Guides

Permissioned vs permissionless blockchain

Permissioned Blockchain

Permissioned Blockchains limit access for those who can perform different activities on the Blockchain. The exchanges are approved and handled by the individuals with record, accepting them for certain trust levels.

A permissioned Blockchain is a closed community, and each participant is well defined. This type of Blockchain is built to allow an organization or a group of organizations to exchange information and record transactions very well. Although permissionless Blockchains was very popular in the business world, companies now know the many advantages of using Blockchains to expand business systems also, especially to provide trust, transparency, and efficiency into B2B exchanges. The Hyperledger Foundation is the leading open source initiative for these B2B Blockchains.

A permissioned Blockchain is run by the members of a certain group. Stakeholders “opt-in” to form a blockchain network. Only pre-approved entities can run the nodes that make transaction blocks valid and carry out smart contracts on the Blockchain. Permissioned Blockchains make it easy to share trusted information in a secure form, and with the required confidentiality for businesses to effectively operate.

Permissionless Blockchain

Permissionless Blockchains allow anyone to take an interest. The exchanges on the platform are approved and handled by votes or agreement. A vote does not depend on having a previous character in the record and no previous trust is expected.Blockchain Explained: What it is and How it Works - GGK Tech

Permissionless Blockchains allow anybody to create an address and start interacting with the blockchain network. The internet is a good example of a permissionless system; where anyone can create any website they want. Similarly, with a permissionless blockchain, creating an address on the network allows any person, thing, or entity to interact with other members or parties. Each party can choose to run a node for the blockchain and help to verify transactions (using mining method), and create smart contracts on the network. This is the essence of Bitcoin and Ethereum Blockchain networks. These networks make use of a crypto-economic model (pushed by proof-of-work consensus method) that rewards people to run network nodes. All network participants get tokens as reward for their contributions.

Permissionless blockchains are becoming accepted as a foundation for business-to-consumer (B2C) and consumer-to-consumer (C2C) cases. Many startup companies are making use of Bitcoin and Ethereum network solutions. Most of these solutions use a token (cryptocurrency) system to simplify the exchange of value among participants with the use of an internal rewarding structure.