Permissionless and permissioned blockchains

We can trace the history of blockchain technology back to Satoshi Nakamoto's Bitcoin whitepaper. The whitepaper introduced a permissionless blockchain technology, where a decentralized network of computers reaches consensus. This permissionless trend continued as the Bitcoin model influenced multiple generations of blockchains.

The characteristics of blockchain have also proven attractive for private applications. Its immutability, transparency (in some aspects), and security have created demand for blockchains that offer a permissioned experience. To meet this demand, blockchain developers have created permissioned frameworks or custom blockchains for third-party use.

Permissionless blockchains

Permissionless blockchains are open to anyone. People can participate in consensus mechanisms, provided they meet the specific requirements. Bitcoin, Ethereum, and Cardano are examples of permissionless blockchains, which are typically transparent and decentralized.

advantages:

1. Potential for decentralization. Not every permissionless blockchain is decentralized, but they typically have a high potential for it. Anyone can participate in the consensus mechanism or use a permissionless network, if they want and have the resources to do so.

2. Group consensus. People can actively participate and decide on changes to the network. Validators and network users can also disagree with proposals. Therefore, changes with low acceptance can result in hard forks of the network.

3. Ease of access. Anyone can create a wallet and join a permissionless network. These networks are easily accessible and have relatively low barriers to entry.

disadvantages:

1. Scalability challenges. Permissionless blockchains must deal with large user bases and high traffic volume. For an effective implementation, network updates that aim to improve scalability must be approved by group consensus.

2. Malicious users. As anyone can join permissionless blockchains, there is always the risk of malicious actors operating on these networks.

3. Excessive transparency. Most information about permissionless blockchains is free and public, raising some concerns related to privacy and security.

Permissioned blockchains

Permissioned blockchains, on the other hand, require invitations to participate. They are typically used in private business environments and are tailored to specific use cases. Power is restricted to a small group of validators who make most of the network's decisions. Transparency may be limited, but network performance and scalability are generally better.

advantages:

1. Scalability. A permissioned blockchain is typically run by an entity with some degree of control over the validators. Updates can therefore be implemented more easily.

2. Easy customization. A permissioned blockchain can be created for a specific purpose, making it efficient for a specific function. If needs change, it is possible to make changes to this blockchain.

3. Controlled degree of transparency. An operator of a permissioned blockchain can determine the appropriate level of transparency for the network, depending on the use case.

4. Invitation-only access. It is possible to have strict control over who can or cannot participate in the blockchain.

disadvantages:

1. Centralization. Power is generally concentrated in the hands of a central entity or a small group of validators chosen by the owners of the blockchain. This means that decisions about the network are likely to not include all stakeholders.

2. Vulnerability to attacks. Permissioned blockchains typically have fewer validators, which makes their consensus mechanism less resistant to attacks.

3. Risk of censorship. The possibility of collusion on the network or updates introduced by the blockchain operator presents a risk of censorship. If a sufficient number of participants agree to do so, it is possible for them to change the information on the blockchain.