Permissionless Blockchain

Permissionless Blockchain means that any participant is able to become a validator for a blockchain.

Bitcoin and Ethereum are the most prominent examples of Permissionless blockchains, which are public and decentralized.

Participants can leave and join the blockchain’s network at any time.

No central authority or trusted third party manages who is allowed to join the network, or bans illegitimate users from connecting to the network.

Anyone can read the chain, make legitimate changes or write a new block into the chain. Thus the number of readers, writers and untrusted writers are very high.

In a Permissionless setup, the number of nodes is expected to be large, and these nodes are anonymous and untrusted since any node is allowed to join the network.

Most of the DMMS (dynamic membership multi-party signature) validators join Permissionless blockchain as a DMMS digital signature to sign blockheaders is formed by group of signers of no fixed size. Bitcoin’s blockheaders are DMMSs because their proof of work has a property that anyone can contribute without enrolment required and their contribution is weighted by computational power rather than one threshold signature contribution per party, which allows anonymous membership without risk of Sybil attack (where party joins many times and has disproportional input into the signature).

Completely decentralized as the permissions to read and write data onto the Blockchain are shared equally by all the connected users, who come to a consensus before any data is stored on the database.

Censorship resistant with anonymous consensus based on a completely trust-less system where no user is given special privileges on any decision.

Consensus mechanism to prove the transactional verifiability is mainly based on proof of work (PoW). Nodes have to prove that they have expended significant amount of energy as Proof-of-Work (PoW) towards solving a hard cryptographic puzzle.

Proof of work consensus assumes that amount of validators (miners) is unknown and validators are anonymous and have no reputation. In order to vote, proof of work needs to be presented, which requires hard computations. A consensus is reached if parties that control majority (usually 51% of computational power) agree.

Highly Immutable blocks, as any tempering requires > 51% of participant node consensus in a very large public blockchain which is almost impossible.

Some Permission less blockchains also support PoS (proof of stake) based consensus. For Example Ethereum (in future), NXT, Peercoin.

PoS (proof of stake) consensus assumes that the validator of the next block is chosen in a deterministic way. The chance that a validator is chosen depends on its stake and a validator loses its stake if it commits an attack. The consensus is reached if the parties that control majority of wealth agrees.

High public verifiability with each state change validated by verifiers, e.g. miners on bitcoin’s or ethereum’s blockchain. Any observer, or reader, on the other hand, can verify that the blockchain’s state has changed as per the protocol and eventually, all readers will have the same version of the blockchain.

Pros

• Decentralized trustless public blockchain supporting a high number of readers and writers.
• High public verifiability with all readers having same blockchain state at all times.
• High security and immutability as Blockchain is mathematically very hard to hack as the cost of hacking becomes too high for a system where every node connected is synced with the entire Blockchain database and more importantly, once a hack is discovered, the value of the hacked coins would diminish exponentially.
• Consistent state of blockchain across all users.

Cons

• Since all transactions in public blockchain need to be verified by thousands of users so transaction verification process is time consuming causing low latency and low throughput.
• Users have to pay a larger amount of transactional fee compared to private blockchain.
• All Transactions are shared and publically accessible, though private data can be concealed by using cryptographic primitives.
• Scalability and Data Privacy is a concern.

Private Permissioned Blockchain

Permission to write data onto the blockchain is controlled by a single organization which is highly trusted by all other users. Useful when no public Readability of content is desired.

This organization may/may not allow users to have access to read the data, as public readability might not be necessary in most cases.

In some situations, the organization might want the public to audit the data. Limited/restricted read permissions also provide a greater level of privacy to the users, a feature not available in Public Blockchains.

The organization in control has the power to change the rules of a Private Blockchain and may also decline transactions based on their established rules and regulations.

In a Private Blockchain, the transactions are quicker as they can be verified be a small number of devices. Thus, the users pay lesser amounts of transaction fees since the number of people verifying the transaction is fewer than in a Public Blockchain.

The devices are very well connected and any faults can be fixed by human intervention, which can be easily approved by the users since the users trust the single organization in control of the Blockchain.

Like public permissioned blockchain, private blockchains have an access control layer built into protocol.

With permissioned blockchains, this may or may not involve ‘proof of work’ or some other system requirement from the nodes. There may not need PoW but broad understanding of consensus at transaction level among peer nodes that allows multiple approaches, Generally permissioned blockchain algorithms are based on BFT(Byzantine Fault Tolerance) consensus type.

BFT consensus type assumes that amount of validators are known upfront. Validators know each other and adding or removing a validator require approval of the rest.

The transactions are quick to verify in a private Blockchain as there are a handful of verifiers, with the transaction fee miniscule thus increasing the overall efficiency of transactions.

The Private Blockchains maintain the privacy of a user’s data, without consolidating power with a single organization.

Hyperledger offers open source pluggable architecture based implementation of private permissioned blockchain with flexibility for users to configure the consensus module that meets their needs.

Pros

• High transactional throughput and transactions are quicker as lesser number of transaction validators are required to validate the transactions stored in blockchain. Scalability is high.
• High Immutability guaranteed with access controlled by central authority.
• Different user defined consensus algorithm based implementation approaches possible with flexible chain trust model execution.
• Transactions are highly secure and user data privacy with permissioned access control for all users accessing blockchain.
• Hybrid approach possible with read and write access to selected nodes as well as read access to public on selected data with modular cryptographic approach.
• Maintain privacy of user data without consolidating power with a single organization.
• Very small or no transactional fee required to carry out transactions.

Cons

• Transparency and anonymity are not fully implemented but rather controlled by single central organization.
• Single point of failure.
• Number of writers and readers are low compared to public blockchain.
• Centrally managed.