What is Permissioned Blockchain and How Does it Work?

Permissioned Blockchain and How It Works

Blockchain technology has revolutionized the world of finance and transactions. It is a distributed ledger technology used to record transactions in a decentralized manner without the need of intermediaries. Permissioned blockchain is a type of blockchain that restricts access to some of its functionalities and data to only a group of authorized users. In this article, we will discuss whatpermissioned blockchainis, how it works, and its advantages and disadvantages.

What is Permissioned Blockchain?

Permissioned blockchain is a type of blockchain that allows only authorized users to participate in its operations. It is also known as aprivate blockchain, as it is not open to the public. Permissioned blockchain is different from public blockchain, where anyone can participate and transact on the network. Permissioned blockchain allows organizations to have control over who can participate in the network and what information is shared.

How Does Permissioned Blockchain Work?

Permissioned blockchain works by creating a network of nodes that are responsible for verifying and recording transactions. The network is maintained by a group of authorized users who have access to the network. These users can perform various tasks such as creating new blocks, verifying transactions, and maintaining the network.

In a permissioned blockchain, only authorized users can join the network, and they are required to undergo a verification process before being granted access. The verification process can include KYC (Know Your Customer) and AML (Anti-Money Laundering) checks.

Advantages of Permissioned Blockchain

Permissioned blockchain has several advantages, including:

1. Security: Permissioned blockchain offers a higher level ofsecuritycompared to public blockchain. This is because access is restricted to only authorized users, and the network is not open to the public.

2. Efficiency: Permissioned blockchain is more efficient than public blockchain as it is designed to handle a limited number of users. This means that transactions can be processed faster and at a lower cost.

3. Control: Permissioned blockchain allows organizations to have control over the network and the information shared on it. This means that they can tailor the network to their specific needs.

Disadvantages of Permissioned Blockchain

Permissioned blockchain has some disadvantages, including:

1. Centralization: Permissioned blockchain is more centralized than public blockchain as it is controlled by a group of authorized users.

2. Limited transparency: Permissioned blockchain is not transparent, as access to information is restricted to only authorized users.

3. Limited innovation: Permissioned blockchain limits innovation, as only authorized users can participate in the network.

Conclusion

Permissioned blockchain is a type of blockchain that restricts access to some of its functionalities and data to only a group of authorized users. It offers several advantages such as security,efficiency, and control. However, it also has some disadvantages such ascentralization, limited transparency, and limited innovation. It is up to organizations to weigh the pros and cons of permissioned blockchain before deciding whether to use it.

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