FOUNDATIONAL TECHNOLOGY

Protocol

A set of rules and standards that govern how participants interact on a blockchain network or decentralized application. Financial institutions evaluate protocols based on security audits, governance structures, and regulatory compliance readiness.

EXAMPLE

MakerDAO's protocol governance voted to accept U.S. Treasuries as collateral backing DAI stablecoin issuance, signaling DeFi protocols' willingness to integrate TradFi assets for institutional credibility.

Relevant Roles and Functions

On-chain Role
Smart Contract Risk & Architecture Lead
Function
Integration with Bank Systems
Operational Resiliency
Reviewing Smart Contract Design
TradFi Equivalent
Core Banking Architecture
Distributed Systems
Payments Infrastructure
Technology

Related Terms

Smart Contract

Self-executing code deployed on a blockchain that automatically enforces and carries out the terms of an agreement when predefined conditions are met—without requiring an intermediary to oversee performance.

Example

A smart contract can automatically release collateral when a loan is repaid, eliminating manual processing and reducing operational risk.

Governance

Decentralized system where protocol changes, upgrades, and parameter adjustments are voted on by token holders and automatically executed via smart contracts. It eliminates intermediaries, offering transparent, fast, and democratic decision-making directly on the blockchain, such as in MakerDAO.

Blockchain

A distributed, immutable ledger that records transactions across a network of computers in cryptographically linked blocks, providing a shared and tamper-resistant source of truth across multiple parties.

Example

By settling trades on blockchain, two counterparties share an identical, real-time record without requiring a central reconciliation agent.