Permissioned Blockchain: A Complete Overview

Blockchain technology is often associated with open, decentralised networks, but not all blockchains are accessible to everyone. As organisations seek greater control, security, and regulatory compliance, Permissioned Blockchains have emerged as a practical alternative to public networks.

In this blog, we explore what is a Permissioned Blockchain, how it works, and why it is widely used in enterprise environments. The blog explains its key features, benefits, and real-world applications, helping readers understand where it fits within the broader blockchain ecosystem.

Table of Contents

1) What is Permissioned Blockchain?

2) How Does a Permissioned Blockchain Work and What Makes it Different?

3) Types of Permissioned Blockchain

4) List of Best Permissioned Blockchains

5) Characteristics of Permissioned Blockchain

6)  Advantages of Permissioned Blockchain

7) Disadvantages of Permissioned Blockchain

8) Examples of Permissioned Blockchains

9) Difference Between Permissioned and Permissionless Blockchains

10) Where can Permissioned and Permissionless Blockchains be Used?

11) Why are Permissioned Blockchains Ideal for Business Applications?

12) Conclusion

What is Permissioned Blockchain?

A Permissioned Blockchain is a closed, access-controlled network where only authorised participants can join, view data, and perform specific actions. Granting of entry may involve verification of identity or some form of approval, and roles are defined to restrict what a particular member may or may not read, write, or validate.

These blockchains are semi-decentralised and are normally applied by organisations in need of security, control, and manageable involvement.

How Does a Permissioned Blockchain Work and What Makes It Different?

A Permissioned Blockchain operates on the same foundational principles as traditional blockchain technology but introduces access controls and governance layers tailored for enterprise use. It also offers more security, efficiency, and regulatory compliance than the public blockchains because it limits membership to authorised users.

The key features that make a Permissioned Blockchain different are:

1) Relies on efficient consensus mechanisms (e.g., PBFT), which are more efficient for supporting validation

2) Demands authenticated identities, roles, and access control

3) Offers provide better privacy by limiting the visibility of data to the authorised participants

4) Enhances better governance, compliance, and auditability

5) Primarily developed in controlled and partially decentralised enterprise settings

Types of Permissioned Blockchain

Bitcoin's Blockchain technology was simple. It was a public peer-to-peer network that could perform transactions without centralised authority, and each node had its copy of the ledger.

However, it is not the only Blockchain or Distributed Ledger Technology that can be used. DLTs are classified into several types. To get a better picture, let's list them briefly.

1) Public Permissioned Blockchain

The most common type of Blockchain is a public Blockchain, which allows anybody to join and conduct transactions and participate in the consensus procedure. There are several well-known public Blockchains available.

Two excellent examples are Bitcoin and Ethereum. Bitcoin is the first-generation cryptocurrency that employs the most fundamental Blockchain concept. Ethereum adds further value to the table by allowing Blockchain Developers to create decentralised apps (dApps) using Smart Contracts.

Public Blockchains also use a consensus algorithm that does not enable a Permissioned approach. They are open source, and anyone without prior authorisation can join the network.

2) Private Permissioned Blockchain

Private Blockchains are similar to Permissioned Blockchains, although they differ in some ways. Private Blockchains are completely closed to the public, whereas Permissioned Blockchains may contain certain conditions for the public to join. Both are limiting in nature, although their approaches differ slightly.

3) Federated Permissioned Blockchain

Federated / Consortium Blockchain falls under the concept of Permissioned Blockchain. External parties are not permitted to participate in these Blockchains. It has various advantages, including greater scalability, and is an ideal solution for large businesses. There are several Permissioned Blockchains, such as R3, B3i, and Hyperledger.

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List of Best Permissioned Blockchains

As you can see, Permissioned networks are crucial to various industries. Permissioned networks can benefit industries such as banking and supply chains.

Corda, Ripple and Hyperledger Fabric are some of the essential Permissioned Blockchains. These are the top Permissioned solutions. Let's take a quick look at each of the Permissioned Blockchains that fall under the category of best-Permissioned Blockchain.

1) Corda

Corda is a Permissioned and highly secure Blockchain framework, making it an excellent choice for developing financial Blockchain Applications. Corda enables CorDapp identities to be solely connected to legal entities by offering a single identity and mutual membership, lowering security threats.

Corda has the extra benefit of making it simple for businesses to execute transactions across numerous networks because it can be linked with any current payment rail.

2) Hyperledger

The Hyperledger platform is an open-source Blockchain technology created by the Hyperledger and Linux foundations.

This framework is based on a consensus technique known as Proof of Elapsed Time (PoET) and Practical Byzantine Fault Tolerance (PBFT).

Hyperledger is the best solution for distributed ledger networks and applications. Developers can define business rules for their Blockchain apps in the language of their choice, which speeds up Blockchain app development.

3) Ripple

Ripple is another Blockchain platform focused on the development of financial software applications. Payment providers, digital asset exchanges, banks, and any other company can be connected to the Blockchain using the Ripple architecture, allowing for the unfettered supply of financial services.

Furthermore, Ripple provides liquidity solutions that relieve enterprises from pre-funding limitations and allow them to construct a decentralised infrastructure to execute payments in under three seconds.

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Characteristics of Permissioned Blockchain

Some of the distinctive characteristics of a Permissioned Blockchain are inextricably linked to security. Since there is an access control layer, Permissioned Blockchains are considered more secure than public Blockchain systems such as Bitcoin.

As a result, it is preferred by those who need to define roles, authenticate identities, and secure access inside a network. Permissioned Blockchains are usually not anonymous and are often produced by private entities such as enterprises and private groups.

1) Diverse Decentralisation

Permissioned Blockchains can be decentralised to varying degrees. Permissioned Blockchains can be partially or entirely centralised. Members of the Blockchain frequently decide the degree of decentralisation of the network and the chosen consensus techniques.

2) Non-transparent

Permissioned Blockchains do not give transparency. In terms of privacy, cryptography protects an individual's or user's identity and data. The identification is only known to the centralised entity.

3) Governance

Permissioned Blockchains are regulated by the organisation and have a decentralised nature with central control. In a Permissioned network, the company can incorporate the validator to validate transactions.

4) Efficient

Permissioned Blockchains are extremely efficient because of the speed and scalability of the transactions. Hackers are unable to target a single repository because of more advanced technology.

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Advantages of Permissioned Blockchain

Permissioned Blockchains provide various benefits, which make them preferable to use compared to Permissionless Blockchain. Here are some advantages:

1) Efficient Performance

Permissioned Blockchains outperform permissionless Blockchains in terms of performance. The main reason for this is the platform's limited number of nodes. This eliminates the need for additional computations to obtain network consensus, enhancing overall speed. Furthermore, Permissioned networks have their pre-determined nodes for transaction validation.

2) Governance Framework

Permissioned networks have an adequate governance framework. This indicates that they are well-organised. Administrators also need less time to alter the network's rules, which is significantly faster than with public Blockchains. The public Blockchain network suffers from a consensus problem as not all nodes cooperate in deploying the latest version. These nodes may prioritise their interests over the demands of the Blockchain, resulting in slower network updates. In contrast, Permissioned Blockchain does not have this issue since nodes collaborate to move updates quicker.

3) Cost-effective

Permissioned Blockchains are unquestionably more cost-effective than permissionless Blockchains. As we can see, Permissioned networks are essential to various industries. Permissioned networks provide substantial potential benefits for banking and supply chain industries.

Disadvantages of Permissioned Blockchain

Permissioned Blockchains are not without flaws. Here are some of the drawbacks of Permissioned Blockchains:

1) Compromised Security

A public or private Blockchain provides higher security as nodes correctly engage in a consensus procedure. However, this may not be the case with Permissioned Blockchains. A Permissioned network's security is only as good as its members' integrity. This means that a small section of a Permissioned system can collaborate to alter data stored on the network. To fix it, the system should have correct permissions configured so that the bad actors cannot combine to cause the intended impact.

2) Regulation and Censorship

In an ideal world, these Permissioned Blockchains would function similarly to public Blockchains but with additional regulations. However, the restrictions introduce censorship into the network, as the authority can restrict or prevent a transaction from happening. These pose a risk to any company or organisation that uses the Permissioned network. This strategy also prevents the Permissioned network from fully utilising the Blockchain ecosystem.

3) Lack of Transparency

As it is limited to only some people and is controlled by a private group, there is a high risk of collision and overriding of consensus. As such, the operators of the network can easily alter consensus rules.

Examples of Permissioned Blockchains

Some of the examples of Permissioned Blockchain are:

1)  Hyperledger Fabric: An open-source, Permissioned Blockchain developed by the Linux Foundation in 2015. It has widespread applications in supply chain management, trade finance, and financial asset clearing and settlement because it is flexible and is modularly designed.

2) Quorum: A platform built for enterprise and commercial applications. It is especially applicable to the financial services industry, which requires greater privacy and performance to be utilised by organisations.

3) Corda: A highly secure Permissioned Blockchain designed specifically for financial markets. It provides organisations with the ability to conduct their business directly and privately and also to comply with high regulation and accountability requirements.

Difference Between Permissioned and Permissionless Blockchains

There are several distinctions between Permissionless and Permissioned Blockchains. The table below provides an overview of Permissioned Blockchain vs Permissionless Blockchain.

Where can Permissioned and Permissionless Blockchain be Used?

The permissioned and permissionless blockchains have various uses depending on the architecture and accessibility models. Decentralised financial platforms, public file storage, digital trading, donations, and crowdfunding can be served well by permissionless blockchains as they are open access.

In contrast, permissioned blockchains are ideal for applications such as supply chain tracking, claims processing, and identity verification. The latter use cases demand access control, data confidentiality, and limited participation.

Why are Permissioned Blockchains Ideal for Business Applications?

Permissioned Blockchains are ideal for business applications because they address the performance, scalability, and governance limitations of permissionless networks. They assist in a quicker confirmation of transactions, approved network admission, and validated identities of participants. This renders them effective in controlled settings that need the KYC and AML, as well as compliance measures.

Conclusion

Permissioned Blockchain provide a secure and efficient solution for organisations that require controlled access, privacy, and regulatory compliance. They address the practical needs of enterprise settings by integrating the general principles of blockchain with governance and identity management. Their quicker speeds of processes and the capabilities of safeguarding confidential information qualify them to be used in business scenarios. As adoption grows, permissioned Blockchains will continue to play a key role in enterprise digital transformation.

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