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Permissioned vs. Permissionless Blockchains: All You Need To Know

The modern technology out there is definitely developing at a rapid rate because it only seems like yesterday when we were coming around the functionalities of a calculator to do the heavy sums and straightening out the mathematical equations, and now we are playing with the very concept of decentralization and blockchain technology. It all seems like a blurry dream, but we are definitely there and are now working on a new journey regarding the financial frontier and making money as accessible and approachable to people as possible.

What is a Blockchain Network?

To put emphasize further the use and the definition of the blockchain system, it is a decentralized digital ledger consisting of a preliminary record of all the transactions that have taken place for a specific cryptocurrency in a linear form. This digital ledger is duplicated wildly and is distributed across a series of network nodes that are responsible for serving the day-to-day operations of the blockchain system.

When some people out there think of blockchain systems, all that can bring to mind is the recording of transactions that the blockchain system is capable of doing, but it has a more extensive use case than that. Blockchains can serve as a decentralized environment to house any and all kinds of data or information. As these are completely distributed and decentralized, there is legally no way of cheating, hacking, or altering the information that is present on the blockchain systems.

To be able to do that, all the network nodes of a dedicated blockchain need to reach a consensus, and that is virtually impossible, even in case of potential cheating or hack initiated by a dedicated network node because others would catch and discard it as soon as possible. Bitcoin was the very first depiction of this very concept as it was a blockchain-based cryptocurrency whose record was made available to the public in a concise and secure manner without worrying about the security and or integrity of the data.

It also allowed people out there working as potential nodes for the network to be able to verify and validate the transactions in an independent fashion and, in doing so, receive a dedicated fee for the service they have presented with.

Suppose a transaction has taken place on the blockchain network, now a request will be sent to all the nodes out there to verify and validate the transaction. When a consensus is reached by all the potential network nodes out there, the transaction would be suggested as validated, and a new block will be formed over the blockchain containing the raw data for the transaction in question.

As soon as this block is formed, the pertaining data for that specific block or transaction would then be sent again to all the network nodes out there so they can update their ledger, thus distributing the information with others and all users being able to update their specific ledgers. This way, the occurrence of a hack or cheating of the system properly gets rooted out.

Every block has its own unique hash number, which also acts as an identification code for the sake of scrolling through a plethora of blocks and finding the particular information for a dedicated transaction. Many blockchains out there use a variety of technologies and decentralized frameworks, but the most prominent ones are permissionless and permissioned blockchains.

What is a Permissioned Blockchain?

A permissioned blockchain, as cleared by the name, is a strictly closed circuit where distributed exchange of information takes place only if the user is actually permissioned to take part or join the blockchain. This kind of blockchain has an access control layer, and this added layer of security is only going to allow those users that are authenticated and have proper authorization to perform certain actions within the blockchain.

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There is a network owner working for a permissioned blockchain system, and any user who wants to become a part of the blockchain would have to ask for permission from the network owner. Only if you have access to the blockchain can you write, read and or access any kind of information depending on your level of clearance or the authorization that you have. Particular roles are assigned to all the individuals taking part in a permissioned decentralized ledger, and everyone can only play their part according to the designated permissions they have.

These kinds of blockchains are only shared among a limited number of users; basically, the participants are known to the network owner and are trusted completely to have the kind of access and authorization that they currently enjoy. Ripple is a great example of permissioned blockchain systems as being a large cryptocurrency in terms of altcoins, Ripple does support permissioned based roles for certain network participants.

These kinds of permissioned blockchains see a huge business from day to day basis because these basically keep all the control to the network administrators, and they can customize the whole layout of the blockchain according to their specific needs and place restrictions or lift them as required by the information they are willing to store in there.

Working of Permissioned Blockchain

There is a huge difference among the use of consensus models when it comes to permissioned blockchains because they don’t use the same ones as permissionless blockchains. Organizations that are using the permissioned blockchain system usually go for the byzantine Fault Tolerance federated and round-robin consensuses.

The PBFT can be classified as a voting-based consensus algorithm. The safety of the network is guaranteed based on the performance of the number of nodes that are behaving honestly and working properly; as long as the required minimum percentage for these notes is alright, the security of the blockchain is considered to be intact.

Then there is Federated consensus, which consists of a set of signers that are trusted by specific nodes within the blockchain. These signers help their specific nodes to reach a consensus stage by bringing into use a single block generator that is going to receive the transactions, hold them off and then filter them accordingly.

As for the round-robin consensus, the nodes that are going to be in charge of developing the blocks are selected pseudo-randomly so that there is no attribute towards favoring a group of nodes more than the others and vice versa; the blocks are developed without any trouble. Every node that has already been used to develop the blocks would have to wait for a complete cycle before it could be used again for the sake of adding a new block.

Salient Features of Permissioned Blockchain

When thinking about a permissioned blockchain, you would have to give this thing credit for being more secure than a permissionless blockchain system, and with the addition of an access control layer, the participants who take part in verifying and validating the transactions could also be filtered in a better way.

That is why it is a more secure and fundamentally active alternative to the public blockchain systems such as the likes of Bitcoin. This kind of blockchain system is preferred by people and organizations that are very specific in the business that these conduct, and those who want to assign roles verify identities and provide secure access to the personnel within their network. Permissioned blockchains, on the other hand, are also extremely unique and private because these are developed by private organizations.

  • Authorization of Decisions

As explained earlier, a consensus is not reached the same way in a permissioned blockchain the way it does in a permissionless blockchain system; some of these are also not entirely consensus-based. Any and all the validation that is made is by a private group of individuals who are authorized to take part in the validation of the transactions and scouring through the information according to the set of permissions they have been given. Also, the final decision would be made by the owner of the network because they have a central and predefined level in all of these and are regulating the working of other participants as well.

  • Decentralization Becomes Flexible
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Another great advantage of the permissioned blockchain system is that the decentralization aspect of the game is not fixed and is extremely customizable. You can either make a permissioned blockchain fully centralized or partially centralized based on your own requirements and the vision of the framework which you are running. All the participants taking part in a permissioned blockchain would decide the very degree of decentralization which the network will be running along with the algorithm which would be used for the sake of reaching a consensus.

  • No Need for Transparency

Permissionless blockchains have to be transparent because any and all record that is present within them is public property and needs to be highlighted and made available to the public, the permissioned blockchains, on the other hand, don’t have any such obligation, and they don’t have to be transparent if they don’t want to. Transparency is completely optional because of security purposes, and the level of transparency will depend on the goals of the organization and the type of business environment that they are running.

What is a Permissionless Blockchain?

A permissionless blockchain system is one where the users or validators taking part within the network don’t require the permission of anyone to join. As long as they have an active Internet connection and a computer or any other electronic device of the sorts to connect with the Internet, they can join the network, but their authorization is going to be limited based on the rules for which these are selected and given the appropriate permissions these have. Bitcoin is a cryptocurrency, and a flagship cryptocurrency runs on a permissionless blockchain network.

In a way, the permissionless blockchain system is decentralized, but it is also open to the public at the same time. The very reason a permissionless blockchain system is given this name is that there are no gatekeepers nor censorship to join the network; anyone who wants to join can join without any preliminary framework to evaluate their professional aptitude. Also, there is no need to pass or give information that is personal regarding the know-your-customer policy as appropriated by many permissioned blockchain systems out there.

As long as the protocol is supporting it, anyone that has joined the network can do anything they want within it but know that these protocols continue to change as per new guidelines that are made available to each and every person taking part within the network. The permissionless blockchain systems are considered remotely identical to the original concept of Satoshi Nakamoto and his blockchain endeavors.

Because of the fact that permissionless blockchains are available to everyone, the real trade-off for this is speed. These tend to be a lot slower than the permissioned blockchain systems as these only have a few participants dividing the resources among them. Because there is no authority or network administrator taking charge of each and everything, therefore, all the transactions that are recorded in the form of the blocks are first verified and validated by the public.

There are two main consensus algorithms that are used here and are known as the proof of work and the proof of stake consensus algorithms. The honesty of the nodes or people taking part in the validation process for the transactions is being incentivized as these are given particular rewards in the form of a dedicated amount of token paid to them when they complete the validation for the transaction and turn it into a block.

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Salient Features of Permissionless Blockchain

What the permissioned blockchains lack, the permissionless blockchains make up for it, transparency is the trademark of the permissionless blockchain systems. Any and all transactions that are taking place out there in real-time get validated and then recorded in the form of blocks is made available to the rest of the public for them to view and understand.

Every transaction is given a hash number, and anyone out there can run it on their system to find out exactly the kind of transaction which took place. But that is as far as the transparency-oriented aspects of the permissionless blockchain systems go. No one can find out the transacting parties involved, such as the sender and receiver of the transaction, along with any other particular such as the amount transacted and so on so.

All of that remains completely anonymous and hidden from the common people that were not involved in this transaction in any shape or form; only the parties involved would get access to these particulars.

  • Decentralization

The permissionless blockchains in their own happening and diversity of function are completely decentralized. Unlike the permissioned blockchain systems, which can be edited in terms of the decentralization that it holds and even turned into centralized entities, the same can’t happen in the case of permissionless blockchain systems.

It also means that no single organization, state, or country is in charge of controlling the multiple elements of the permissionless blockchain, and that is why they cannot edit the Ledger, shut down the network, or change the protocols or policies in place in any capacity. A general agreement of more than 50% of the validators is required to validate or verify a transaction, and the same goes for any and all policies that are drafted regarding the operation of the blockchain.

  • Complete Anonymity

As explained earlier, a permissionless blockchain system doesn’t provide any kind of information other than to the transacting parties involved for a dedicated transaction; that is why it means that the whole thing is completely anonymous. The public can only see a fraction of the information, such as the hash number of the transaction or the time at which it took place; at the end of the day, all this confirms is that a particular transaction, in fact, took place, was validated, and then recorded in the form of a block.

Other than that, the permissionless blockchain system also doesn’t require any kind of identification documents from the users; they can just join the network whenever they want without going through any kind of screening process.

  • Utilization of Tokens

The permissionless blockchain environment out there allows the users to be able to utilize tokens or digital assets. The blockchain is not primarily limited to the recording of transactions taking place for native cryptocurrency as these can also be used to store any kind of data or information whatsoever, but the permissionless blockchains allow the use of these tokens because this could be used as an incentive for the validators working around the clock for the network binding all of their processing power to validate transactions.

That is why these validators will be given a chunk of the token based on their service. The value of the token can either increase or decrease over time, depending on the market. That is why it is important to know that a permissionless blockchain system is more widely used as compared to the permissioned blockchain system and is more popular than the latter.

Hassan Mehmood (Saudi Arabia)

Hassan is currently working as a news reporter for Tokenhell. He is a professional content writer with 2 years of experience. He has a degree in journalism.

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