What Is Permissioned Blockchain and How Does It Work

Permissioned blockchain is a type of blockchain technology that allows only authorized entities to participate in and validate transactions. This is in contrast to public blockchains, which are open to anyone.

The key feature of permissioned blockchain is that it requires users to have permission or an invitation to join the network. This permission is typically granted by the network administrator or a central authority.

Permissioned blockchain is often used in industries where security and control are paramount, such as finance and government. It allows for the creation of a private network that is secure and efficient.

A unique perspective: Planning Permission

A permissioned blockchain is a distributed ledger that requires permission to access and is not open to the public. It has a centralised authority and no defined decentralisation, which makes it suitable for enterprise purposes.

Permissioned blockchains are used by organisations and enterprises that require security, identification, and defined roles in their blockchain network. They impose certain restrictions on access, which is a key point of difference compared to permissionless blockchains.

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To access a permissioned blockchain, you need to be invited to join and have to identify yourself digitally or through certificates. This layer of access control and security allows only permissioned users to perform actions that have been set by the ledger administrators.

Here are the key features of permissioned blockchains:

A permissioned blockchain is a type of distributed ledger that requires 'permission' to access and is not open to the public. This layer of access control and security allows only permissioned users to perform actions that have been set by the ledger administrators, while also having to identify themselves digitally or through certificates.

Records are kept within the blockchain of who is involved in the transactions, making permissioned blockchains different from public blockchains. This is because administrators maintain an access control layer to allow certain actions to be performed only by certain identifiable participants.

A permissioned blockchain is generally used for enterprise purposes, where user approval is required to join. This is in contrast to public purposes, which often use permissionless blockchains.

Key features of permissioned blockchains include no defined decentralisation, a centralised authority, and the need for an invitation to join. This also means a lack of anonymity, but scalability is manageable.

A permissioned blockchain is a type of distributed ledger that requires permission to access and is not open to the public. This layer of access control and security allows only permissioned users to perform actions that have been set by the ledger administrators.

Permissioned blockchains are similar to permissionless blockchains in that they use the same technologies. However, the main difference is in how they are accessed and who can access them. For example, a bank may be running a permissioned blockchain operated through a designated number of nodes internal to the bank.

Key features of permissioned blockchains include no defined decentralisation, a centralised authority, and a lack of anonymity. Invitation to join is necessary, and scalability is manageable. Here are some key differences between permissioned and permissionless blockchains:

In contrast, permissionless blockchains are generally open source, allowing users to build, develop, and upgrade them. In the case of permissioned blockchains, the power to develop the network is proprietary and is restricted to the developers or company that is using them.

Permissioned blockchain technology offers several benefits and advantages that make it an attractive solution for enterprises.

Improved security and trust are key benefits of permissioned blockchain, as it limits participants and defines their roles, creating a more secure and trusted environment.

This is especially important for businesses dealing with sensitive data or transactions, as it ensures that only authorized parties have access to the network.

Permissioned blockchains are also more scalable and can handle higher transaction volumes more efficiently than public blockchains.

The controlled number of nodes and optimized consensus mechanisms contribute to better overall performance.

Additionally, permissioned blockchains are better suited to meet specific regulatory requirements, offering greater control over data and transactions.

This is crucial for industries that are heavily regulated, such as finance and healthcare.

Here are the key benefits of permissioned blockchain:

Permissioned blockchains guarantee a high level of security by requiring authentication and necessary permissions for participation.

This trade-off for security is a controlled level of decentralisation, which ensures that the network is not vulnerable to attacks.

These blockchain networks work faster since they have limited accessibility, resulting in improved performance and scalability.

In a permissioned blockchain, security is inherited from a public network blockchain. Each block is formed and concatenated to the blockchain after a consensus, and is signed by the actors of the transactions with a timestamp embedded in the block.

Rewriting a block without modifying the subsequent blocks is impossible, thanks to the way blocks are linked together. This ensures the integrity of the blockchain.

The public keys of past transactions are inserted into the blockchain, making it possible to verify each transaction in the future. This provides a transparent and tamper-proof record of all transactions.

Security in permissioned networks relies on a complex and well-designed Public Key Infrastructure (PKI). Notaries, or dedicated nodes, are used for multi-signing to validate the correctness of a block.

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Security is a top priority in permissioned blockchain networks. Each past transaction can be verified in the future because the public keys are inserted into the blockchain.

To maintain strong authentication, permissioned blockchains rely on multi-level conditional authorization. This means that users must enter a login and password or perform a similar identification to access the network.

In the banking context, security is extremely important due to the risks of attackers stealing credentials from authorized users. Banking-grade PKI is required to provide a bulletproof system to participants.

Cryptographic keys play a crucial role in strong authentication and non-repudiation. Effective key management is challenging, especially in decentralized architectures.

Regulating bodies mandate the use of certified HSMs and Key Management solutions. Compliance with standards such as PCI (PIN Transaction Security) PTS HSM version 3.0, FIPS 140-2 Level 3+, and Common Criteria (Evaluation Assurance Level) EAL Level 4+ is required.

To ensure security in blockchain networks, HSMs and key management systems should be compliant with standards such as NIST Special Publication 800-57 and NIST Special Publication 800-130.

A well-designed PKI is essential for security in permissioned networks. Notaries, dedicated nodes that are used for multi-signing, can validate the correctness of a block.

Here are some key standards for HSMs and key management systems:

Using HSMs that have earned globally recognized certifications and implementing standard/best practices is highly recommended.

Paxos is a consensus algorithm first described in 1989. It's designed to ensure that a distributed system can reach agreement on a value, even if some of the nodes in the system fail.

Paxos is particularly useful in blockchain, where it can be used as a consensus algorithm to ensure all nodes in the network agree on the state of the blockchain. This is crucial for maintaining the integrity and security of the blockchain.

Paxos is designed to be fault-tolerant, which means it can handle network partitions and failures. This makes it a reliable choice for distributed systems.

The Paxos algorithm works by having a set of nodes, called acceptors, vote on proposed values. A separate node, called a proposer, is responsible for proposing new values to the acceptors.

There are several variations of the Paxos algorithm, including Multi-Paxos and Fast Paxos, which have been proposed to improve its performance and efficiency.

Consensus and Validation are crucial components of permissioned blockchain technology. They ensure that all nodes in the network agree on the state of the blockchain, and that transactions are valid and secure.

In permissioned blockchains, consensus is achieved through various techniques, including proof-of-stake, delegated proof-of-stake, round-robin, proof-of-authority/identity, and proof-of-elapsed time. These methods are more energy-efficient and suitable for permissioned blockchains than proof-of-work.

The banking context often employs proof of validity and proof of uniqueness for consensus. For example, in Corda banking applications, smart contract code is run to validate transactions, and all signatures are checked.

Notaries play a key role in validating the correctness of a block in permissioned blockchain networks like Corda. These dedicated nodes are used for multi-signing, providing non-repudiation, technical protection, and a high level of legal assertion.

Here are some common consensus models used in permissioned blockchains:

The choice of consensus algorithm depends on the specific use case and requirements of the permissioned blockchain network.