Cryptocurrencies are all the rage these days. People are quick to compare them with the .com bubble and suggest the cryptocurrency market is a bubble waiting to burst as well.
But there is another comparison that is done in the blockchain realm, which is the weight of the application layer and protocol layer in the working of the blockchain.
The main issue is whether crypto protocols will be fat or thin, meaning if they will drive most things about blockchain projects or not. We take a closer look at it.
Understanding what fat and thin Protocols are
Before you contemplate whether the crypto protocols will be fat or thin, you should understand what is meant by fat and thin protocols.
Any application has the protocol layer and the application layer. The current scenario of web apps is a fat application layer and a thin protocol layer. Almost everything regarding apps and services today is determined by the application layer. It’s how you build on top of the underlying protocol that proves decisive. For example, Facebook is a social networking site. It’s not the underlying protocol of messaging and connectivity that makes Facebook so huge. It’s the way Facebook utilizes it. The same is the case with Amazon, Google, etc.
This scenario shows a model where the protocols are thin, and the applications are fat. When it comes to the crypto world, there is debate whether the protocols will be fat or thin. The business sector is still new, and there are a lot of products under development, so all one can do is speculate. We will help provide some clarity on both arguments, though.
Fat Crypto Protocols
Data Storage on the Blockchain
The blockchain is the protocol while anything built on top is an application. Blockchains are distributed ledgers owned by thousands of people all over the world. This means that the data is stored on the blockchain and not by the applications themselves. This is a huge reason why crypto protocols might be fat. All the major players like Google and Facebook are so assertive today because of the data they hold. It’s the data that gives them the edge over other apps.
This is not so with blockchains. While a new social networking site will be no competition for Facebook because of its number of users, blockchain apps do not have that luxury. People can just switch to a different app that offers something better since the data is stored on the blockchain and the other app has access to the same data.
Tokenization Creates an Incentive for Protocol Development
There are many decentralized app hosting platforms like Ethereum and NEO which allow users to develop on top of them. There is still scope for more of these protocols to appear that offer a better service. When people actually start hosting apps, and all the projects under development currently are completed, these platforms will be used extensively. If someone is to create an efficient platform now, the tokens they create for the exchange of services on that platform will rise in value when the user base grows. The potential for earning enormous profits is there, which is why developers and entrepreneurs are investing in protocol development.
Increased Speculation leads to more Blockchain Investors
Whenever a blockchain protocol becomes popular, a hoard of investors rushes to the scene to invest in it. People buy tokens and hold on to them in the hope of selling them for a profit later. Even when the apps built on top of the blockchains become popular, users are drawn, and they buy tokens as well. All in all, the value of the token and the blockchain increase manifold.
Thin Crypto Protocols
The main issue with crypto protocols is that they can easily be forked. Forking is someone using data and the code of the protocol and coming up with a new protocol of their own. This reduces the dependency on any one blockchain and protocol since it can be forked at any time. People have no scruples moving to a different protocol because it has all their data and works in much the same manner as the previous protocol but is better in some regards. Sometimes forked protocols can even offer a more streamlined service for a particular use case, which hints at a future where a number of different protocols lie beneath the application layer vying for supremacy.
While the application layer itself will be thin, the protocol layer might not be as fat as people think. Besides, the fatter a protocol grows, the more likely it is to be forked because people will look for something specific. Developers are quick to recognize this opportunity and learn from the mistakes of their predecessors to offer users something better. All the forked cryptocurrencies you see today are examples of this notion.
Because of the open source nature of cryptocurrencies, anyone can go over the code and make changes to come up with something that works, in the same manner, more or less but offers something more. The risk of doing so is minimal and the reward huge, so forking is something that makes a case for crypto protocols to be thin. Moreover, the likelihood of a protocol being forked increases as the protocol gains popularity.
It is impossible to say with any certainty whether crypto protocols will be fat or thin. There are compelling arguments for both cases, and only the future will shed light.
The only certainty is that people will have a lot less dependence on applications. This will mean that developers will have to focus entirely on the service they provide and the quality of that service.
Protocol developers, on the other hand, will have to compete with each other to continue enjoying user support. Forking is difficult as of now, but it is only going to get simpler in the future. As for the question of whether crypto protocols will be fat or thin, only time will tell.