Private vs. Public Blockchain, or is it Permissioned vs. Permissionless Blockchain?
I suppose standardization in the Blockchain sector is an entirely separate conversation!
Although there may not be a difference between the two ways we refer to these types of blockchains, it is important to understand the differences between them. In this post we will review how these two approaches to Blockchain share similarities and of course highlight some of their main differences.
In order to understand why it is easy for many individuals to not recognize that a difference exists, let’s begin by pointing out some similarities:
- They each rely on a consensus mechanism to validate transactions
- They each store transactions on a distributed ledger
- They each provide immutability and have the option to store encrypted information
- They each have the ability to host Smart Contracts
So, what is the key difference?
Within a Permissioned Blockchain the network participants interested in accessing the Distributed Ledger as well as validating transactions will require an invitation by the Network Administrator or validated through governed process the network has in place.
Within the Permissionless Blockchain it is important to note that the network is available to any participant interested accessing the Ledger and setting up Nodes to assist in validating transactions. Bitcoin is likely the world’s most popular Permissionless Blockchain which relies on its Consensus Mechanism called Proof of Work (POW). POW is what dictates the method by which Miners (Nodes) will validate transactions. For a node to validate a transaction the node must solve a complex cryptographic problem (Proof of Work) which helps keep the network and its transactions concurrent. At this point we can begin to understand that one of the primary obstacles is the amount of processing power that the Permissionless Blockchains require to host the amount of transactions that the network will face. Additionally, since Permissionless Blockchains do not have any limitations regarding network participation the Blockchain information is no longer private and will likely not meet specific security standards that Business’s may require.
Many Enterprise Organizations are exploring Blockchain Technology. The Enterprise community recognizes many benefits from a Permissioned Blockchain such as:
- Leveraging network governance to restrict access to participants
- Transaction volume is likely less of a concern eliminating network scalability concerns
- Maintaining privacy and security for organizational transactions
- The ability to Channel transactions to specific organizations further increasing privacy
As mentioned earlier in the post, entrance to a Permissioned Blockchain requires Permission to access the network for the participant to begin playing an active role in maintaining the Distributed Ledger. Access may be granted in several ways:
- Networks Members will decide
- The Network Administrator or Originator will decide
- A Consortium will decide
As a Microsoft Azure Blockchain Partner focused on Professional Services revolving around Implementation and Development, Envision Blockchain Solutions, can openly claim that at this point in time, the majority of the Enterprise Community is exploring Permissioned Blockchains. Understanding how your business can leverage Blockchain Technology in effort to increase business efficiency is a process which can rely on a number of factors.