In blockchain technology, one of the biggest divisions is that between permission and permissionless blockchains. At the foundation, the difference is quite clear. In a permissioned blockchain network, a participant requires approval. Permissionless systems, on the other hand, allows anyone to take part in it. The original Bitcoin blockchain was a totally open one, and it still is. However, as companies begin to embrace the technology, they have become willing to trade trustfulness and transparency for access to better controls and ease of customization.
No matter how similar these two systems may seem, they ideally are not to be used for the same set of things. Probably, businesses will not be so excited about using a permissioned cryptocurrency. This is because one of the strongest things with digital assets is that no one controls its working process or its destination. On the converse, a firm such as Marsek that uses blockchain for tracking shipping logistics, will not want to dump all of its sensitive information into a permissionless blockchain network.
Summarily, a permission blockchain is the type that is only open to those who are granted access. If you want to validate transactions or have access to data on the network, you need to be an approved member, a shot called by the central authority. This technology is especially a good one for banks, companies, and other organizations that need to play by the rules while not willing to completely hand the reins of data control to other entities. Rather than building on a large, decentralized blockchain such as Ethereum, they formulate a custom solution that will be run only by the institutions they want to be in the show.
The much-talked-about digital currency being cooked by Facebook is a good example. Libra might finally go public in the future, but then only a select number of companies who have invested and given approval will be allowed to operate it. Other users may have no other option than to sign up with their actual identities. Permissioned blockchains are highly customizable, have better energy-efficiency, and have an easier time changing to comply with regulations. On the downside, they are more centralized, less transparent, and less anonymous.
A lot of the blockchain network you know fall into this category - Bitcoin, Ethereum, Dash, Litecoin and Monero. The rest are public systems where anyone can transact on or even join as a validator. Anyone can access the data stored on these chains because they are publicly available. Full copies of the ledgers are stored around the world, making the systems impossible to hack or censor. No user is the supreme overlord of the blockchain, and as such, has no power to restrict access. A user can decide to remain relatively anonymous since they do not need to identify to get an address and validate transactions.
Permissionless blockchain generates buzz in their wake because they are what underlie most cryptocurrencies and the most interesting decentralized solutions. The hype is nothing short of deserved because they have what it takes to revolutionize currencies and services that no longer need the so-called trusted middlemen. If there is an immutable blockchain of cars, one would be able to access reliable data on each part, service, record, and transaction associated with a used car rather than trusting some Craiglist seller who says he can be trusted.
However, the system is far from perfect. Of course, it can be slow, difficult to create and scale on. Some businesses may not opt-in because permissionless blockchains are transparent to keep sensitive data, hard to control access to, energy-intensive, and all-around complex. For these reasons, permissioned blockchains are becoming a more widespread solution for businesses that want to use blockchains to replace more traditional systems.
Permissioned and permissionless blockchain networks do have some interesting things in common, and that is probably the reason some businesses think they can be used for the same processes. Both of these blockchains are distributed ledgers, which implies that there are multiple copies of the same data stored in different places which are interconnected through a network. They also both use some kind of consensus mechanism, meaning that there is a system for them to have multiple versions of the ledger to decide on how they should look like.
The permissioned and permissionless blockchains both have theoretically immutable nature, which means that the data stored on them cannot be altered or modified in the absence of sufficient power over the network. Even with the necessary, the blocks are linked by cryptographic hashes, which change immediately any data is altered. In other words, both blockchains employ cryptography and decentralization to varying degrees to effectively store information in a manner that’s impossible to hack or mess with.
Permissioned and permissionless blockchain systems are more or less like branches of the same technology that was developed to attend to different business needs. In their own ways, both of them are useful. Also, for most practical purposes, they are different kinds of technology. The benefits in the offing of a permissionless blockchain do not directly map over to permissioned systems.
So, just because a firm claims it is adopting blockchain does not essentially mean it is using a more private or decentralized platform than a traditional database. The distinction between the permissioned and the permissionless is where the buzzword really comes to play, making a very important puzzle piece that needs to be known.