What is a protocol in cryptocurrencies?

What is a protocol? Protocols are basic sets of rules that allow data to be shared between computers. For cryptocurrencies, they establish the structure of the blockchain — the distributed database that allows digital money to be securely exchanged on the internet.

How does a protocol work?

The way they work is determined by a protocol. A protocol is basically a foundational layer of code that tells something how to function. It's the program that forms the software basis of any given network. Think of a protocol as a set of rules that allow entities to communicate and transmit information.

Why are cryptocurrency protocols called Fat?

This is why cryptocurrency protocols are called fat: they have very few applications running on them. Internet protocols are thin: they have thousands and thousands – even millions – of applications running on them. With any cryptocurrency, the protocol is the value.

How do blockchain protocols affect a cryptocurrency project?

Cryptocurrency investors often take blockchain protocols for granted when analyzing the potential of a cryptocurrency. While a project’s roadmap and business efforts are essential, the different blockchain protocols and consensus algorithms used can play a prominent role in the success of a cryptocurrency.