Blockchain has already proved itself a transformative technology for a large number of industries, enabling both public and private entities to implement new services that provide improved ways of processing transactions.
If you’re in the research stages of starting a blockchain project, you’ll need to make some important decisions along the way. One of these will be deciding between persmissioned and permissionless blockchains.
Unsure about the difference between the two types? In this article, Blockchain Australia Solutions breaks down the comparison and explains the benefits of each.
What are the blockchain types?
Since all industries are vastly different from each other, one single, standardised blockchain network isn’t sufficient for all sectors. The need for different sets of protocols has led to more blockchain networks branching out, which all maintain the same basic structure.
There are two main types of blockchains to know about; permissioned and permissionless. Let’s take a look at what they are.
Permissionless (public) blockchains
Most cryptocurrencies (e.g. Bitcoin and Ethereum) are powered by public blockchains. There’s no barrier to access this blockchain (hence the name “permissionless”) and any user can create a personal address and get access to the network. Anyone can run a node, employ mining protocols, access a wallet, write data onto the blockchain and more.
Permissioned (private) blockchains
Private blockchains, in contrast, do not allow open entry to all users. Permissioned blockchains are more of a closed ecosystem, often deployed by centralised organisations to run internal business operations. Some private blockchains may allow public users to read the information, but they would require permission to actually transact on the network.
What are the benefits of permissionless blockchains?
Organisations may prefer the more open ecosystem of permissionless blockchains, as they offer benefits such as:
- They are decentralised – no centralised entity is needed to approve or change the protocols in the system. Permissionless (public) blockchains are usually based on consensus protocols dictated by the users. This means that as long as at least 50% +1 users agree to a network change, it can go ahead.
- They offer anonymity – in order to access and transact with a public network, users usually don’t have to enter their personal information. However, there are some cases where some information is legally required, such as when trading Bitcoin.
- They are transparent – one major attraction of blockchain networks is their transparency. Users know they can trust the network because they’re given access to all information related to a process or transaction.
What are the benefits of permissioned blockchains?
Only an approved set of people or computer systems get to access permissioned blockchains. These private networks offer advantages including:
- Control over decentralisation – the network’s level of decentralisation is negotiable and can be controlled by members of the blockchain. In order to manage varied levels of control between users within the networks, private blockchain users can be ranked into tiers.
- Transparent and anonymous – levels of privacy and transparency can be decided by the business and usually depends on the business type and operations.
Permissioned vs permissionless blockchains: which is best?
There has been some debate over whether public or private blockchains are best, with some people dismissing permissioned networks as a type of blockchain completely, due to their centralised nature.
When it comes to the argument of permissioned vs permissionless, there is no right answer. The best option comes down to an organisation’s requirements. Public blockchains are necessary for cryptocurrencies and are more open to users, while private blockchains are better for businesses to manage their internal operations securely.
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