Here’s What to Understand on How Permissioned Blockchains Work

There are several companies that are starting to embrace blockchain technology as a very innovative technology to solve many of the challenges that firms are currently facing.

It is possible to track items or send information through the blockchain. Indeed, some analysts say that blockchain could have a similar effect on the market as the internet had years ago and it still has.

Several companies believe that the so-called permissioned blockchains are a great tool for their future. These permissioned blockchains are restricted to a few players and could help firms improve their services by tackling the current challenges they are facing.

The first thing to mention about a permissioned blockchain is the fact that they are private compared to public blockchains. There are some members that have privileged access while others cannot enter the network. A permissioned blockchain works with a distributed database that allows members to decide who enters and who not.

Public blockchains, instead, have no restrictions and individuals or groups of people can set up their own node and participate in the consensus mechanism of that network. With permissioned blockchains is possible to keep sensitive information protected. Furthermore, these permissioned blockchains have a better performance compared to public ledgers.

Public blockchain networks do not have a clearly defined governance structure as permissioned networks do. For example, the Bitcoin network takes a long time to be updated and developed because there are individuals from all over the world operating full nodes. It is quite difficult from nodes to reach a consensus since they act in their own interest.

However, permissioned blockchains can be governed in a much easier way. Since there are just some companies, it might be possible for them to take decisions to improve the network. But there are some issues that permissioned blockchains face. The security of these private networks is completely reliant on the integrity of the members on it. Public blockchains have a lower risk of collusion.

At the same time, permissioned blockchains are more prone to censorship and regulation because they are run by a consortium. An entity could force its laws on a permissioned blockchain and censor specific transactions.

There are some firms already working with their own permissioned blockchains such as IBM or JP Morgan Chase. In the future, new companies might enter the space and start innovating with distributed ledger technology.

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