The global blockchain market size is projected to grow from $3 billion in 2020 to $39.7 billion by 2025, at an impressive CAGR of 67.3% (Figure 1). As blockchains gain mainstream adoption, it‘s important to understand the core differences between permissioned and permissionless blockchains.
Figure 1: Blockchain global market size forecast. Source: MarketsandMarkets Research
In this comprehensive guide, we‘ll explore everything you need to know about permissioned and permissionless blockchains, from their structural composition to real-world applications.
Defining Permissioned and Permissionless Blockchains
A blockchain is a distributed ledger technology that records transactions in an immutable, decentralized manner through cryptographic validation and community consensus. Blockchains can be categorized based on their access control mechanisms:
Permissioned blockchains restrict access and participation to a limited group of authorized users. They are also referred to as private or enterprise blockchains.
Permissionless blockchains allow anyone to join the network, validate transactions and participate in the consensus process. They are also known as public blockchains.
Key Characteristics of Permissioned Blockchains
Popular permissioned blockchain platforms include Hyperledger Fabric, R3‘s Corda, Quorum and Kaleido. Some core features include:
- Access control – Only authenticated participants via KYC can join the network
- Identity management – Real identities preserved through enrollment certificates
- Efficiency – Consensus mechanisms like PBFT enable high throughput and low latency
- Centralized governance – Network rules and upgrades controlled by authorized admins
- Selective transparency – Private channels and restricted data sharing across organizations
- Compliance – Aligns with regulations and enterprise security requirements
Permissioned blockchains strike a balance between decentralization and centralized control for enterprise needs. Their ability to restrict participation makes them ideal for applications like interbank payments, trade finance, private stock exchanges and supply chain tracking.
Key Characteristics of Permissionless Blockchains
Well-known permissionless blockchains include Bitcoin, Ethereum, Litecoin and Monero. Some core features include:
- Open participation – Anyone can join, validate transactions and participate without identity verification
- Anonymity – Participants identified by pseudonyms and public keys only
- Decentralized governance – Consensus mechanisms used for upgrades and dispute resolution without central authority
- Transparency – All transactions are visible to every participant on the network
- Censorship resistance – Transactions can‘t be altered or blocked based on identity or location
- Innovation – Permissionless architecture fosters innovation in digital assets, DeFi, NFTs etc.
The permissionless model offers true decentralization but sacrifices efficiency, privacy and regulatory oversight. It is better suited for public cryptocurrencies, decentralized finance and decentralized apps.
Comparing Performance and Scalability
While both models have their trade-offs, permissioned blockchains tend to outperform permissionless ones in metrics like transaction throughput and latency while preserving data privacy.
For example, tests on the Hyperledger Fabric permissioned blockchain recorded throughput of 3,500 TPS and latency of under 1 second with private data sharing between participants. On the other hand, the public Ethereum blockchain currently supports 15 TPS and latencies of several minutes.
This performance gap is mainly attributed to differences in their consensus protocols, network structure and architecture. However, scaling solutions are in development for both models.
Adoption and Market Trends
In enterprise blockchain adoption, over 65% of projects are on permissioned blockchains according to a recent PwC survey (Figure 2). Leading industries include financial services, healthcare, retail and industrial products.
Figure 2: Industries adopting permissioned blockchains. Source: PwC
Public permissionless blockchains dominate the cryptocurrency market. As of 2022, the total market cap of cryptocurrencies exceeded $1 trillion, with over 90% running on permissionless blockchains like Bitcoin and Ethereum (Figure 3).
Figure 3: Cryptocurrency market share by blockchain platform. Source: WEF
This dominance highlights the transformational role of permissionless blockchains in enabling direct peer-to-peer exchange of value at a global scale.
Real-World Applications
To understand these differences better, let‘s look at how permissioned and permissionless blockchains are applied:
Supply chain tracking – Permissioned blockchains preferred to balance transparency with privacy. Walmart uses Hyperledger Fabric to track food from farm to shelf.
Clinical trials – Platforms like Anylnk and Triall allow transparent, tamper-proof data sharing between pharmaceutical testers, regulators and participants.
Trading platform – Private stock exchanges like tZero use permissioned blockchains for automating workflows while complying with securities regulations.
Cryptocurrencies – Bitcoin, Ethereum pioneered permissionless blockchains to create censorship-resistant, peer-to-peer digital money without intermediaries.
NFT marketplace – Open platforms like Opensea enable trading of digital collectibles and metaverse assets using permissionless Ethereum blockchain.
Decentralized Finance – Innovative DeFi protocols built on permissionless blockchains allow global access to lending, trading, investing services without intermediaries.
Conclusion
Permissioned and permissionless blockchains both serve important purposes. Permissioned models allow enterprises to leverage blockchain‘s strengths around identity, privacy and auditability in a regulated setting.
Permissionless blockchains drive innovation of decentralized public utilities and platforms for finance, data exchange, digital property and more. Understanding their inherent trade-offs helps identify which applications they are best suited for as blockchain adoption accelerates globally.