What is a Permissioned Network? And why use it?

– Tejas Vakil, Founder and CEO

With the emergence of blockchain technology and its use in the rise of cryptocurrency, its underlying architecture started getting a lot of attention. Most of that was focused on the public nature of the network, like the one used for mining and keeping track of Bitcoin. Among the many advantages of blockchain technology cited was the permanence of the data that enabled knowing the provenance and chain-of-custody of the crypto-currency, and its decentralized nature which prevented a single organization from controlling the network. In fact, transactions were not considered final unless there was some form of consensus among a critical mass of network peers. The consensus mechanism used different methodologies or algorithms, usually implemented as a proof-of-work requirement.

But, could blockchain technology be used in an Enterprise where control is centralized, data security and privacy are of paramount importance, and interaction is within a controlled and known set of entities, rather than an anonymous population on an open network? The answer is yes but with some qualifications.

The implementation will not be completely de-centralized and the peer-to-peer aspect of an open blockchain will only partially exist. The administrative node will be superior to all the member nodes although the latter will have a peer relationship with one another.

If there is one thing that enterprise IT managers agree on, it is the need to keep their technology infrastructure secure from unfettered outside access. Permissioned networks will only allow designated parties who have been pre-vetted in some way to conduct business on their platform. Data privacy is enforced because all transaction information is only available to validated members of the network. The blockchain advantage of data immutability is preserved thereby providing a comprehensive audit trail of information.

Closed-loop permissioned blockchain networks can be used for a wide variety of enterprise applications in a diverse set of vertical or cross-industry market segments. Among these are banking and financial services, healthcare, manufacturing and supply chain, real estate, legal/notary, and public sector institutions. These implementations reduce fraud, forged or counterfeit documents, and collusion between bad parties. Applications that require provenance and chain-of-custody information will also benefit.

Permissioned networks are typically faster and more energy-efficient since they have fewer nodes and do not require network-wide consensus for transaction verification.

There are many people who support the de-centralized nature of a permissionless blockchain. Its greater transparency, anonymity for its participants, and lack of centralized control all hark back to a desire for a Friedrich Hayek-type laissez affaire ecosystem. A permissioned network will not appeal to this community. But it will to enterprise customers who value greater control and limited access while making processes more efficient.

Permissioned networks can be customized for specific use cases based on industry or market segment requirements.