Permissioned and unpermissioned blockchains, part 2

Monday 08 February 2016

Permissioned blockchains are the new buzz - but are they really anything like their libertarian cousins?

Permissioned blockchains, such as are being actively developed by many traditional financial institutions, offer some of the same advantages as bitcoin and other unpermissioned networks. However, the introduction of the control layer that limits who is allowed to submit transactions has far-reaching implications.

Read also: Permissioned and unpermissioned blockchains, part 1

Control is vulnerability

One key point is that control goes hand-in-hand with vulnerability. Where there is a gatekeeper, there is a gate. Bitcoin addresses that problem by removing gatekeepers - there is no centralised authority, and therefore no single point of failure (SPOF).

Gates

Where there are gatekeepers and gates, there are vulnerabilities

Bitcoin developer Nick Szabo has argued that banks cannot expect to enjoy the benefits of blockchain technology if they neuter it by trying to permission it - though the temptation is ever towards that. ‘Their bureaucracies are so heavily invested in the expertise and importance of local regulations and standards that it's extremely difficult for them to cut the Gordian knot and implement seamless global systems. So they keep trying to re-inject points of control, and thus points of vulnerability, into blockchains, e.g. through “permissioning”; but this nullifies their main benefits, which come from removing points of vulnerability.’

Performance and cost

It’s not all bad, of course. If you restrict access to a blockchain (so long as you can genuinely and safely restrict access), you lose a set of concerns that go with the territory of unpermissioned blockchains. For example, you wouldn’t need to worry about the risk of a DDoS attack, like the ones that clogged the bitcoin network at the end of last year. And not having to worry about spam means that transaction costs can be lower, because you don’t have to dissuade bad actors from submitting frivolous transactions.

And, as Eris Industries explains, it means that your blockchain can be more ‘performant’. Blockchains are not by nature very performant, because sharing transactions amongst all nodes necessarily means massive built-in redundancy. (Think how many tens or hundreds of thousands of copies of the bitcoin blockchain exist on computers around the world.) Permissioning your blockchain means you can allow nodes to focus on a specific application and not waste resources unduly.

Financial freedom not supplied

But the biggest difference is ideological. A permissioned blockchain strips the permissionless bitcoin blockchain of what was truly ground-breaking, its status as a non-finance sector means of wealth transfer. ‘Permission’ is inherently exclusive, perpetuating the us-and-them barriers of the industry. Permission a blockchain and what you have is simply a different kind of database: a more efficient means of doing what they were already doing.

The permissioned blockchain is a very different animal to the chains pioneered by Satoshi Nakamoto. It might improve transfer speed and lower costs, but let’s not pretend they are really going to change anything fundamental. In a further article, we'll be looking at some of the ultimate implications of where this could be heading.

 


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