In the last decade, blockchain has emerged as a robust technology in the digital landscape. Blockchains are continuously transforming various industries by redefining data management, data security, and decentralized collaboration. Blockchain gained popularity with the emergence of cryptocurrencies. Let’s take a look back to the year 2017 when Japan recognized Bitcoin as a legal currency and Block.one company brought up the EOS blockchain operating system. It aimed to support commercial decentralized applications.This showcased its potential for broader applications. Among the diverse array of blockchain iterations, permissioned blockchains stand at the forefront enabling enterprises to maximize efficiency, and security and foster collaborative ecosystems. As a leading blockchain development company, we will answer various questions such as: What is a permissioned blockchain? Advantages of permissioned blockchains, What are the other types of blockchains?, Use cases of permissioned blockchains, and so on.
Definition of Blockchain
Before diving into the intricacies of permissioned blockchain, it is important to understand the parent term “blockchain” and how blockchain works? Well, Blockchain is a cutting-edge database mechanism that facilitates transparency while sharing information within a business network. The blockchain database stores information in blocks that are also linked in a chain. Simply put, Blockchain can be thought of as a network of computers that stores information much like a digital ledger or record-keeping system. Thus, rather than being kept in a single location as in a typical database, the information is dispersed and duplicated among numerous computers, or nodes.
The data is chronologically consistent because you cannot eliminate or modify the chain without consensus from the network. As a result, you can use blockchain technology to create an unalterable or immutable ledger for tracking orders, payments, accounts, and other transactions. As The system has built-in mechanisms, it prevents unauthorized transaction entries and create consistency in the shared view of these transactions.
What is Permissioned Blockchain?
Permissioned blockchain technology is a blockchain network in which only authorized entities have access to participate in the network and validate transactions. Simply put, permissioned blockchains are closed networks with limited decentralization, an extra layer of access control, and specifically designated entities. In simple terms, permissioned blockchain operates in a more controlled environment unlike its public blockchain counterparts, which offer a relatively more secure and regulated framework.
Consider it a gated community within the blockchain ecosystem, granting entry based on predefined criteria. This approach ensures more control over network governance and data integrity, making permissioned blockchains ideal for enterprises and industries requiring heightened privacy, compliance, and accountability measures.
What does “Addition layer in permissioned blockchain means”?
Now let’s deep diver into the permissioned blockchains. These type of blockchainshave an additional layer of access control which means that only authorized users can access the blockchain. In this type of Blockchain, administrators of the ledger grant users with role-based access. The roles within the blockchain network determine what actions the users can perform. Therefore, the users need to authenticate themselves via certificates or digital identifier methods to gain access.
Also, the type of information users can access is also based on the roles assigned to them. Hence the permissioned blockchain ensures that the sensitive data remains accessible to only those users who have the required permissions.
What are the other types of Blockchains besides permissioned blockchain?
There are several types of blockchains including permissioned blockchains, each offering unique features and designed for specific use cases. To clarify, we have mentioned all 4 types of blockchains, their unique characteristics, and their applications below:
1. Public Blockchains
A public blockchain is the foundational type of blockchain technology. This blockchain technology has made the concept of distributed ledger technology (DLT) popular. It is a decentralized and open ledger system that eliminates centralization-related problems such as transparency and less security. In DLT, the information is not stored in one specific place. The decentralized nature of public blockchain may require some method to verify the authenticity of data. That method is a consensus algorithm through which participants in the blockchain reach common ground on the current state of the ledger. Proof of work (PoW) and proof of stake (PoS) are two common consensus methods.
2. Private Blockchain
Private blockchains operate on private or we can say closed networks. On these networks, only authorized participants can join and access the blockchains. Usually, these blockchains are used within a single entity or group of entities that need to maintain the confidentiality of transactions. The governing entity has full control over the private blockchain network and manages who can read, write, and participate in the consensus process. Private blockchain’s popular examples are Hyperledger Fabric and R3 Corda.
3. Consortium Blockchain
Consortium blockchains balance the public blockchain’s decentralization and the private blockchain’s controlling capability. A pre-selected group of organizations or nodes manages the consensus process in these semi-decentralized networks. They collaborate to maintain a common, secure ledger while exerting more control than a public blockchain.
4. Hybrid Blockchain (also known as Federated Blockchains
As the name suggests, Hybrid blockchain has elements of both private and public blockchains as they have a balance between the transparency and credibility of public blockchains and the control and privacy of private blockchains. Please note that, in hybrid blockchains, some data and transactions remain accessible only to the authorized participants however the general data can be made public and accessible to anyone. This works in favour of enterprises as they can leverage this dual approach and utilize the advantages of blockchain technology such as security, immutability, and transparency while controlling confidential information and ensuring regulatory compliance.
5. Sidechains
Authorized participants in hybrid blockchains control access to specific data and transactions, while making general data publicly accessible to anyone. These blockchains rely on their own distinct set of rules, ledger, and consensus mechanisms. Sidechains facilitate flexibility by implementing different rules, consensus mechanisms, and features without disturbing the parent chain. They have some significant applications in various industries and blockchain ecosystems all thanks to their capability of offering enhanced flexibility, scalability, and experimentation.
Sidechains like Polygon for Ethereum offer scalable solutions for decentralized applications (dApps), enabling smoother user experiences and lower costs. They can also cater to industries such as supply chain management, gaming, identity verification, and decentralized finance (DeFi). Some popular examples may include the Liquid Network for Bitcoin, which provides faster and more private transactions, and Polygon (layer two” or “sidechain” scaling solution that runs alongside the Ethereum blockchain) for Ethereum, which offers scalable solutions for decentralized applications (dApps).
6. Layer 2 Solutions
Layer 2 Solutions improve scalability and transaction speed by developing protocols on top of the current blockchains. These solutions leverage the security of the underlying layer 1 chain and manage the transactions off the main blockchain. This results in cost reduction accelerates transaction throughput, and minimizes the load on the main blockchain. Let’s consider, Ethereum’s Optimistic Rollups, which group several transactions off-chain and then commit them to the main chain, improving the scalability of smart contracts and decentralized applications, and Bitcoin’s Lightning Network, which facilitates quick and low-cost transactions.
7. Child Chains
Child chains function similarly to independent chains but rely on the security strength of their parent chain for safeguarding. They are a safe and scalable solution for specific applications as they often inherit robust security properties from the parent chain. Child chains are capable of having independent governance structures and consensus processes. As an example, consider Ignis, a child chain on the Ardour platform that gives users access to smart contracts, asset creation and management, and other blockchain functions all while leveraging Ardor’s scalability and security.
8. Tokenized Blockchains
Tokenized blockchains emphasize the creation, management and transfer of digital assets or tokens. These blockchain networks specifically design to represent and manage the digital assets or tokens. These digital assets demonstrate a range of real-world assets including currencies, real estate, commodities, and ownership rights in physical goods. The tokenization process transforms these physical assets into digital tokens, enabling their exchange, transfer, and secure storage on a blockchain network.
What are the various aspects of Permissioned Blockchains?
Permissioned Blockchains have several key aspects that differentiate them from their other public counterparts. Here are the key aspects of permissioned blockchain:
1. Extra Security Layers
Permissioned blockchains have additional security layers such as encryption protocols and access control mechanisms that safeguard sensitive data and transactions from any potential threats.
2. Access Control
As previously mentioned, permissioned blockchains restrict unauthorized access to the network, only authorized entities can access and participate based on the roles allocated to them. And even so, they need authentication and approval to do so.
3. Limited Decentralization
While both permissioned and public blockchains are decentralized to some extent. This simply means that they do not depend on a specific authority to facilitate transactions. However permissioned blockchains have fewer participants than public blockchains. Public blockchains such as Bitcoin and Ethereum allow anyone to join the network and perform a transaction validation. Hence, there are large and diverse networks of participants involved in the public blockchain making it highly decentralized. Permissioned blockchains restrict access to the network to authorized entities, such as specific businesses, government agencies, or consortium members, unlike public blockchains. As a result, the number of participants in permissioned blockchains is typically smaller than in public blockchains. Network members determine the level of decentralization and consensus mechanisms.
4. Role-Based Permissions
Permissioned blockchain allows only role-based permissions. The network allocates defined roles and permissions to users, governing the level of access they receive and the actions they can perform within it.
5. Authentication Methods
Permissioned blockchains use authentication methods like digital identifiers and certificates to verify users’ identity. This ensures that only authorized individuals can perform the assigned actions on the network.
6. Data Privacy
Permissioned blockchains offer better privacy features enabling participants to have authority over certain data and manage the access of the data and transactions within the network.
7. Regulatory Compliance
These blockchains often have features that ensure regulatory compliance with various requirements including audit trails and identity verification. This makes permissioned blockchain the best fit for industries with strict regulatory standards.
8. Decision-Making Authority
The designated group can control the decision-making within the network, especially the network owners. The network owners are based on a pre-defined hierarchy or structure.
What are the advantages of permissioned blockchains?
Permissioned blockchain has many advantages that make it a good choice for certain applications, especially where efficiency, control, and privacy play a crucial role such as in businesses and enterprise structures. Below we have mentioned several advantages of permissioned blockchains:
(i) Enhanced Security
Controlled access and identity verification aspects of permissioned blockchain result in improving the security level. Hence, it minimizes the risk of malicious actors infiltrating the system.
(ii) Improved Privacy
Authorized parties protect sensitive information since transaction details and data are only visible to them. The capabilities of permissioned blockchain to conduct confidential transactions ensure that the business information remains private and protected.
(iii) Regulatory Compliance
Permissioned blockchains have enhanced audit capabilities that enable comprehensive tracking and transaction verification. These blockchains can also be designed for regulatory compliance ensuring businesses fulfill legal and regulatory standards.
(iv) Scalability
The permissioned blockchain network is scalable in a controlled manner. This capability ensures that the performance of the blockchain remains uniform as the no. of users/participants grows with time. It also facilitates the optimized use of resources as the permissioned blockchain doesn’t need computational capacity just like public blockchains.
(v) Integration with existing systems
Blockchains offer seamless integration with existing enterprise systems, enabling effortless data exchange and process automation. They also facilitate the formation of collaborative networks and consortiums, allowing multiple organizations to collaborate on shared processes, enhancing efficiency, and fostering innovation.
(vi) Cost-Effective
Permissioned blockchains have significantly lower operational costs and lower transaction fees compared to public blockchains. This is because a permissioned blockchain facilitates a controlled environment and optimizes consensus mechanisms. Furthermore, its energy-efficient consensus mechanisms including Practical Byzantine Fault Tolerance (PBFT) offers energy efficiency.
(vii) Governance & Control
Permissioned Blockchain facilitates clear governance structures, which make decision-making clearly defined and are under the authority of the entity or group in charge of blockchain management.
Real-World Applications of Permissioned Blockchain
Permissioned blockchains have become popular in various industries as it is more secure, offer controlled access, and have advanced regulatory compliance features. Below, we have mentioned some real-world applications with examples:
1. JP Morgan Chase’s Quorum (Finance)
Quorum is JP Morgan’s permission blockchain platform that secures and streamline financial transactions. By restricting access to sensitive financial data to just authorized participants, Quorum ensures privacy and regulatory compliance. It is applied to private equity, interbank, and syndicated loan transactions.
2. TradeLens by IBM & Maersk (Supply Chain Management)
TradeLens, developed by IBM and Maersk, is a permissioned blockchain platform used in the global supply chain. This platform enhances global trade’s efficiency and transparency as it digitizes and secures the documentation process. This enables various participants including shippers, port operators, and customs authorities to check and share real-time shipment data.
3. MedRec (Healthcare)
MedRec; the permissioned blockchain platform is built to organize electronic medical records (EMRs). By using this platform, the participants ensure patient data privacy and are allowed to share medical records among authorized healthcare professionals. By providing physicians, hospitals, and patients with accurate and current medical histories, it simplifies the process of providing patient care.
4. Dubai Blockchain Strategy (Government & Public Services)
Dubai Government has started using a permissioned blockchain to digitize and improve the efficiency of its public services. Moreover, this initiative of the Dubai government aims to position itself as the pioneer in blockchain by 2021. The government aimed to accelerate the efficiency and transparency of government transactions. Furthermore, it encompasses numerous sectors, including banking, real estate, and healthcare, aiding security and efficiency in public services.
Future Prospects of Permissioned Blockchains
The future prospects of permissioned blockchains are truly promising. Combined with several trends and emerging developments, permissioned blockchains are solidifying their position as compelling alternatives to permissionless networks. Because it excels in security, scalability, and tailored consensus mechanisms, they serve as an ideal for enterprise projects in tightly regulated environments. Anticipated developments include increased interoperability with existing systems and other blockchains. Moreover, enhanced security and scalability through innovative consensus mechanisms are expected. Additionally, there will be improvements in compliance with evolving regulatory requirements. Polymesh, with its focus on interoperability, secure consensus, and regulatory compliance, is well-positioned to meet the complex needs of regulated industries and institutional tokenization.
Summary
Permissioned blockchains represent a significant evolution in the blockchain landscape. Additionally, they offer tailored solutions for enterprises requiring heightened security, privacy, and regulatory compliance. With their controlled access, improved scalability, and seamless integration capabilities, they are set to play a crucial role in the future of digital transformation. Moreover, permissioned blockchains foster innovation and collaboration across various industries. Also, We at Codalien Technologies are at the forefront of this revolution, driving innovation and collaboration across various industries. We leverage our advanced blockchain expertise to empower businesses to achieve unparalleled efficiency, trust, and competitive advantage in the digital era, having successfully delivered numerous blockchain projects. As a leading blockchain development company, pioneers innovation and collaboration across industries. Leveraging advanced blockchain expertise, our blockchain development services empower businesses to thrive in the digital era. Contact us today to unlock unparalleled efficiency and competitive advantage.