Difference between Permissioned and Permissionless Blockchains
Difference between Permissioned and Permissionless Blockchains
Have you heard about types of blockchain proof-of-work (PoW) or Proof-of-stake (PoS) each blockchain can consider either permissioned or permissionless. learn more about permissioned and permissionless blockchains.
What Are Permissioned and Permissionless Blockchains?
Blockchain is a distributed ledger technology that allows multiple parties to maintain a shared database without the need for a trusted intermediary. There are two main types of blockchain networks: permissioned and permissionless.
What is Permissioned Blockchain?
Permissioned blockchains are private networks that are restricted to a defined group of participants who have been permitted to access the blockchain. These participants are often identified and authenticated using some form of access control mechanisms such as a username and password or a cryptographic key. Transactions on a permissioned blockchain are typically validated by a smaller number of pre-approved nodes, which results in faster transaction processing times and greater efficiency.
What are Permissionless Blockchains?
Permissionless blockchains are public networks that are open to anyone who wants to participate. There is no central authority controlling access to the blockchain, and anyone can validate transactions and create new blocks. These networks rely on a consensus mechanism such as proof-of-work or proof-of-stake to ensure that transactions are validated by the network as a whole, rather than a select group of pre-approved nodes. This decentralized approach provides greater security and transparency but can result in slower transaction processing times and higher energy consumption.
Both permissioned and permissionless blockchains have their advantages and disadvantages, and the choice between them depends on the specific use case and requirements of the network. Permissioned blockchains are often used in enterprise settings where a small group of trusted participants need to share sensitive information and maintain control over the network. In contrast, permissionless blockchains are often used in public settings where transparency and decentralization are paramount, such as in cryptocurrency networks.
|Users||Invited||Free to join|
|Digital assets / tokens||Rare||Common|
|Upgradability consensus process||Short||Lengthy|
Permissionless Blockchains: Benefits
The benefits of permissionless blockchains include:
- Decentralization: Permissionless blockchains are decentralized, meaning that there is no central authority that controls the network. This makes it more difficult for any one entity to control or manipulate the network, which can lead to increased trust and transparency.
- Transparency: Since anyone can view the data on the blockchain, permissionless blockchains are transparent. This can help to prevent fraud and corruption, as well as ensure that all participants are following the rules.
- Security: Permissionless blockchains are secured by a consensus algorithm that is designed to prevent malicious actors from tampering with the data on the network. The decentralized nature of the network also makes it more resilient to attacks.
- Censorship resistance: Since there is no central authority controlling the network, permissionless blockchains are resistant to censorship. This means that anyone can participate in the network and share their ideas and transactions without fear of being silenced.
- Innovation: Permissionless blockchains are open to anyone, which means that anyone can contribute to the development of the network. This can lead to increased innovation and the development of new use cases for blockchain technology.
- Global access: Anyone with an internet connection can join a permissionless blockchain network, which means that it is accessible to people all over the world. This can help to increase financial inclusion and provide a way for people in underprivileged areas to access financial services.
Permissionless blockchain: Drawbacks
Some of the drawbacks of permissionless blockchains include:
- Scalability: Permissionless blockchains can be slow and difficult to scale due to a large number of participants and the high computational requirements needed to validate transactions. As the number of transactions and participants on the network increases, the performance and speed of the blockchain can suffer.
- Lack of control: Since permissionless blockchains are decentralized and open to anyone, it can be difficult to control who joins the network and what activities they engage in. This can lead to issues with bad actors or malicious users who may engage in fraudulent or illegal activities on the network.
- Energy consumption: Permissionless blockchains require a large amount of energy to maintain the network, validate transactions, and secure the blockchain. This can hurt the environment and contribute to climate change.
- Cost: While permissionless blockchains may offer lower transaction fees compared to traditional financial systems, the cost of participating in the network can still be high. Participants may need to invest in specialized hardware or software to participate, and the computational requirements of the blockchain can be expensive to maintain.
- Lack of privacy: Since permissionless blockchains are transparent and anyone can view the data on the network, privacy can be a concern. While some blockchains offer privacy features, they may not be as strong as other privacy-focused technologies.
Permissioned blockchains: Benefits
The benefits of permissioned blockchains include:
- Control: Permissioned blockchains are controlled by a specific group of participants who have been granted access to the network. This allows for greater control over the network, including the ability to set rules and permissions for participants and govern how the network operates.
- Scalability: Since permissioned blockchains are restricted to a specific group of participants, they can be more scalable and have higher transaction throughput compared to permissionless blockchains. This makes them well-suited for use cases that require high transaction volumes.
- Privacy: Permissioned blockchains can offer stronger privacy and confidentiality features compared to permissionless blockchains. This is because access to the network is restricted to a specific group of participants, which can help to prevent unauthorized access to sensitive data.
- Efficiency: Since permissioned blockchains are restricted to a specific group of participants, they can be more efficient in terms of processing transactions and validating data. This is because the network can be optimized for the specific use case, which can help to reduce the computational requirements of the blockchain.
- Trust: Since permissioned blockchains are controlled by a specific group of participants, they can be more trusted by participants who are part of the network. This can lead to increased adoption and usage of the network, particularly in use cases where trust is a critical factor.
- Compliance: Permissioned blockchains can be designed to meet specific regulatory and compliance requirements, making them well-suited for industries such as healthcare, finance, and supply chain management.
Permissioned blockchains: Drawbacks
Some of the drawbacks of permissioned blockchains include:
- Centralization: Permissioned blockchains are controlled by a specific group of participants, which can lead to centralization. This means that the network can be vulnerable to attacks or manipulation by a single entity or group of entities, and may not be as resilient or trustworthy as permissionless blockchains.
- Limited transparency: While permissioned blockchains can offer greater privacy and confidentiality, they may also limit transparency. This is because the data on the blockchain is only visible to the participants who have been granted access, which can make it difficult for external parties to verify the accuracy of the data or ensure that the rules of the network are being followed.
- Dependence on a central authority: Permissioned blockchains may require a central authority to manage and govern the network. This can limit the decentralization and trustlessness of the network and may introduce additional risks such as regulatory or legal challenges.
- Higher cost: Permissioned blockchains can be more expensive to operate and maintain compared to permissionless blockchains, due to the need for more advanced infrastructure and the requirement to manage access and permissions for participants.
- Limited innovation: Since permissioned blockchains are controlled by a specific group of participants, they may be less open to innovation and may not offer the same level of community-driven development and growth as permissionless blockchains.
Should I Use a Permissioned or Permissionless Blockchain?
The decision to use a permissioned or permissionless blockchain depends on several factors, including the use case, the level of decentralization desired, the required level of control, and the regulatory and compliance requirements. Here are some considerations to keep in mind when deciding whether to use a permissioned or permissionless blockchain:
Permissionless blockchain may be more suitable if:
- Decentralization is a priority: If you require a high level of decentralization and want a network that is not controlled by a single entity, then a permissionless blockchain may be more suitable. This is particularly true for applications that require a high degree of trust and security.
- Transparency is important: If you require transparency and want to create an open and public record of transactions, then a permissionless blockchain may be more suitable. This is particularly true for applications such as public financial markets or supply chain management.
- Community-driven innovation is important: If you want to benefit from the network effect of a large community of developers, then a permissionless blockchain may be more suitable. This is particularly true for applications that require constant innovation and development.
Permissioned blockchain may be more suitable if:
- Control and privacy are important: If you require greater control and privacy over the network, then a permissioned blockchain may be more suitable. This is particularly true for applications such as healthcare or financial services where sensitive data needs to be protected.
- Scalability is a priority: If you require a high level of scalability and want a network that can handle a high volume of transactions, then a permissioned blockchain may be more suitable. This is particularly true for applications such as enterprise supply chain management or trading platforms.
- Compliance and regulation are important: If you need to meet specific regulatory or compliance requirements, then a permissioned blockchain may be more suitable. This is particularly true for applications in heavily regulated industries such as healthcare, finance, and government.
Related: Understanding Zero-Knowledge Proofs and Their Role in Blockchain