Permissioned and Permissionless Blockchains: A Comprehensive Guide [UPDATED]

• Toshendra Kumar Sharma
• May 10, 2024

When it comes to blockchain technology, blockchain applications can be used for various types of operations such as finance, tech, authentication, and a lot more. It is why there are different types of blockchain that are used for various purposes and by different types of organizations. This article mainly describes the importance, function, and main difference between Permissioned and Permissionless Blockchains that can be used for various operations.

Permissioned Blockchain

When it comes to security operations on a blockchain ledger, which can only be done by a few people authorized to do so, we use a permission ledger. In simple terms, the distributed ledger in this can only be accessed by a few people who have been allowed to do so by the administrator. These users are provided different types of privileges which allows them to do certain actions. However, it must be noted that anyone who is not allowed by the administrator, will not be allowed to access it publically. The major benefit of this model is that since the people accessing the ledger are limited, any kind of changes made in the ledger can be easily tracked and the user can be identified. 

Users can be added or removed and use digital verification or certificates to access the data. Since the access is restricted, it becomes very different from a regular public blockchain. You can also say, that it is an additional layer of security for blockchain and are great for people who require role definition for certain individuals in blockchain with limited access. Since it brings security and privacy to the blockchain, this model is adopted by most of the biggest companies in the world and is becoming more popular with time. Permissioned Blockchain will be mainly used in business operations or where data security is the highest priority. It can be used in supply chains, creating contracts, and verifying payments. 

Features

• The first major feature of permissioned blockchain is that it provides more transparency based on the objectives of the organization. It is more clear as to who has made the changes, and who has been permitted to do so. Every action taken by the user is tracked and known.
• Permissioned Blockchain is of great advantage to private entities or companies as it has allowed them to handle data in a more secure way. It has complete control over who has the access to it and who has permission to make the changes.
• Lack of Anonymity is another feature that can prove a lot more useful for private entities. Since only a limited number of users are allowed to make the changes to the data, every change is tracked to the user. So the administrator is always aware of the changes and who actually made them.
• Permissioned Blockchain does have a lack of central authority but it allows a private group to authorize decisions.

Pros and Cons

Although Permissioned blockchain is very useful in adding an extra layer of protection and security due to which it is being adopted by a lot of private entities, there are still some cons as well. Let’s have a look at the pros and cons of Permissioned blockchain.

Pros

• Since it is a decentralized model, the companies can easily participate without having to deal with the risk of centralized models.
• Privacy is the focal point of Permissioned Blockchain and strong privacy is what the users have to work with while accessing the transaction details.
• It can be easily customized with various configurations and as per the needs. Users can have hybrid integrations or modular components.
• Since the access is limited, few modes handle the transactions which increase the performance and scalability.

Cons

• Since it has limited or few participants, it has more chances of collusion and corruption of data.
• Getting a consensus in this model is not easy as rules of consensus can be changed by the operator at any time. 
• Since the participants are limited, there is less transparency to outside oversight.

Permissionless Blockchain

A permissionless blockchain is completely the opposite of a Permissioned blockchain. In the Permissionless model, which is also known as a public blockchain, there are no restrictions, and the participation is not controlled by an administrator. Anyone can participate in the consensus and validate the data. There are no administrators allowing the users to participate or giving them the permission and rights to make the changes. It is a completely decentralized blockchain platform across unknown parties.

Features

• Since Permissionless blockchain does not have any kind of restrictions for the user to join through an open network, there is complete transparency of transactions to the users. 
• The platform is a completely open-source development as the users can easily access it and make the necessary changes to it.
• The clause of anonymity did not exist in permissioned blockchain, but here it does. However, it does not mean that it provides complete anonymity, it does have some exceptions while making the changes. 
• Permissionless blockchain lacks central authority since it is open to any user.
• It also offers heavy use of the tokens and digital assets as an incentive to participate. Therefore, it leads to more efficient and effective working.

Pros and Cons

Just like Permissioned Blockchain, Permissionless blockchain also comes with a lot of pros and cons which makes it a great platform, but not for private entities or companies looking for a more secure platform.

Pros

• It has a broader decentralized platform which allows more participants through the network when compared to permission blockchain.
• It has a high level of transparency and also speeds up the reconciliation process
• Since it has a large number of participants, it is very resistant to censorship
• It is almost impossible to disrupt the repository as for that 51% of the network needs to be corrupt and corrupting that a large amount of data is almost impossible.

Cons

• Less privacy as compared to permissioned blockchain
• Low performance and scalability as more users lead to more pressure on the computing resources
• The model is not energy efficient as network-wide verification uses a lot of resources intensively.

Where can Permissioned and Permissionless blockchain be used?

Both Permissoned and Permissionless blockchains have different kinds of architecture which can be useful for some types of applications and not useful for some. However based on their usage, we have differentiated the applications they can be used on. For example, Permissionless blockchain can be used to build a strong financial platform that is based on a decentralized platform. It can be used in Digital Trading, donation, and crowdfunding and also as a file storage medium for the public. Since it does not come with any restriction, it can be easily accessed by users.

In a similar fashion, permissioned blockchain comes with restricted user access to the data and could be used in applications like supply chain tracking, claim settlements, and verification of identity. Since these applications are based on privacy with restricted access to certain individuals, permissioned blockchain suits it the best. The adoption of both technologies will depend on the kind of business application it will be used for. 

Here are some of the factors that can help you decide whether to use permissioned or permissionless blockchain:

• Scalability and Performance: It refers to the frequency of transactions and the interaction with it for validation, security, etc.
• Power Usage: The more the transactions will be, the more will be power consumption in processing them.
• Roles: It refers to different kinds of user configuration needed for things like decision making, setting permissions, allowing access, and more. 
• Privacy: Based on the business parameters, it can be decided on what kind of privacy is required or will it remain public.
• Smart Contract: Smart contracts check for accountability and liability in case the system is compromised. 
• Token: It is more relevant to the permissionless blockchain where the companies can decide to give token or digital rewards to users.

Difference between Permissionless and Permissioned

We have already explained how Permissioned and Permissionless blockchain works and how it differs based on the applications it is used on. Based on their usage, there are four major differences between the two.

 

	Permissionless	Permissioned
Overview	Open Network allowing anyone to interaction consensus validation and ful decentralized	Closed Network with limited Decentralization and designated parties for participation in Consensus Validation
Also Known As	Public, Trustless	Private, Permissioned Sandbox
Key Attributes	Full transparency Development in Open Source Mostly Anonymous Privacy dependent on technological limitations No Control Authority Involves digital assets	Controlled Transparency Development by Private entities Not anonymous Privacy based on governance decision No Single authority May or May not involve digital assets.
Benefits	Brader decentralization Highly transparent Censorship resistant Security resilience	Incremental Decentralization Strong privacy Customizable Faster and Scalable.
Drawback	Less energy efficient Slow and difficult to scale Less user privacy	Limited decentralization Override risk Less transparent
Market Traction	P2P B2C Government to Citizens	B2B B2C Government to Organizations

Some differences that you need to understand in brief

Private and Public Use

It is one of the major differences between the two. For example, a company that wants its business to grow with more privacy and security features and restricted access to the data will go for permission blockchain. Since it has its own level of transparency and not everyone is allowed to access or edit it, it becomes easier for the company to define roles and manage the data. One such great example is the handling of the Supply chain through Permissioned blockchain. Similarly, things like Donation and blockchain platforms like Bitcoin need people to participate without any kind of restrictions, where the permissionless model comes into play..

Decentralization

Where the permissionless blockchain is more decentralized, permissioned is decentralized in a limited way. Permissionless blockchain provides an option for more and more users to join through the network, which extends the network as well. On the other hand, the restrictive nature of Permissioned blockchain limits decentralization. Also, since permissioned is used by companies, decentralization can only be limited to managing the data and resources. 

Development and Upgrades

Since Permissionless blockchain is open source, a community of users can easily develop, upgrade and change the components of the blockchain. Also, it allows all the users to view the data and transactions without any restrictions. In Permissioned blockchain, the upgrade and development of the blockchain are limited to the developer or the company that is using it. 

Transparency

Permissionless blockchain does not have any kind of restriction for users to view and access the transaction. Therefore, it offers less transparency as anonymity is more, and it is not easy to know who made the changes. Since transactions are encrypted, tracking a wallet address is not easy. Similarly, since only a handful of users with access can access the transactions, it is easy to track who made the changes in the data. It not only helps to track but also reduces errors, which is very important in private entities. 

Conclusion

There are various types of applications for which both Permissoned and Permissionless blockchain can be used. It cannot be said that one approach is better than the other as the usage depends on the business criteria. Be it Permissoned or Permissionless blockchain both have a specific set of features. However, where permissioned is focused more on private entities and companies to manage their data and operations, the permissionless blockchain is created for more and more people to join and contribute to adding their value as well. Permissioned and Permissionless blockchains are being continuously developed and upgraded to give them a wider area for working. 

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