Permissioned Blockchain - A Complete Overview

Blockchain that is closed (i.e., not accessible to the general public) or contain an access control layer are referred to as Permissioned Blockchain. Permissioned blockchain is a distributed ledger that can only be accessed by users with permissions. Permissioned Blockchains are designed to benefit from Blockchain technology ​without compromising the centralised system's authority.

According to Statista,  as of August 2017, the results of a survey asked senior executives in Asia-Pacific about their preferred type of Blockchain to use in their businesses. During the survey period, 45 percent of respondents said they wanted to use a Permissioned Blockchain.

In this article, we will learn what Permissioned Blockchain is, how it works, and its benefits and drawbacks. We will review some of the finest Permissioned Blockchains available, the different types of DLTs, and other crucial Permissioned Blockchain topics to get a complete overview.

Table of Contents

1) What is Permissioned Blockchain?

2) Characteristics of Permissioned Blockchain

3) Types of Permissioned Blockchain

4) Advantages of Permissioned Blockchain

5) Disadvantages of Permissioned Blockchain

6) List of best Permissioned Blockchain

7) Difference between Permissioned and Permissionless Blockchains

8) Where can Permissioned and Permissionless Blockchain be used?

9) Why are Permissioned Blockchains ideal for business applications?

10) Conclusion

What is Permissioned Blockchain?

Permissioned Blockchains are closed Blockchains with an access control layer. This additional layer of security restricts participants to only performing tasks they are permitted to conduct.

In a Permissioned Blockchain, a user would require permission from the network owner to join the network. A person can technically only view, read, and write information on the Blockchain if granted access. A private Permissioned Blockchain specifies the roles that govern how and what each member can contribute to the Blockchain.

A Permissioned Blockchain also allows customisation. As a result, instead of having the network owner approve each user, identity verification could be used to permit users to join the Permissioned network. Ideally, users should still be allowed to do specified network activities depending on the Blockchain's predefined permissions.

Permissioned Blockchains, sometimes known as "private Blockchains" or "Permissioned sandboxes," are considered partially decentralised. This is because, unlike Bitcoin, the network is spread among known participants.

An excellent example of a Permissioned Blockchain is Ripples. It is a prominent cryptocurrency that provides permission-based roles for network users. Many organisations prefer Permissioned Blockchain networks because they allow network administrators to change settings and put limitations as required.
 

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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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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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.
 

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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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?

Permissioned and Permissionless Blockchains have various architectural styles that can be advantageous for some applications and disadvantageous for others.

For instance, permissionless Blockchain technology can create a strong financial platform built on a decentralised platform. It can be used for file storage for the general public and digital trading, donations, and crowdfunding. Users can readily access it because it has no access restrictions.

In applications like supply chain tracking, claim settlements, and identity verification, Permissioned Blockchain offers the controlled user access to the data. Permissioned Blockchain is the most appropriate technology for these applications because they are built on privacy and have limited access to specific people.

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Why are Permissioned Blockchains ideal for business applications?

Due to limits in efficiency and scalability, Permissionless Blockchain systems are currently unable to meet the performance requirements of many enterprise use cases.

The identity of the participants is also a crucial requirement in situations where Permissioned Blockchains are replacing current secure, centralised networks, such as in financial transactions where Know-Your-Customer (KYC), Anti-Money Laundering (AML), and supply-chain provenance regulations must be adhered to.

For business use, it should have the following requirements:

1) Low confirmation delay for transactions

2) Networks must be granted authorisation

Participants must be identifiedData related to commercial transactions should be kept private and secret.

Conclusion

Permissioned Blockchains will be there for a long time. They deliver Blockchain benefits in a closed ecosystem while ensuring that an organisation's needs are met. It has significant advantages, such as cost-effectiveness, competent governance, and efficient performance. 

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