In this article, we will explain what permissioned and permissionless blockchains are. We will take a look at their characteristics, what sets them apart, as well as their pros and cons.
What Are Permissioned Blockchains?
Permissioned blockchains are closed networks that require permission from the network administrator or the owner to join and participate in consensus and data validation. They maintain an access control layer in order to allow certain identifiable participants to perform specific tasks.
They are useful for organizations that cannot afford to make their data or processes public and that require identity and role definition within the blockchain. For example, they can be used in banking, supply chain management, and internal voting.
Some of their characteristics include the following:
- Governance structure and varying decentralization – permissioned blockchains are governed by the organization, and there is a private group that authorizes decisions and appoints members of the business network.
- Controlled transparency – the level of transparency in such a network depends on the goals of the organization using it.
- Customizable – permissioned blockchains allow organizations to customize restrictions while configuring their network.
- KYC (Know Your Customer) requirements and authentication process – participants need to go through a KYC process when joining the network, and the network’s operator determines the privacy requirements.
Their Pros and Cons
Some of the advantages of permissioned blockchains are:
- Performance and scalability – they ensure a fast output since they choose the consensus method used and fewer nodes are needed for validation purposes.
- Strong privacy – permission is required to access transaction information.
- Defined roles – they enable organizations to assign and define roles.
- Diverse configurations – theycan be customized for specific purposes.
This blockchain type is not free of disadvantages since:
- It is not truly decentralized.
- It is less transparent.
- The network owners and operators can change the consensus rules.
- Fewer participants can increase the risk of corruption.
What Are Permissionless Blockchains?
Also known as trustless or public blockchains, permissionless blockchains are open networks available for anyone to join. In such a network, a user can create a personal address and then interact with the network either by contributing to it, for example, to validate transactions, or by using it to make transactions. Bitcoin is the first example of such a blockchain.
Some of their key characteristics include the following:
- They are decentralized, so there is no central authority.
- The data on the platform cannot be changed.
- They are mostly anonymous, with a few exceptions.
- Given their open-source protocols, they ensure full transparency of transactions.
Permissionless ones are suitable for running and managing digital currencies, but they can also be used for voting, digital identity, and fundraising, to name just a few use cases.
Their Pros and Cons
This type of blockchain has the following advantages:
- Broader decentralization;
- High transparency – you can see and trace all transactions;
- Resistance to censorship since anyone can join them;
- Strong security due to the cryptography and other security parameters they use.
Permissionless blockchains do have their drawbacks as they are:
- Less energy efficient
- Slower, and
- More difficult to scale.
Conclusion
Permissioned and permissionless blockchains are branches of the same technology. However, they are developed to meet different needs, which sets their use cases apart. While permissionless blockchains are more appropriate where transparency and decentralization are needed, permissioned blockchains are used by companies that need clearly defined roles for their identifiable participants.