What is a Permissioned Blockchain?

TL;DR

Permissioned blockchains operate differently from public blockchains, as they require an invitation to join and are primarily used in private business settings for specific use cases. They are managed by a limited group of validators who have the power to make most of the network decisions. Although transparency may be limited, permissioned blockchains tend to have shorter network upgrade times and greater scalability compared to public blockchains. These characteristics make permissioned blockchains suitable for enterprise applications that require a higher degree of control and privacy.

Table of Contents

Introduction

A permissioned blockchain is a type of blockchain technology that restricts access to a specific group of participants who have been granted permission to read, write, and validate transactions on the network. Unlike public blockchains, which allow anyone to join and participate, permissioned blockchains are designed for private business settings and tailored for specific use cases.

As I mentioned above, what are permissioned blockchains, it is important for you to know, they offer greater control, security, and privacy, but at the cost of decentralization and immutability. Permissioned blockchains are typically used in enterprise applications and financial services, where data privacy and confidentiality are critical.

So, keeping in mind all your needs here, I come up with a detailed guide about it.

What is Permissioned Blockchain?

Permissioned blockchain is a type of blockchain technology that allows access to a specific group of participants who have been granted permission to read, write, and validate transactions on the network. These blockchains are designed for private business settings and tailored for specific use cases, offering greater control, security, and privacy. Unlike public blockchains, permissioned blockchains are more centralized and allow for faster transaction processing.

History and Background

The origins of blockchain technology can be traced back to Satoshi Nakamoto’s Bitcoin white paper, which introduced the concept of a permissionless blockchain where unaligned users generate consensus. This trend towards permissionless blockchains has continued to influence subsequent blockchain generations, reflecting the values and ethos of Bitcoin and its descendants.

However, blockchain’s immutability, transparency, and security characteristics have also made it attractive for private applications, leading to the development of permissioned frameworks and custom blockchains such as Hyperledger Fabric, Quorum, MultiChain, and Ethereum Geth, which offer a more controlled and private experience for enterprise needs.

Pros and Cons of Permissioned Blockchains

Pros

Greater control: Permissioned blockchains allow for more control over the network, with administrators able to set rules and governance frameworks that ensure compliance with regulatory requirements.
Improved privacy and confidentiality: Access to the blockchain is restricted to a pre-approved group of participants, ensuring greater data privacy and confidentiality.

Faster transaction processing: Since participants are known to each other and trust is established, complex consensus mechanisms are not required, leading to faster transaction processing times.
Suitable for enterprise applications: Permissioned blockchains are tailored for private business settings and designed for specific use cases, making them ideal for enterprise applications.

Cons

Less decentralized: Permissioned blockchains rely on a central authority to manage access and enforce rules, leading to less decentralization compared to public blockchains.

Vulnerable to censorship and collusion: The central authority can control who can participate and what transactions are validated, making permissioned blockchains more susceptible to censorship and collusion.
More vulnerable to security breaches: Since permissioned blockchains offer greater control over the network, they are more vulnerable to hacking and other security breaches.
Limited transparency: Permissioned blockchains may limit transparency compared to public blockchains, as access to the network is restricted.

What is an example Permissioned Blockchain?

Permissioned blockchains are designed for private business settings and tailored for specific use cases. They restrict access to a specific group of participants who have been granted permission to read, write, and validate transactions on the network.

One example of a permissioned blockchain is Quorum, which is a private, enterprise-focused version of Ethereum developed by JPMorgan Chase. Quorum offers privacy features such as private transactions, zero-knowledge proofs, and a permissioned network that restricts participation to approved members. Another example is R3 Corda, a distributed ledger platform designed for financial services that allow for secure and private transactions between counterparties.

Hyperledger Fabric is another popular permissioned blockchain framework that offers a modular architecture and the ability to customize smart contracts to fit specific business needs. These permissioned blockchains are ideal for use cases such as data storage, digital identity systems, and inventory and supply chain management, where privacy and control are critical.

Final Words

I hope now that you’re well aware, of permissioned blockchain. In conclusion, permissioned blockchains offer a more controlled and private experience for enterprise needs. While they are less decentralized and limit transparency compared to public blockchains, they provide greater control, security, and privacy. Permissioned blockchains such as Quorum, R3 Corda, and Hyperledger Fabric are popular frameworks designed for specific use cases such as data storage, digital identity systems, and supply chain management. As businesses continue to adopt blockchain technology, permissioned blockchains are likely to play an increasingly important role in the future of enterprise applications.

FAQs

What is Permissioned and Permissionless blockchain?

Both permissioned and permissionless blockchains have distinct characteristics. Permissioned blockchains primarily cater to private entities and companies in managing their data and operations, while permissionless blockchains are designed to enable more individuals to join and contribute to adding value.

Is Ethereum a Permissioned blockchain?

Ethereum is a blockchain-based platform that is originally designed as a public and permissionless platform with a Proof-of-Work (PoW) based consensus protocol called Ethash. However, it can also be configured to function as a private platform.