An Introduction to Permissioned Blockchains

By  //  April 11, 2022

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The general assumption is that blockchains are decentralized. Therefore, there is no central authority in control. No one needs to grant permission for the existence of cryptocurrency networks. Surprisingly, there are permissioned blockchains too! Here you need to know how Bitcoin trading makes you rich.

Permissionless Blockchains

What are the features of a typical, permissionless blockchain?

 Its most important job is to keep track of every single transaction that goes through its network.

Every member of that network may access it. This is an indication that the blockchain believes in transparent operations.

No personal details of any investor/trader go onto the blockchain. Therefore, participants remain anonymous. 

It is possible to trace the addresses of different wallets. However, it is not possible to trace the owners of those wallets.

The blockchain manages to remain decentralized, due to the efforts of the miners. They undertake verification of transactions, in return for block rewards. 

Since much of the information is available to the public, typical blockchains are public ones. 

Permissioned Blockchains 

Public blockchains are permissionless. No third-party interference is there. Only two parties (sender and receiver) need to connect with one another.

In contrast, there are blockchains that operate differently. These are the permissioned blockchains. They refer to networks, which are not easily available to the public. Only people/groups possessing explicit permissions to access them may do so. They are the special users of such blockchains. 

They may read or write new information, in alignment with the permission obtained to do so. Similarly, users may perform certain actions, provided they have permission to do so. Sometimes, users are restricted to mere connecting and conducting of work. 

How do people get the go-ahead for accessing permissioned blockchains?

Anyone, who wishes to access a permissioned blockchain, must reveal his/her identity via digital certificates. Alternatively, other authoritative means may also come into play. Whatever is the case, unless the blockchain network is completely satisfied, access is denied. 

The network even determines, which person may access which kind of information. It all depends upon what the digital certificates show. Above all, the blockchain network maintains records of permissioned participants. 

Differences between Permissionless and Permissioned Blockchains

Decentralized apps and digital currencies are public entities. They use permissionless blockchains. 

Businesses and commercial enterprises are private entities. They use permissioned blockchains.

Anonymity and mining of coins are the key features of permissionless blockchains. They help to keep the network safe and secure.

Permissioned blockchains ensure security and definition of participants’ roles, with the assistance of digital certificates.

Permissionless networks are completely decentralized.

The other one is only partially decentralized.

Anonymity in permissionless networks leads to less transparency.

It is not the case with permissioned networks, for roles are well defined.

Permissionless blockchains are open-source. 

The other is proprietary and controlled. The extent varies from one establishment to another.

Functions of Permissioned Blockchains

Basic Usage

Establishments, which approach permissioned blockchains, are keen to reduce expenses. They may define roles for diverse participants. This way, not everyone may access specific domains. As a result, it becomes possible to keep control over various activities on the network. Thus, the integrity of the network remains intact. 

Secure Identities and Secure Transactions

Businesses and commercial establishments assign roles to various employees in their respective organizations. Permissioned blockchains take note of these roles. In fact, they keep a record of every person on the network. 

They also outline how the establishments and their participants should conduct themselves and their business dealings. This way, they can assure the participants about keeping information safe. If the information is sensitive, it is not accessible to all. Only certain participants may avail of it, and even modify it on the blockchain network.

Thus, decentralization is not a suitable feature in this scenario. Permissioned blockchains refuse to consider it. The details of every transaction are maintained. It becomes easy to trace fraudsters if any are present.

Transparency of Operations

Unlike permissionless blockchains, permissioned networks prefer to have organizational control. In other words, they opt for centralized networks. It helps to maintain limited access. 

Certain regulations come into play, for protecting the interests of the concerned commercial enterprise or business. It is permissible, for the entities accessing permissioned blockchains are private. At the same time, these blockchains also enjoy a certain amount of decentralization in diverse aspects.