Application Layer Protocol

Definition ∞ An application layer protocol defines how software applications interact over a network. These protocols operate above the fundamental blockchain infrastructure, enabling specific functionalities and services for users. They dictate the rules for data exchange and transaction processing at the user-facing level of decentralized applications. Examples include protocols for decentralized finance, non-fungible tokens, and decentralized autonomous organizations.
Context ∞ News often reports on the development and adoption of new application layer protocols, highlighting their capacity to alter traditional industries. Updates to existing protocols, such as upgrades or security vulnerabilities, frequently drive market discussions. The operational success or failure of these protocols directly impacts the utility and value of associated digital assets.