Table of Contents
This guide includes a brief explanation and examples about permissioned blockchains, stating advantages, disadvantages, and more!
Because they have multiple advantages that make them suitable for various use cases, particularly in corporate and organizational environments, permissioned blockchains are significant. We will go over everything that needs to be discussed.
What are permissioned blockchains?
Blockchain networks, known as permissioned blockchains, require access to join. In these blockchain varieties, a control layer that regulates the actions taken by the authorized players runs on top of the blockchain. As is evident, the operation of permissioned blockchains differs significantly from that of private and public blockchains. They are designed to benefit from blockchains without surrendering the centralized system’s authority.
Consisting of a small number of players, permissioned blockchains are a type of private blockchain network. In contrast, anyone may join the network and approve transactions on public blockchains like Bitcoin and Ethereum.
Only users given permission can validate transactions and add new blocks to the chain in a permissioned blockchain network. A central authority, such as the network administrator, must administer access control and approve new participants. Additionally, the administrator can impose limitations on transactions and specifications for data storage on users.
Permissioned blockchain platforms: Advantages and Disadvantages
Permissioned blockchains carry advantages and disadvantages that could be important for many. This part of the article will discuss the pros and cons of the technology.
Advantages
Pros will be the first to be covered. Let’s start with the following:
Better Security
The network can better manage the information flow and lower the danger of harmful activity by restricting access to only a small number of users. This is so that unauthorized access or manipulation may be avoided because only vetted and approved participants can validate transactions and add new blocks to the chain.
The network administrator can impose stringent security protocols and measures, such as encryption and authentication, to guarantee the confidentiality and privacy of data on the blockchain. This is crucial for finance, healthcare, and government sectors since it involves sensitive information.
By enabling the administrator to keep an eye on and audit the network to make sure all transactions are valid and the network is operating as intended, permissioned blockchains also add an extra layer of security. This safeguards the integrity of the blockchain and its assets and prevents fraud, hacking, and other forms of cybercrime.
Faster transaction
Another benefit of permissioned blockchains is their increased transaction speed. Permissioned blockchains offer a smaller, more controllable network of members than public blockchains, where many users must verify transactions. As a result, validating transactions and adding new blocks to the chain become simpler and faster processes.
Compared to public blockchains, permissioned blockchains frequently employ more effective consensus methods, which can further accelerate transaction times. For instance, permissioned blockchains may use faster and more energy-efficient proof-of-stake (PoS) consensus processes rather than proof-of-work (PoW) like Bitcoin.
Permissioned blockchains’ quicker transaction rates might be advantageous for corporations and organizations. For instance, it can aid in reducing the time needed to complete transactions and boost the general effectiveness and speed of operations. This can be particularly significant for sectors like finance and healthcare, where speedy processing is essential and time is of the essence.
Improved scalability
Compared to public blockchains, permissioned blockchains have better scalability. The blockchain can assure seamless operation and growth because of the smaller network size and ease of management and upkeep. This is so that the network administrator may more readily upgrade and improve the network while having better control over the flow of information and resources.
Furthermore, permissioned blockchains’ smaller network size and centralized control make it simpler to extend the network to accommodate rising demand. The network can be quickly expanded to handle the increased load as the number of transactions and participants increases. This can make maintaining a quick, effective, and responsive network easier even as it expands.
Improved scalability is crucial for enterprises that manage massive data and transactions. For instance, without sacrificing performance or efficiency, a permissioned blockchain used for supply chain management can readily scale to accommodate an expanding number of participants and transactions.
Customization
Permissioned blockchains can be customized to match the unique demands and requirements of a certain organization or use case, in contrast to public blockchains, which are intended to be open and decentralized.
The network administrator can define rules, policies, and protocols, giving them more authority over the network. This can ensure that the blockchain satisfies the organization’s unique demands and requirements and contribute to the network being more effective, efficient, and user-friendly.
The administrator can alter the network to conform to industry-specific regulatory requirements. For instance, a permissioned blockchain utilized in the healthcare sector can be built to comply with HIPAA’s privacy and security standards.
Disadvantages
Apart from the advantages, below are the disadvantages that permissioned blockchains bring:
Insufficient decentralization
The absence of decentralization in permissioned blockchains is one of their drawbacks. Permissioned blockchains have a narrower, more centralized network of participants than public blockchains, intended to be decentralized and accessible to all users. The pool of participants validating transactions and adding new blocks to the chain is, therefore, smaller.
This centralization may lead to several negative effects. For instance, it may increase the network’s susceptibility to single points of failure and online attacks. Additionally, it can render the network more vulnerable to censorship or manipulation by the network administrator or other users with excessive influence.
A lack of decentralization may affect the network’s openness and dependability. Without a sizable and varied network of users, it may be more challenging to confirm the legitimacy of transactions and ensure the network is operating as intended.
The lack of decentralization might make reaching agreements and settling disagreements more challenging because fewer people are involved in the decision-making process. Conflicts or delays could result from this, which would be bad for the network’s stability and security.
Censorship resistance
Due to the network’s centralized structure, certain transactions may be restricted or prevented from being added to the blockchain by the network administrator or other users with disproportionate influence.
This censorship may harm the network’s reliability and integrity. It can be more challenging to confirm the integrity of information and ensure the network is operating as intended without an open and transparent system for validating transactions.
Censorship may reduce the network’s capacity for innovation and expansion. New concepts and technologies can be more challenging to arise and spread if there is no open and transparent procedure for adding new transactions and blocks to the chain.
Censorship can also prevent users from expressing their opinions or engaging with the network in meaningful ways. This may lessen the variety of opinions and viewpoints in the network and make settling disagreements and reaching a consensus more challenging.
Because of the network’s centralized structure, the network can be managed and controlled by a single person, such as the network administrator.
This reliance may impact the security and stability of the network on a single authority. The network is more susceptible to single points of failure and online attacks without a decentralized network of participants to verify transactions and add new blocks to the chain.
The network’s transparency and dependability may be constrained by its reliance on a single authority. Without a sizable and varied network of users, it may be more challenging to confirm the legitimacy of transactions and ensure the network is operating as intended.
One major problem of permissioned blockchains is their reliance on a single authority. Thus, balancing the network’s advantages against these potential dangers and disadvantages is critical. While faster transaction times and enhanced security may be benefits of permissioned blockchains, it’s crucial to remember that these advantages come at the expense of increasing reliance on a central authority and the potential for censorship.
Cost
Even though speedier transactions and enhanced security are two benefits that permissioned blockchains can provide, they can also be more expensive to set up and operate than other blockchain systems.
This expense may be incurred from several sources, including hardware and software prices, hiring programmers and IT personnel to maintain the network, and continuous upkeep and updates. Additionally, proprietary software or technology could incur additional costs, such as licensing fees.
When assessing permissioned blockchains, the cost is a crucial aspect to consider. It’s crucial to balance the network’s potential advantages with setup and ongoing maintenance expenses. While there are several advantages that permissioned blockchains may have over alternative blockchain architectures, it’s crucial to remember that these advantages come at the expense of greater financial commitment.
Private blockchain
A decentralized digital ledger called a private blockchain is used to securely and openly record transactions. Private blockchains, as opposed to public blockchains like Bitcoin or Ethereum, are intended to be utilized by a small number of individuals who have been given access to and authorization to confirm transactions.
Here is a guide on consortium blockchains that you have a look at!
Public blockchain
Anyone with an internet connection can participate as a user, validator, or observer on a public blockchain, a decentralized digital record accessible to everyone. Public blockchains, like those used by Bitcoin and Ethereum, run on a consensus mechanism that enables decentralized decision–making and lowers the possibility of fraud or tampering.
Blocks are added to the chain in a straight line and chronological sequence, where transactions are validated and recorded. As a result, a secure, transparent, and irreversible record of all network transactions is produced.
Hyperledger permissioned blockchain
A platform for open-source, cooperative development of permissioned blockchain technologies is called Hyperledger. The Linux Foundation developed it in 2015 to assist in the creation of scalable, secure, and transparent blockchain systems for various use cases.
As a permissioned blockchain platform, Hyperledger is locked to outside parties and only accessible to those permitted to access and validate transactions. This contrasts with public blockchains, which are accessible to everyone and permits participation as a user, validator, or spectator, like Bitcoin and Ethereum.
