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Blockchain networks have two major categories: permissioned and permissionless blockchain networks. Let’s see what is the difference between the two, how do they work, and what are their benefits.

What is a permission in blockchain?

Permission in blockchain means, whether there is a permission from a central party, or parties needed to join a blockchain network as a node and perform activities. We are talking about permissionless blockchains when anyone is allowed to join the network, while permissioned blockchains need the approval to join.

Permissionless or public blockchains

Permissionless blockchain allows any party to join, create an address on the network, and interact with other parties. Network participants can choose to run a node, and verify transactions, or create a smart contract.

Bitcoin and Ethereum are both permissionless blockchains, with a big decentralized network around the world which anyone can join. Without central governance, the transparency within makes sure that the nodes can control each other, and oversee any transaction.

While permissionless networks bring a foreseeable new future of decentralized transactions, there are still hurdles to overcome: there are scalability issues, where it is hard to find a solution which is secure, fast and efficient.

Processing transactions – alias mining- becomes more and more expensive as the network extends, and the real number of nodes decreases, which endangers decentralization.

Permissioned or private blockchains

Permissioned blockchains mean, that an approval is needed from some kind of central entity or entities to join the blockchain, and the identity is well defined. These are typically networks within organizations or a consortium of different organizations. Permissioned blockchains contain the function to allow different rights to different members.

Private blockchains provide better performance, as these do not have issues with scalability, and pre-approved nodes are adding blocks and verifying transactions. Their governance is more effective, as the questions regarding the network are decided with a typically smaller number of participants.

When it comes to decentralization the question becomes tricky: it depends on the number of peers, expected number of bad nodes, type of consensus mechanism and the type of transactions they agree to. One thing is for sure, permissioned blockchains tend to be more centralized, especially if only a few parties make the majority of the decisions.

Permissioned blockchain networks can be built with applications as the Hyperledger Fabric, R3 Corda, or even via Ethereum. Also, Ripple runs on a permissioned blockchain, where validators are appointed by the central organization, thus making it a highly centralized blockchain.

Grey area

Some blockchains, such as Dash and EOS need some prerequisites towards becoming a node on their network. Fulfilling these requirements, as a certain amount of coins held, community participation, availability, gives permission to join the network.

So, there is a certain permission involved, but it does not mean that anyone who fulfils the requirements can become a network member. These blockchains stand a little bit in the middle between permissioned and permissionless chains, with Dash being closer to permissionless and EOS to a permissioned network.

By Barbora Juhaszova