1.3 k
views

A Beginners’ Guide to Permissioned Blockchains

It has been a few years since the topic of blockchain technology invaded the market for the first time. Today, people are gradually learning to see a blockchain and a cryptocurrency as two distinct concepts.

The technological and financial culture is growing, and, as a result, the industry is attracting more developers and users. Among the many consequences of this trend, we find the appearance of new tools.

Today we will talk about one of the many new applications of this technology. Permissioned blockchains represent an example that is gaining interesting popularity.

But what is a permissioned blockchain? And how does it differ from traditional permissionless blockchains?

What is a permissioned blockchain?

Let’s start from a premise: several ways to build a blockchain exist. Likewise, access to these systems is not unique, and developers can customize such aspects.

Some blockchains need permission to write and read the information on the system. As readers may have guessed, this category is that of permissioned blockchains, which we will study today.

We can see a permissioned blockchain as a virtual ledger that not everyone can. Administrators may give the right to read the information, to modify or write it.

A digital certificate allows users to prove their identity and their right to access the blockchain. If you are familiar with traditional (or “permissionless”) blockchains, understanding how a permissioned system works will not be difficult.

A comparison with permissionless blockchains

The permissioned blockchain technology is generally the same as a permissionless system. Obviously, a closed system needs several adjustments, such as an identification system.

Below we explore the topic by explaining why the market sometimes requires the creation of a permissioned blockchain. It will also be helpful to analyze the pros and cons of the two different systems.

Why does the market need permissioned blockchains?

Researchers shared many studies on the creation and use of permissioned blockchains. It is clear that limiting access to a system seems to go against the original nature of blockchain technology.

Companies increasingly appreciate the usefulness of private blockchains. This choice should not surprise us, especially if we think about the value of confidential information in a business.

If we introduce the concept of access management into the system, we obtain a permissioned blockchain. System administrators can decide who joins the network and what these people can do.

A bank may decide, for example, to restructure an internal IT system into a blockchain structure. There is no reason why an external user should access this data, and this is where the need arises for a private system.

Furthermore, people with different seniority in the bank may have different roles in the blockchain. It could be risky to give every employee full read and write rights. Hence the need to create a permissioned blockchain becomes clear.

Summing up the pros and cons

We can summarize the advantages of a permissioned system as follows:

  • Strong privacy, as authorization is required to view transaction information.
  • Customizability for unique needs since it allows for different setups, modular components, and hybrid integrations.
  • Decentralization may happen in stages, allowing various companies to participate without the dangers associated with highly centralized models.
  • Transaction verification and consensus need fewer nodes, which improves performance and scalability.

Concerning the negative aspects, we should mention:

  • There is less transparency to outside oversight because the number of participants is limited.
  • One could override consensus more easily because the owners and operators can change consensus, immutability, and mining rules.
  • The number of participants needs to respect a limit, and the network’s managers establish privacy restrictions. Overall, there is less transparency to outside supervision.

The permissionless approach finds itself in a specular situation in terms of pros and cons.

Choosing a suitable blockchain for each project

To choose a suitable blockchain for a project, we need to define the strategic goal. Instead of starting with a blockchain “plan,” we should consider how the firm may function.

Second, we must prioritize use cases and efforts in the context of the larger picture rather than in isolation. This is when we need to ask ourselves several questions about the goals we aim to achieve.

Specifically, we must consider the stakeholders’ best interests when selecting a blockchain type. Clients will often not have extensive experience in the blockchain industry. Therefore, it is up to the management to explain the perks of our choice to the users.

Conclusions on permissioned blockchains

Blockchains with restricted access will probably change how we think of our economy. They deliver blockchain advantages in a closed ecosystem respecting an organization’s requirements.

Bitcoin live price
Btc
Bitcoin
$29.033
price
1.88072%
price change
BUY NOW

Cost-effectiveness, competent governance and efficient performance are just a few of the advantages that come to mind. It will be fascinating to see how different sectors adapt this tool to their needs.

Stay up to date with our latest articles

More posts

What is Tornado Cash, and How Does It Work?

Decentralized and non-custodial, Tornado Cash is an Ethereum-based solution for privacy and anonymity. Severing the on-chain link between those who send and receive coins enhances transaction anonymity.  This guide will provide our readers with more insight into Tornado Cash. We will start with a general introduction and move deeper into how Tornado Cash works. We will also add a list of pros and cons to this system for the reader's benefit. Understanding Tornado Cash Decentralized protocols such as Tornado Cash…

What Is the Blockchain Scalability Trilemma?

In the context of decentralization, security, and scalability, the Blockchain Trilemma refers to the generally held notion that decentralized networks can only deliver two of the three benefits at any given moment. In this article, we more closely into the matter, assessing all the most relevant aspects of the blockchain scalability trilemma. The Trilemma Vitalik Buterin invented the term "blockchain trilemma," which refers to a conundrum that blockchain engineers face while balancing three competing demands at once: decentralization, security, and…

Do Smart Contracts Represent Legal Contracts?

When industry players use the term "smart contracts," they may mean different things. Words matter, as any contract lawyer will be able to explain. Is the word “contract” a technical overstatement, or does it trigger actual legal bindings? The industry needs to agree on the consistency of its terminology. What exactly is a smart contract? Does it have any legal implications? When attorneys and technologists use this terminology, do they understand each other? Our article will provide a short analysis,…

How Do Crypto Anti-Dumping Policies Work?

Scammers utilize social media platforms to impersonate celebrities or acquaintances to persuade victims to make fake investments. The rise of cryptocurrencies and the lack of regulations gave new tools to these criminals. We'll look at how the market is attempting to safeguard investors today. Crypto commentators frequently emphasize anti-dumping regulations as a deterrent to online fraudsters. What Are Pump and Dump Operations? Before dwelling on the concept of anti-dumping policies, we need to understand what is a “pump and dump”…

Understanding Layer 3 Blockchains

Scalability has become an even more pressing issue as the crypto sector experiences increased customer demand. Many of us have come across terms like “layer one” and “layer two” protocols in the blockchain world. Blockchains must be very secure due to the lack of a centralized authority. They must also be incredibly scalable to cope with growing users and transactions. Today we will learn more about layer three solutions, a technology aiming to provide scalability while maintaining top-notch security. A…

Venezuela – How Does the Petro Crypto Work?

Venezuelan President Nicolas Maduro suggested the creation of a national cryptocurrency in 2017. Officials claim that the country's oil, gas, and mineral riches back its value. However, as of today, Petro seems to fail fulfilling its purpose of rescuing the national economy. Some foreign observers believe the Petro digital currency is a trick to circumvent international restrictions. These sanctions prevent Venezuela from borrowing cash on global markets. This article will provide an analysis of the creation of this national cryptocurrency.…

Understanding Advanced Smart Contracts

The clever use of smart contracts has contributed significantly to the exploding popularity of blockchain technology. Initially proposed by computer scientist Nick Szabo, a smart contract is a collection of instructions executing automatically. This technology aims to make the contract execution as automated as possible. Many know how basic smart contracts work, but it is rare to find a guide on their advanced versions. After a basic overview, we will analyze two typical cases of advanced smart contracts. The article…

Layer 2 Blockchain Projects – A Guide for Beginners

One of the critical difficulties confronting the blockchain community is the matter of scalability. While the technology has proven its high potential over the years, several aspects limit its applicability to a large scale. The scalability problem has been on our minds since humankind came up with the first technological inventions. We'll expand on that in this post, looking at the particular case of Layer 2 blockchains. Layer 2 (L2) blockchain definition The "Layer 2 blockchain technology" concept is gaining…

A Beginners’ Guide to Permissioned Blockchains

It has been a few years since the topic of blockchain technology invaded the market for the first time. Today, people are gradually learning to see a blockchain and a cryptocurrency as two distinct concepts. The technological and financial culture is growing, and, as a result, the industry is attracting more developers and users. Among the many consequences of this trend, we find the appearance of new tools. Today we will talk about one of the many new applications of…

Hyperledger Fabric – What Is It and How Does It Work?

The cryptocurrency world continues to see new developer ideas enter the market. Today, we will simplify a technical aspect: the Hyperledger Fabric technology. Any reader interested in learning about the most complex aspects of the topic can refer to the official documentation. This article will analyze the main elements of this system, also highlighting important criticisms in the sector. Understanding Hyperledger Fabric Let's start, first of all, by understanding the origin of the instrument name: Hyperledger is an open-source distributed…