In this article, you will learn what are protocol coins. 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. Protocols allow the cryptocurrencies to be via — decentralized which means they are spread across a network of computers with no central hub or authority.
What Are Protocol Coins?
Protocol coins or tokens are cryptographic tokens that are required to access the service that the underlying protocol provides. Usually, apps or DApps are created on these protocols, just like you have decentralized applications/exchanges built on Ethereum (eg, Augur, EtherDelta, etc. .)
That's why, the shift from thin protocol layers (that used to have little value and economic activity) to fat protocol layers, which will be immensely valuable with increased adoption, has started. Also, this will, in time, be reflected in the value of the blockchain-based web stack that enthusiasts around the world are developing.
So finally, you can envisage a future, where we will have the internet layer (TCP/IP), and then the blockchain layer or the blockchain protocols and on top of it will be their various applications.
What are the Top Protocol Coins?
- 0x (ZRX)
The 0x protocol is a decentralized exchange protocol for ERC20 tokens. It is an open source protocol and has its native protocol token known as 0x (ZRX).
The idea behind 0x is straightforward. The founding team believes that there will be a lot of DApps and different protocols that might need to interact with each other and synergize to provide the best service to their user in the future. In that case, a user won't like to manage different tokens for different purposes all the time, and that's where 0x exchange protocol will provide a seamless user experience and liquidity to the user.
- Loopring (LRC)
Loopring is working in the same niche as 0x protocol but in a different fashion.
Loopring is an open source decentralized exchange protocol for exchanging ERC20 tokens, and it combines the off-chain order books with on-chain settlement contracts for making successful trades. It is a blockchain-agonistic protocol that can bether deployed on different blockchains such as E , NEO, QTUM, or EOS, etc. as long as they are capable of running smart contracts on them.
-Lisk
Lisk is another blockchain protocol that aims at empowering developers to build blockchain applications or DApps. Lisk makes it easy for developers to develop and deploy blockchain applications by providing them with the relevant tools in JavaScript, the world's most popular programming language.
Lisk does it by providing a robust Lisk core and SDK (sidechain development kit), and the main chain which is fueled by LSK tokens. This acts as the gas on the main chain and sidechain to perform operations.
- Filecoin
The Filecoin protocol is a Decentralized Storage Network construction built on a blockchain with a native token (also called “Filecoin-FIL”). It is a marketplace protocol where clients spend tokens (FIL) for storing and retrieving data from the decentralized network and miners earn tokens (FIL) by storing and serving data for their clients.
-Ethereum
Ethereum is one of the oldest protocols in the market after Bitcoin and is also the first blockchain project to have conceptualized the idea of blockchain protocols that are more than just money. Vitalik Buterin is the founder of the Ethereum project which aims to make Ethereum as the The world's only computer where the gas is paid in its native token Ether (ETH).
Bottom Line
Now it becomes important to discuss some of the blockchain protocols and their coins because this is an opportunity to capture their right value for the future. That's why one should make the best use of this opportunity. This article is about what are protocol coins.
