All of the P’s! What Do Permissions and Privacy Mean in Blockchain?

Get up to speed on the types of blockchains out there.

Last time, we dove into the types of ledgers aka types of blockchains there are. We learned about permissions and privacy, which basically decide who is allowed to read and write on the blockchain.

This time, we’ll look at examples of different ledger combinations:

• Public-Permissioned
• Private-Permissioned
• Public-Permissionless
• Private-Permissionless

It’s going to be a P-P-P-P-P-P-P-Party!

If you’re just getting started, check out Blockchain for N00bs. It’ll give you the core information on what blockchain is all about. We talk about what a distributed ledger is, how blockchain works (on a rudimentary level) and its possibilities.

Quick Look

Deep Dive

There’s much more to know about the different types of Permissions and Privacy. Below are mini blurbs of each, with supporting links that you can explore to learn more!

Public Ledgers

Here’s a prime example of a Public-Permissionless ledger: Bitcoin. Bitcoin was created by Satoshi Nakamoto, an unidentified figure who forever changed the world of cryptocurrencies (here’s a fun piece that suggests the NSA knows who he is, although his identity remains unknown for the rest of the world).

Bitcoin is the first decentralized digital currency — basically the first digital money that’s not controlled or owned by any single parties or entities. The transaction history is publicly available for anyone to look at; and everyone has permission to verify and add transactions to the blockchain (done through mining).

When we talk about bitcoin mining, simply put, we refer to a bunch of computers on a network competing with each other to verify the block of transactions first. The computer that wins, aka “mines the block,” gets a bitcoin reward and the block is added to the blockchain.

We call this type of verification a proof of work consensus system. Consensus refers to how transactions are verified and then added to the blockchain. Proof of work consensus creates trust in the system because there are multiple parties mining the blocks, reducing the risk of tampered data logging by one dominant entity.

The downside is that this type of consensus requires a lot of energy to mine bitcoin. By 2020, bitcoin mining could consumer as much energy as it takes to run Denmark!

Public Ledger Ver. 2

This is where Casper and the public-permissioned ledger comes in. Casper is a not-yet-launched blockchain protocol (system), with Vitalik Buterin leading the charge.

Vitalik co-founded Ethereum, another blockchain protocol. The big difference between bitcoin and Ethereum is that one is a digital asset while the latter is an infrastructure. A big similarity of both is in how they mine blocks. They both use proof of work consensus.

Casper is planning to be different by using proof of stake consensus. This means that the network is public, and if you own a certain stake in the network via tokens — assets you can convert to currency, like tokens you buy at game centers — you have permission to verify and add to the blockchain aka “mine blocks.”

This type of ledger has value because it consumes much less energy and resources to reach consensus.

Private Ledger

Let’s talk very briefly about Private-Permissionless ledgers because it’s almost the antithesis to public ledgers like the bitcoin blockchain. Often referred to as private ledgers, these ledgers are kept within a single organization. While it can contradict what blockchain is supposed to be — a decentralized system where there aren’t any single parties controlling who can read or write on the chain — it can serve a different purpose. For banks, it opens up the possibility for a more efficient system for logging data, as well as benefits for institutions that don’t want to share their information publicly but need a better way to manage their data internally. Since transaction verification occurs within one organization, the consensus process occurs much faster. Here are some perspectives on how private ledgers can play a role in the future.

Consortium Ledger

Finally, let’s take a quick look at Private-Permissioned ledgers. Although it’s similar to a private ledger, these ledgers can be thought of as federated or consortium ledgers. The key difference is that private ledgers reach consensus within one organization while consortium ledgers involve multiple organizations/ entities in the consensus process. Such a ledger type could be useful for governance or for supply chain, where there are multiple entities involved in an end-to-end process. This type of ledger serves more as a business or operation model.

As you see, the different ledger types can address different needs such as:

• value exchange (public ledgers)
• organized end-to-end operations (consortium ledgers)
• efficient data logging (private ledgers)

What remains the same throughout though, is that blockchain aims to add more trust and accountability in how organizations and people operate.

If you want to learn more about the types of blockchains and all of the detailed features around them, you can check out Blockchain Hub’s piece on Blockchains and Distributed Ledger Technologies.

In the upcoming pieces, we will be tackling cryptocurrencies, ICOs and investing.

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