Crypto Alphabet

Benefits and drawbacks of permissioned blockchains

Permissioned blockchains are distributed databases that enable its members to decide who can participate in the consensus mechanism of the network and who can validate transactions on the network. Nodes on permissioned blockchains are given full authority over the network by verified and registered members of the permissioned blockchain.

On public (permissionless) blockchains, there are no restrictions that prevent participants from accessing the blockchain. Any individual or group can set up a node and participate in the consensus mechanism of a public blockchain.

The benefits of permissioned blockchains

  • Permissioned blockchains offer more efficient performance compared to public blockchain networks. In a blockchain network, all nodes on the network must compute and validate transactions on the network. These nodes often perform redundant computations to validate transactions on the network. Because permissioned blockchains only require its member nodes to validate transactions, they offer better performance relative to the amount of computation used for validation.
  • Permissioned blockchains have clearly defined governance structures compared to public blockchain networks. Public blockchains operate like public forums where any individual operating a full node would have a say in the governance and the rules of the network. As a consequence, updates and developments on these networks are incredibly slow as multiple independent nodes, acting in their own self-interest, would need to come to a consensus to activate an update to the network. Nodes on permissioned blockchains are capable of moving forward with updates much faster. While at times there may be debates on updates to a permissioned blockchain’s network, these debates are easier to settle between a consortium of businesses compared to a public arena of hundreds of thousands of individuals and entities.

The drawbacks of permissioned blockchains

  • The security of permissioned blockchains is entirely reliant on the integrity of its members. Compared to public blockchains, permissioned blockchains carry higher risks of collusion. If an inner-group of members in a permissioned blockchain collude to change data points in that blockchain, they can ruin the integrity of the network to their benefit.
  • Compared to public databases, permissioned blockchains are more prone to censorship and regulation. Because permissioned blockchains are run by a consortium of businesses they must adhere by the same regulations that their members do. While the threat of regulation may not impact the day to day operations of businesses that already comply with existing laws, it would prevent businesses that need the uncensorable features of public blockchains from operating on permissioned blockchains.