The difference between permissioned and permissionless distributed ledgers (a.k.a.: blockchain)
On my last article, we discussed a bit about how blockchain was created, what is its basic concept and why there is so much potential for this technology. Only recently we started to study and apply it to other fields rather than just cryptocurrencies.
When studying other applications to distributed ledgers (from now on I’ll refer to blockchain on as distributed ledgers) researchers found that to create business applications on top of it we should not do the same way as Bitcoin and Ethereum. Even though security and cryptography are the foundation of distributed ledgers, in some cases businesses don’t want their data available to everyone, just to some third parties.
To solve this problem, researchers started working on what we call permissioned distributed ledgers. But, what is a permissioned ledger? The whole concept isn’t to share data?
Permissioned Distributed Ledgers
Sometimes businesses need to share data but not with everyone. For example, if you are a bank and your customer wants to transfer money to a friend you will have to share this data with the other bank. However, you don’t want anyone besides the involved parties to know what’s being moved or if you are a fisherman who agreed to a specific price deal with one of your distributors.
In this kind of distributed ledgers, differently from Bitcoin and Ethereum, only allowed peers can join the network, create contracts (on further articles I’ll talk about Smart Contracts) and share confidential information to other peers without the knowledge of the whole network.
For this use case, trust is enforced thru a strict control to who can validate a new transaction.
Permissionless Distributed Ledgers
On the other hand, permissionless distributed ledgers are the same as Bitcoin — anyone can join and have access to the ledger. There are no authorization nor restrictions on who can view which data. Trust is enforced by cryptographic proof of work or in Ethereum case proof-of-stake (in further articles I’ll talk about consensus algorithms).
Use Cases
Both types of distributed ledgers are useful. However, you have to be careful on choosing which one suits better to your needs. To find out you have to ask a simple question: does everyone need to have access to all data in the ledger? If the answer NO then you have to choose a permissioned distributed ledger.
Let’s get our hands dirty and put some real-world examples.
Supply Chain Management — Permissioned
Supply chain management is by default a distributed network of partners who have to share information. That is the core of distributed ledgers, share data across multiple entities in a secure and immutable way, but the tricky part is how you do that without disclosing private information that needs to be shared only with the involved parties? The answer is permissioned distributed ledgers!
Health Care — Permissioned
Imagine that you want to store all your medical background and avoid filling thousands of documents every time you go for your check-up exams. However, you don’t want people looking at your medical records without your permission.
Environmental Audits — Non-Permissioned
Almost every developed country has strict rules and audits to prevent ecological damage, but have you ever seen one of this documents? Non-permissioned distributed ledgers could solve that for us. Imagine that all audits are stored in a ledger which is publicly available — would be a lot easier for citizens to monitor these audits.
Political Donations — Non-Permissioned
This is the one I like the most; we could store in a publicly available distributed ledger all political donations made and track every transaction made with that money. Everyone would be able to monitor their candidates and see what they are doing with that money.
I hope this article helped you to understand the difference between permissioned and non-permissioned distributed ledgers.
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