Put briefly, the main difference is political: permissions. In a permissionless blockchain, otherwise known as public, anyone can hop in. A permissioned blockchain is only available to users with a key or invitation to join.
But there are more differences between these two types of blockchain. To better understand them, let’s take a closer look at their nature.
A permissioned blockchain is closed to unauthorized users. It has an authority at the top that decides who is eligible to join the blockchain and manages relationships between participants. If you meet the authority’s requirements, you might be eligible to take part of this blockchain system.
The permission system is also known as an additional access control layer. It makes a blockchain secure and governable. And as far as there are permissions to be granted and revoked, someone needs to manage them: a superseding regulator. Therefore, a permissioned blockchain is also a regulated blockchain.
An authority grants permission by handing over a coded key or a digital invitation to a participant candidate. It also regulates which participant can do what on the blockchain.
Permissioned blockchains are rare and mostly used by corporations and large enterprises. The most prominent examples include L3COS, Hyperledger, Quorum and R3.
In contrast to permissioned blockchains, a permissionless system is open to everyone. A more common term for it is ‘public blockchain’, which speaks for itself.
If you’re not sure yet what that means, consider another term: community-owned. This is another way to say that this type of blockchain belongs to everyone in general and nobody in particular.
Such a blockchain is logically centralized via a consensus mechanism that allows nodes (participants) to communicate with each other. Yet it doesn’t have a central entity that regulates it. This means that a permissioned blockchain is politically decentralized — you may even call it anarchic.
Most blockchains are public. These include Bitcoin, the blockchain that was designed to create the first cryptocurrency, and Ethereum, which ups the game by enabling smart contracts and decentralized apps (DApps).
The nature of the permissioned blockchain predefines its advantages.
Of course, a permissioned blockchain will have some disadvantages that make it unsuitable for some uses and situations.
If you want to create a system that is self-reliant and does not require tending to, you should create a public blockchain.
Censorship is a common risk of all centrally regulated systems. L3COS solves this problem by giving every individual the power to decide who they trust to govern the system and the country. In this case, the superseding authority is democratically elected.
Although putting a system in the hands of a single authority strengthens its security, some unique risks may arise. In a permissioned blockchain, a group of nodes with malicious intent can plot together and modify the network. L3COS uses three layers of permissions to prevent that.
Every organization has its tools, platforms and mechanics. And the bigger the organization, the more complex its processes are. Integrating any new service into its infrastructure can be a challenge — and adopting a permissioned blockchain even more so. Nevertheless, the benefits that L3COS offers outweigh the difficulties by a long shot.
If the regulator needs to review and approve every permission request before participants can access data, processes may slow down. By using the three-level permission system and smart contracts, L3COS allows the main authority, the government, to allocate its regulating powers to respective sublevel participants and to automate common regulatory compliance.
Blockchain-permissioned ledger is simply another name for permissioned blockchain.
Harvard Business Review describes blockchain design as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. You can also view the distributed ledger as a blockchain’s use case.
Although the permissioned ledger is regulated, it is still distributed. Distribution is a structural term that describes the decentralized architecture, the underlying principle of blockchain.
Today, most blockchains are used as distributed ledgers to enable cryptocurrencies. The permissioned ledger of L3COS can be used as the foundation for central bank digital currencies (CBDC). The Bank of England and some other financial authorities are currently reviewing L3COS technology to be used for that purpose.
A blockchain that will put an end to all other blockchains? It’s a definite possibility, but governments around the world would have to agree to use it.
What is for sure is that L3COS is ready for global adoption. It runs on 195 nodes (one for each country) and has all the instruments required for an international system.