For many cryptocurrency enthusiasts, the ecosystem is a completely decentralised one. However, in all honesty, the assertion is not valid. Well, you might say what then differentiates the sector from the regular traditional financial sector. You must know that there are a lot. Most importantly, you must consider that Bitcoin preaches peer-to-peer interaction which is the core basis for decentralisation. At the same time, you should remember that cryptocurrencies have gone way beyond limiting the stance to Bitcoin. Due to the emergence of many cryptocurrencies, blockchain has moved beyond remaining permissionless or fully decentralised.
Therefore, in this article, we will include the meaning of permissioned and permissionless blockchain, and also assess the difference between both. So, if you have ever been concerned about the differences, we advise you to stick around and read this article. By the end of this article, you should be able to understand:
- What blockchain entails
- The meaning of a permissioned blockchain
- What permissionless blockchain means
- The Differences between permissioned and permissionless blockchains
- How both blockchain affect the crypto ecosystem.
So,before we go into the details of permissioned and permissionless blockchains, let’s give you a quick rundown of what blockchain means.
Table of Contents
Blockchain: Defined In Simple Terms
If you have been in the crypto space long enough, you can’t deny that the term “blockchain” must have appeared a couple of times. However, not everyone who has experience with crypto trading or investing has in-depth knowledge of what blockchain means. In fact, some subscribers and long faithfuls of the Immediate Edge platform who are considered experienced and mentors to beginners sometimes struggle with the concept. Regardless, that should not concern you. We will do our best to break down the blockchain theory in the most simple way. So, what do you mean when you say blockchain?
Simply out, a blockchain is a digitally distributed ledger or data bank that aids the storage and security of information and transactions. However, you should note that a blockchain is not like your regular bank database because the former is decentralised. Decentralised in the sense that no central authority controls it and it is open to the public. When we say public, we mean that transactions on the blockchain can be viewed by anyone at any time, So, there is complete transparency unlike when you deal with traditional finance. That said, let’s inform you that there are two kinds of blockchain that exist in the ecosystem. The first is the permissioned blockchain While the other is the permissionless blockchain. However, you should not worry about raking your brain about what these concepts entail. We will do you the honour of describing them in detail. In further parts of the article, you would also understand the differences between both.
Recall that we mentioned earlier that blockchains do not require the services of central authority. However, that does not apply to every other part of the blockchain. This is where the permissioned blockchain comes in.
So,you can define a permissioned blockchain as one which requires some form of control to allow the free flow of the network performance. However, not anyone can access a permissioned blockchain. In most cases, it is the only network owner that has control. Other times, the network owner can grant access to a few other people with an oversight of what goes on within the blockchain.
The permissioned blockchain is sometimes called the private blockchain. Due to this privacy, participants require verification before they get any access to the blockchain network. In addition, you can describe a permissioned blockchain as relatively decentralised. It is also possible that you have heard that some financial institutions have adopted the use of blockchain. In these cases, they partner with permissioned blockchain networks like Stellar Lumens and Ripple for seamless integration.
For permissionless blockchain, it is quite different and encourages more full decentralisation and much less control. So, it is basically the opposite of permissioned blockchain. You can point to Bitcoin as one cryptocurrency that agrees with the idea of Blockchain.
So, you can refer to permissionless blockchain as one which does not support the idea of a central authority. In the same vein, a permissionless blockchain does not agree with having a network owner. So you never need to bother following some verification procedures. At the same time, permissionless blockchains do not subscribe to the idea of Know Your Customer (KYC) processes. This implies that every participant within the blockchain has equal rights and equal access. You should also know that permissionless blockchains are very much accessible to the public. Also, they require no regulation unlike permissioned blockchains. You can point to the tussle between Ripple and the United States Securities and Exchange Commision as how regulation affects permissioned blockchains.
Now, let’s move to identifying the differences between permissioned blockchains and permissionless blockchains.
Differences Between Permissioned and Permissionless Blockchains
In this part of the article, we will highlight some of the key differences between these two blockchains apart from the few you may have learnt.
|Permissioned Blockchain||Permissionless Blockchain|
|You require access to the blockchain with verification and access from the network owner||Network does not ask for verification or any form or identity|
|Partially decentralised||Fully decentralised|
|Does not require complete transparency||100% transparency in interactions and transactions|
|Decisions taken by owner or a selected group of the chain||Decisions agreed upon by every participant|
|Risks of participants being banned from the network||No one person holds the power to stop another from participating in the network|
The Bottom Line
In conclusion, we believe that you must have learnt one or two things about the blockchain, permissioned and permissionless kinds. We will also recommend that if it interests you further, you can go ahead and do more research about the concepts. Besides these, we want you to know that the concept of decentralisation or blockchain is still in its early days. S, there have been hurdles that have been difficult to cross. Nevertheless, it remains an integral part of financial inclusion and the objectives towards digital asset adoption.