Decentralized Ledger Networks(DLT) has opened up a slew of opportunities for the companies that are looking to innovate. It is not new. Blockchain technology is one of those technologies that have radically changed how industries work. However, there cannot be one single solution for the whole industry.
Each startup, company, enterprise, or an industry is different when it comes to their needs and requirements. It is evident that a privately held company just cannot use a fully decentralized blockchain network. That’s where different types of DLT’s comes in.
In this article, we will be exploring permissioned blockchains. Also, to get the best possible picture, we will also go through the best-permissioned blockchains out there, type of DLT’s and other vital topics related to permissioned blockchains. Let’s start with the definition of Permissioned blockchain.
What are Permissioned Blockchains?
Permissioned blockchains are blockchain networks that require access to be part of. In these blockchain types, a control layer runs on top of the blockchain that governs the actions performed by the allowed participants. As you can see, permissioned blockchains work entirely different than that of private and public blockchains. They are crafted to take advantage of blockchains without sacrificing the authority aspect of a centralized system.
So, basically, there is one big difference between a permissioned and an un-premissioned one, i.e., the way the participants are going to interact with the network. A permissioned system is also known to have a restriction on the consensus participants, making permissioned networks highly configured and controlled by the owners. However, it is not a bad thing, but it is all about building a suitable blockchain network.
There are many popular permissioned blockchain frameworks out there. It includes Hyperledger, Quorum, Corda, and others.
Benefits of Permissioned Blockchains? Do we need them?
There are many benefits of permissioned blockchains.
- Efficient performance: When we compared permissioned blockchains to public blockchains, they offer better performance. The core reason behind is the limited number of nodes on the platform. This removes the unnecessary computations required to reach consensus on the network, improving the overall performance. On top of that, permissioned networks have their own pre-determined nodes for validating a transaction.
- Proper governance structure- Permissioned networks do come with an appropriate structure of governance. This means that they are organized. Administrators also require less time to update the rules over the network, which is considerably faster when compared to public blockchains. Public blockchain network suffers from the consensus problem as not all nodes work together to get the new update implemented. These nodes might place their self-interest above the needs of the blockchain, which, in return, means slower updates to the whole network. In comparison, permissioned blockchain doesn’t have the problem, as the nodes work together to move the updates faster.
- Decentralized storage: Permissioned networks also make proper use of blockchain, including utilizing its decentralized nature for data storage.
- Cost Effective – There is no doubt that permissioned blockchains are more cost-effective
Drawbacks of Permissioned blockchains
Permissioned blockchains are not free from disadvantage or drawbacks.
- Compromised security – A public or private blockchain have a better security as the nodes participate in a consensus method properly. But, in the case of permissioned blockchains, this might not hold true. The security of a permissioned network is as good as the member’s integrity. This means that a small section of a permissioned system can work together to modify the data stored within the network. In this way, the integrity of the network can be compromised. To resolve it, the system should have proper permissions set so those bad actors cannot merge together to cause the desired effect.
- Control, Censorship, and Regulation – In an ideal world, these permissioned blockchains should work as that of a public blockchain, but with regulations. However, the regulations bring censorship to the network, where the authority can restrict a transaction or control it from happening. These are a threat to any business or organization who is using the permissioned network. This approach also stops the permissioned network from making the most out of the whole blockchain ecosystem.
Types of blockchain permissioned ledger technologies (DLTs)
The blockchain technology used in bitcoin was simple. It was a public peer-to-peer network capable of doing transactions without any centralized authority, and each node has its own copy of the ledger. However, it is not the only possible blockchain or distributed ledger technology. There are many types of DLTs. Let’s list them briefly to get a clear idea.
Public blockchains are the most common type of blockchain that allows anyone to participate and do transactions or even participate in the consensus method. There are many prominent public blockchains out there.
Bitcoin and Ethereum are two great examples. Bitcoin is the first generation cryptocurrency that utilizes the most basic idea of blockchain. Ethereum brings more on the table by providing the developers with the ability to develop distributed apps(dApps) using smart contracts.
Public blockchains also utilize consensus algorithm that doesn’t support a permissioned approach. They are open source, and anyone without any prior permission can take part in the network.
Federated/Consortium blockchains – Permissioned blockchains
When it comes to permissioned blockchain, Federated/Consortium blockchain falls into the category. These blockchain doesn’t allow any external people to take part in the blockchain. There are many benefits to it, including higher scalability and is an excellent choice for enterprise companies. There are a lot of permissioned blockchains, including R3, B3i, Hyperledger, and so on.
The last type of blockchain that we are going to discuss is private blockchains. Private blockchains are “similar” to permissioned blockchains but have some differences that bring them apart. The private blockchains are not open to the “public” at all, whereas a permissioned blockchain might have some criteria for the public to join. Both of them are restrictive in nature, but their approach differs a little.
Key difference between permissioned and permissionless
There are many key differences between permissionless and permissioned blockchains. We are comparing these two so that you can get a clear picture of how permissioned blockchains and are implemented.
Permissioned vs Permissionless blockchain
|Privacy||Private membership||Transparent and open – anyone can become a member|
|Ownership||Managed by a group of nodes pre-defined||Public ownership – no one owns the network|
|Decentralization nature||Partially decentralized||Truly decentralized|
|Cost||Cost-effective||Not so cost-effective|
|Security||Less secure||More secure|
Best Permissioned Blockchain
As we can see that permissioned networks are crucial to the different industries out there. Industries such as the finance industry, supply chain, etc. can benefit immensely through permissioned networks. The key permissioned blockchains include Quorum, Corda, and Hyperledger Fabric. Let’s look briefly into each of the permissioned blockchains below that we think falls in the “best permissioned blockchain” category.
- Hyperledger Fabric: Hyperledger Fabric Framework is one of the popular Hyperledger projects that is maintained by Linux foundations. The modular architecture enables anyone to develop solutions or applications to plugin and play with different services. It uses smart contracts known as “chaincode” containing the system’s logic. Want to know more about Hyperledger? Check out our detail coverage here.
- Quorum: Quorum blockchain is an enterprise-focused Ethereum blockchain that is aimed at the financial industry. It is created by JP Morgan. We have already covered it in detail.
- Corda: Corda lets businesses build interoperable blockchain networks. It is open-source in nature and provides excellent value to businesses. Check out more about Corda here.
Challenges of Permissioned Solutions
Permissioned blockchains are not free from challenges. In fact, implementing permissioned blockchain solutions can be a tough task. So, what makes it so challenging? There are many challenges that it has to go through. Few of them include data storage, messaging and integration, identity, smart contracts management, and so on.
As a business, many decisions need to be made before starting a permissioned network. For example, the company first needs to decide which blockchain platform to use. They also need to determine the blockchain runtime to use. After all, answers to these two questions will give them the development stack on which the development will take place. If you are are a business looking for the best, then we suggest checking out Hyperledger Fabric, Quorum, Corda, and Parity. They are a top-notch solution when it comes to permissioned solutions.
- Integration: One of the biggest challenges that a business or organization has to go through integration challenges, especially when using APIs for communication. To make it easy, you can use Rhombus, Chain Link, and Oraclize. They are great tools which will help you connect and integrate services more efficiently.
- Data Privacy: Privacy is a big concern, especially when it comes to regulated industries. To ensure proper privacy, they must meet specific requirements. Quorum and Aztec are a good pick when it comes to developing permissioned blockchains that offer great privacy.
- Data Access: Accessing information in a permissioned blockchain can be slow compared. A right solution is to use The Graph which can expose data to the APIs and smart contracts for easy access.
- Data Storage: Data can be stored in many ways on a blockchain. However, not all of them are optimal, considering that a huge amount of data is stored on the blockchain. To ensure proper storage, it is advised to use data storage solutions such as IPFS Private Network, Bigchain DB, and AWS Quantum Ledger.
- Identity: The last challenge that we are going to discuss is the participant’s identity problem. As it is permissioned network, the identity of the peers is already known, which can cause issues during the consensus computations. To simplify the issue, it is advised to use Azure BaaS or uPort that will help your business to better leverage their identity protocols and solutions for decentralized applications.
Permissioned Blockchains are here to stay. They provide blockchain benefits in a closed ecosystem while ensuring that it meets the need for an organization. There are apparent benefits of using it, including cost-effective, proper governance and efficient performance. However, it also does come with its own drawbacks and challenges. So, what do you think about permissioned blockchains? Comment below and let us know. We are listening.