A permissioned blockchain is a distributed ledger that cannot be accessed by the public. It can only be accessed by authorized users. In order to access ledger functions, users must first identify themselves using certificates or other means of digital identification, which are granted by the ledger administrators.
The addition of permissioned users could be considered an extra security measure for the blockchain. An administrator maintains an access control layer to allow only certain participants to perform certain tasks. Records of who takes part in the transactions are stored in the blockchain. Permissioned blockchains are thus different from public blockchains.
An Overview of Permissioned Blockchains
The blockchain can be built and accessed in a variety of ways. There are some blockchains that require special permissions to read, write, and access information. Other options just require you to have the ability to connect and be able to carry out the work for the network. Each blockchain has an intrinsic configuration that rules the transactions made by the participants and defines each participant’s role in accessing and contributing to the blockchain.
It may also be necessary to maintain the identity of each blockchain participant. The term permissioned blockchain refers to such a system.
Permissionless Blockchains vs. Permissioned Blockchains
A permissioned blockchain uses the same technology as a permissionless blockchain. This, however, does not allow users to view the blockchain without being identified.
A bank, for example, may be able to track money transfers using a permissioned blockchain through the use of a number of internal nodes within the bank. Due to lack of permissions, you cannot access this blockchain. Once you have established a semi-anonymous account on a blockchain like a cryptocurrency mining network, you could join a permissionless blockchain.
In a lot of ways, blockchains work in the same way. The major differences are:
- Public vs. Enterprise usage
- Decentralized system
- Development process
- Transparent system
Public vs. Enterprise usage
Bitcoin, the most popular cryptocurrency with a permission-free blockchain, allows anyone to participate in the network as a full node or a miner contributing to the network. Anyone can take a role as a read-only reader, or they can make legitimate changes to the blockchain, like adding a new block or maintaining a copy of the entire chain.
In addition to the cost-saving benefits blockchain technology brings into organizations, blockchain uses are growing and maturing. So, permissioned blockchains are popular among enterprise firms, whose primary concerns are security, identity, and role definition.
There is a broad decentralization element in permissionless blockchains in that they can be used by more users and can extend to a much wider network. The permissioned blockchain, on the other hand, is not completely decentralized since it is primarily used for enterprise and business purposes, requiring various degrees of centralization.
Permissionless blockchains are usually open source, which means there is a community behind them, which means anyone can change and use them. A permissioned blockchain is generally proprietary and controlled by the developers or company using it.
An access-control layer manages permissions and profiles in this way. This is distinct from un-permissioned or public blockchain networks, which do not have control layers.
Since permissioned blockchains are used for business transactions, they require a higher degree of transparency. The nodes, or all the users and their connections, are known to one another and their transactions are visible. One of the many benefits is that it may protect a company against double invoicing, double spending, double paying, or any other number of mistakes that can be made using enterprise management software.
Which is the best blockchain for permissionless and permissioned transactions?
Generally, permissioned blockchains are used for enterprise purposes and require user approval to join, whereas permissionless blockchains are used for public purposes with less transparency and control requirements.
Uses of Permissioned Blockchains?
The general purpose of permissioned blockchains is to create and manage supply chains, sign contracts, verify payment among parties, and much more.
So, do not get mistaken that like the digital Bitcoin wallet, these can only store Bitcoins, they are much beyond that.