Two flavors of Blockchain: Permissioned vs. Permission-less

There exist two philosophies in the world of blockchain – permissioned and permission-less. What’s the difference?

A permission-less blockchain is one that anyone can join. Thus anyone, anywhere can validate transactions, create smart contracts, and gain access to data that may be stored in a distributed file system such as IPFS. Obvious examples are Bitcoin and Ethereum, but also include experiments such as Golem. There are six characteristics of a permission-less blockchain:

  • It must be open to anyone
  • It must be borderless
  • It must not permit third parties
  • It is neutral, on account of consensus rules
  • It is censorship resistant because the chain cannot be altered
  • The blockchain history is open to anyone

Permission-less blockchains describe the essence of the decentralized internet (Web 3.0). They are “trustless” in that the computer code decides what is valid or not. Power shifts from a centralized authority to decentralized nodes.

A permissioned blockchain, on the other hand, is one that restricts the participants. Only authorized parties can validate transactions, create smart contracts and gain access to data. Platforms designed for permissioned blockchains include Azure or Hyperledger (both open-source projects). A permissioned blockchain has the following characteristics (some in clear contrasts to a permission-less one):

  • Participation is restricted to approved parties
  • It should account for differences in national laws
  • It does not permit third parties
  • It is neutral, on account of consensus rules
  • Access to data on the chain can be restricted, even for approved participants

Permissioned blockchains are designed for today’s enterprises. They require a level of trust to approve parties in the first place. However, third party authority is eliminated as transactions are adjudicated by the consensus mechanism and agreed-upon business rules. One clear advantage is it allows integration between multiple parties without having to share sensitive information. Supply chain management is where the most exciting permissioned blockchain developments are happening right now (see e.g., Maersk’s initiative).

The difference between permissioned and permission-less blockchains has been compared to the difference between the internet and the intranet. One is an open tool that has truly revolutionized the way we live. The other is much less exciting, but still necessary to the smooth, daily operation of a business. Both have their place in today’s world, and it will be interesting to see how the permission-less philosophy evolves with the decentralized web.

 

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