Differences between permissioned and permissionless blockchains

One of the biggest divisions of blockchain technology is that of permissioned and permissionless blockchains. The basic distinction is pretty clear:you need approval to use a permissioned blockchain, while anyone can participate in permissionless systems. The original Bitcoin blockchain was and still is completely open, for example, but as businesses and institutions begin to embrace the technology, they are willing to sacrifice lack of trust and transparency for better access controls. and easier customization.

SummaryHow Permissionless and Permissionless Blockchains Are SimilarPermissionless BlockchainsPermitted BlockchainsWhich is better?

Why do we care? As similar as the two systems may seem, they really shouldn't be used for the same things. People probably won't be as keen on using a licensed cryptocurrency, for example, because one of the biggest appeals of crypto is that no one can control how it works or where it goes. Conversely, a company like Maersk, which uses blockchain to track its shipping logistics, does not want to put all of its confidential data on a blockchain without permission.

How permissioned and permissionless-blockchains are similar

Permissionless and permissionless blockchains have some important characteristics in common:

All data stored on these chains is publicly available and full copies of the records are stored worldwide, making these systems very difficult to hack or censor. No one is running the blockchain, no one can restrict access to it, and you can stay relatively anonymous since you don't need to identify yourself to get an address and transact.

This type of blockchain tends to generate buzz because it is what underpins most cryptocurrencies and the most exciting decentralization solutions. The hype is deserved, as permissionless public blockchains have the potential to revolutionize services that previously required trusted intermediaries — not just currency. An immutable car blockchain could give you the ability to look up reliable data on every part, service record, and transaction associated with a used car instead of trusting the guy at Craigslist, for example.

Of course, this system is far from perfect. It can be slow, difficult to develop and develop, too transparent to keep sensitive data, difficult to control access, energy-intensive and complex. This is why permissioned blockchains are becoming a more popular solution for businesses and institutions looking to use blockchains to replace more traditional systems.

Blockchains authorized

In a nutshell, permissioned blockchains are only open to those who are authorized to access them. Anyone wishing to validate transactions and/or view data on the network must first be approved by the central authority.

This is especially useful for banks, corporations, and other institutions that need to comply with regulations and may not be fans of losing complete control of their data. Instead of relying on a large decentralized blockchain like Ethereum, they can instead create a custom solution run only by institutions they trust.

Imagine a watermelon company taking its supply chain to the next level:

1. The company decides to create a blockchain system to track its delicious fruits from farm to store. They need to make sure no one slips into subpar watermelons and want to know exactly who is involved in each step, so they decide on an authorized blockchain that only authorized users can access.
2. They build a Melonchain and give each stop in their supply chain a way to access it and add data to it, which is validated by a network of servers run by the company. This way, whenever data about a melon is recorded, it can be viewed in the ledger and cryptographically verified later.
3. Some data about each watermelon, such as the date and location of harvest, is made public for consumers, while other data, such as the exact movements along the supply chain, remain confidential to assist consumers. to maintain its competitive advantage.

Another good example is Facebook's Libra cryptocurrency. It may go fully public in the future, but when it launches, only a certain number of companies that have invested and been approved will be allowed to operate it, and users may need to register with real identities.

The big advantages of permissioned blockchains are that they have:

• Access controls
• High customization
• Easier change to comply with regulations
• Better energy efficiency
• Potentially better scalability

However, there are also disadvantages. They are:

• More centralized
• Less transparency
• More vulnerable to hacks and manipulation
• Easier to censor
• Less anonymous

Which is the best?

Permissionless and permissioned blockchains are just branches of the same technology that have developed in response to different needs. Both are useful in their own way and are, in most practical cases, different technologies.

This means that the benefits brought by a permissionless blockchain are not directly related to permissioned systems, so just because a company says it uses blockchain technology does not necessarily mean that it is much more private or decentralized than it is. a traditional database. The permissionless distinction is where the buzzword really starts to fall apart, making it a pretty important piece of the puzzle to know.

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