The definition of a protocol in relation to cryptocurrency is: "a set of rules & procedures using cryptography in order to secure its operations & governs user/participant behavior in a decentralized network.
What is the Distinction Between Web 2 Protocols & Web 3 Protocols?
Web 2 is centralized & Facebook for instance runs on a protocol. Two examples of common web 2 internet protocols are: HTTP & HTTPS.
Web 3 cryptocurrency protocols are not only decentralized but are open source & transparent and what this means is that no single authority controls the network or in other words there is no centralized governance but individual users contribute to the operability of decentralized networks & the way they do this is by validating transactions. But, for example, Canadian Fintech Koho is powered by web 2 & is a better option than a conventional brick & mortar bank, but, the problem is that Koho is in partnership with the People's Trust which is a Federally regulated financial institution in Canada & while I'm all for Fintechs such as Koho & Revolut the problem is that Fintechs are powered by web 2 & use web 2 infrastructure as a platform for the Fintech vehicle to move, meaning that as the user you cannot validate a digital transaction on your prepaid card to an online retailer since transactions are validated by a single or central authority but individual user validation of transactions on web 3 networks maintains network consensus.
Cryptocurrency Protocols Don't Require A Trustworthy Middleman/Agent
Web 2 powered Fintechs require trustworthy intermediaries to be able to validate both online & in-store prepaid virtual card & prepaid physical card transactions. But this is not the case when dealing with cryptocurrency protocols since the design of cryptocurrency protocols is to be trustless which means that individual users of the network do not need or have zero requirement of trusted intermediaries to validate transactions since the users of cryptocurrency protocols validate transactions which is made possible via the use of cryptography in order to secure transactions & ensure integrity. For instance to make an international money transfer or send money locally using Wise, users require a third party or trusted intermediary which is the bank & as the user you're not authorized to validate domestic & international fiat money transfers but allow me to use the Bitcoin protocol as an analogy: the Bitcoin protocol permits individual users of the Bitcoin protocol to transact money directly without an intermediary, this is due to the fact that the algorithm of the Bitcoin protocol is Proof of Work (PoW) based & this means individual users of the Bitcoin network solve complex mathematical puzzles in order to validate transactions & as a reward for individual user transaction validation using the Bitcoin network or protocol individual users earn new bitcoins for their efforts.
Cryptocurrency Protocols & Decentralized Finance
Challenger banks or neobanks widely known as Fintechs such as Koho as I mentioned earlier in this article have partnered with People's Trust which is a Federally regulated financial institution in Canada & Koho utilizes web 2 protocols, British Fintech Revolut (which I myself use) utilizes web 2 protocols like Koho such as Revolut's app & Fintechs such as Revolut being Centralized Finance has created new services such as user banking from within an app, opening a Fintech account without undergoing credit checks compared to brick & mortar conventional banking, multi-currency accounts & new products such as a virtual prepaid cashback card, but beyond a shadow of doubt Centralized Finance has created new services such as Fintechs, referral programs offering a percentage in commissions for every user they refer & new products such as virtual prepaid cashback cards & whilst Fintechs have streamlined banking processes in comparison to conventional brick & mortar banks & credit unions if users need to add funds into their Fintech account they need to employ a middleman such as their bank or PayPal in addition to users having zero power to validate online transactions & whilst to some degree Fintechs are beneficial (since Fintechs can create passive income), users cannot validate transactions & are not in control. Decentralized Finance (DeFi) has the goal of the creation of new financial systems & products that are powered by decentralized web 3 networks & cryptocurrency protocols are a vital necessity to DeFi emerging as a much greater rival to centralized finance.
