The Bitcoin protocol is the system’s rule set, written as computer code or software. These rules determine what is allowable and not within the Bitcoin monetary system — for example, who can spend coins, how many coins can exist, or how many decimals each coin can be divided into.
The rules create three data structures – the blockchain, UTXO set and mempool.
Network participants enforcing the rules and constantly checking and updating these data structures is how the Bitcoin monetary system works. The blockchain is the historical record of all BTC transactions; the UTXO set is the current record of bitcoin ownership at any given point in time; and, the mempool is the list of pending and valid transactions waiting to be added to the blockchain record.