosystems. They are the foundation of cryptocurrency networks, enabling secure, efficient, and decentralized digital finance.