When a company develops a blockchain solution to meet its supply chain needs, a decision must be made about which type of blockchain is best suited for the project. As a result, it is critical to have a thorough understanding of the blockchain structure options.
Blockchains can be classified as permissionless, permissioned, or both. These models each have their own set of use cases and are appropriate for a variety of situations.
In this post, we’ll look at the differences between permissioned vs permissionless blockchains and determine which is best for developing Dapps.
Permissioned vs. permissionless blockchains: An overview
What is Permissioned blockchain?
The permissioned or private blockchain access model has got administrators that regulate and prospect the blockchain platform on a regular basis. It has a governing structure in which different members have different roles and levels of authority.
Permissioned blockchains include Quorum and Corda. Quorum offers permissioned DeFi services to financial institutions and enterprises, whereas Corda is a blockchain project that allows individuals and businesses to create interoperable blockchain networks that allow them to communicate and transact with other businesses.
Before being granted access rights, permissioned blockchains require identity and role definitions known as KYC (Know Your Customer) compliance.
So, what exactly is KYC?
KYC compliance is a process that verifies a customer’s identity in order to prevent fraud and corruption.
Anyone wishing to join a permissioned blockchain platform must first obtain permission access, which allows administrators to limit the number of users who can access the platform or specific features. The ability to adjust user traffic implies that the blockchain will be simple to maintain.
Permissioned blockchains are not completely transparent because platform owners or administrators control how much information is shared on the blockchain platform. Ordinary members will be unable to detect faults or track specific data.
What is Permissionless blockchain?
A permissionless blockchain lacks a centralized governing body. To join the permissionless blockchain platform or community, members do not need permission access. A permissionless blockchain, unlike a permissioned blockchain, allows users to remain anonymous.
Some of the first permissionless blockchain platforms were Ethereum and Bitcoin. These open source platforms use consensus algorithms to validate blocks and reward those who validate (or mine) them.
This model enables all users to see all transactions taking place on the blockchain platform. Etherscan, for example, is a platform that records and displays Ethereum transaction activity.
Because a permissionless blockchain lacks a governing body or owner, a consensus algorithm is used to facilitate all transactions and activities on the platform.
Permissionless blockchains employ various consensus algorithms, including:
- Proof of Work (POW)
- Proof of Stake (POS)
- Effective Proof of Stake (ePOS)
These consensus algorithms govern how miners who validate blocks are compensated with tokens. Because miners validate blocks and can revoke any malicious blocks, these consensus models promote security. Permissionless blockchain, ironically, is safer and more secure than permissioned blockchain.
Although permissionless blockchains appear insecure, corrupting data is difficult in this model because more than half of the participants must agree to corrupt data.
Which blockchain is more secure?
Both of these blockchain types have their own advantages and disadvantages, which is why in order to improve transparency and privacy, administrators should use permissioned and permissionless blockchains concurrently. When these two models are used concurrently, the result is a new blockchain model known as a hybrid blockchain.
A hybrid blockchain model keeps a portion of the services, features, and processes private while keeping the rest of the blockchain public.
Permissioned vs. permissionless blockchains: Which blockchain is best for your DApp?
To determine which blockchain is best for your DApp, we must first investigate the various use cases and characteristics of permissioned and permissionless blockchains.
The following are some factors to consider when deciding on the best blockchain access model for you.
Transparency and censorship
If the primary goal of your DApp is to promote privacy and transparency, then a permissionless blockchain is the best option. Permissionless blockchains are also the best for maintaining privacy and transparency because users can be anonymous, and all transactions are visible to everyone. Every user is equal and has equal access. No administrators have the ability to censor DApp users.
Permissioned blockchains are not ideal in this situation because one person with access can corrupt data. It is also difficult to maintain a consensus algorithm if those in power intend to change it for their own benefit.
Permissioned blockchain has performed well in the NFT market. When a user purchases an NFT, he or she gains access to a permissioned blockchain. This membership provides them with additional benefits, such as yachting with other members. This access is only available to blockchain members who have not purchased the NFT.
The best thing about permissioned blockchain is that it is well-regulated and beneficial to businesses because businesses can control who has access to their private blockchain.
Security and performance
Permissioned blockchains are faster than permissionless blockchains because they control how many users can access and join the permissioned blockchain.
When compared to permissionless blockchain, permissioned blockchain does not have effective security because there are no or few validators who validate the blocks or activities. Every block or transaction in a permissionless blockchain must be validated before it can be added.
Because there are millions of members reporting bugs and validating blocks, a permissionless blockchain is simple to maintain. Security measures can be implemented by administrators in a permissioned blockchain, but they are less effective than in a permissionless blockchain.
Ecosystems and community participation
Because their source code is open source, FAANG companies and Ethereum Layer 2 platforms are successful. Open sourcing the source code of your decentralized application is advantageous because you will receive reviews, updates, and ideas from developers all over the world.
Open-source DApps benefit from rapid development and technological advancement. Because it is suitable for voting and fundraising, a permissionless blockchain is ideal for this use case. This is due to the fact that anyone can participate in the fundraising program and contribute to the source code.
Permissionless blockchain also allows contributors to be compensated in cryptocurrency. Consensus algorithms aid in the compensation process.
When mining and validating blocks, the permissionless model consumes a significant amount of energy. When using the permissionless blockchain, it is also difficult to scale your DApp because many unknown users join every day and carry out transactions.
According to a MoneySuperMarket study, a single Bitcoin transaction consumes at least 1,173kWh. This amount of energy is sufficient to power a house for more than a month. The permissionless blockchain is used by all of these cryptocurrencies that mine tokens. This is due to the large number of transactions that must be validated by crypto miners.
A permissionless blockchain is costly because validators must be compensated. Many permissionless blockchains, such as Ethereum and Harmony, have developed their own cryptocurrencies and tokens to reward validators. This is an effective strategy, but obtaining a crypto coin with real value that can be traded on the open market is difficult. The cryptocurrency’s value will be determined by the performance of the blockchain platform. This market also has a lot of competition.
Web personalization and adaptability
Because they have a small audience and user base, as well as administrators and owners who devote their time to designing the platform’s specific needs, permissioned blockchain DApps are easy to customize and satisfy their audience. This process is quick because no voting is required to determine which updates are pushed to the DApp’s codebase.
As mentioned before, the hybrid model, which is a combination of permissioned and permissionless blockchains, can not only address the drawbacks of both types but also enhance transparency and privacy. This model is considered ideal for many DApps because it does not limit you to only one blockchain access model and allows your users to switch between permissioned and permissionless features.
In a nutshell, permissionless blockchains are beneficial for public platforms and apps because all users are treated equally and no one is above the blockchain consensus. Contrarily, permissioned blockchains are perfect for DApps that demand strict data access.
However, the best blockchain access model is one that meets the needs of your DApps. Hopefully, the criteria I’ve outlined in this article will help you make an informed decision for your next project.
If you have any blockchain ideas in mind, especially in the Web3 or NFT fields, send them to Satom Venture Studio. At Satom, you can get help with idea clarification, support, and enabling services to make your idea come true.