Is Ethereum’s blockchain permissionless, or permissioned, or both?

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 Is Ethereum’s blockchain permissionless, or permissioned, or both?
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Highlights

  • Just like Bitcoin’s mainnet, Ethereum’s mainnet is focused on cryptocurrency records and is open and permissionless in nature
  • Ethereum says it can support permissioned Layer 2 solutions with restricted access for participation within the network
  • Enterprise blockchains are usually viewed as private and permissioned, with access only to a few participants for limited decentralisation

Blockchain is a popular technology that promises decentralisation of all aspects related to data. Ethereum, which has Ether (ETH) as its native cryptocurrency, is a major blockchain network with Solana and Cardano as its competitors. All these networks let developers build new decentralised solutions, where record-keeping is distributed widely among peers, meaning no single authority can make decisions.

But in the blockchain space, there is a debate about the extent of the distribution of power among peers. Should all members of the public be allowed to participate, or should entry be restricted? This takes us to the concept of permissioned blockchain networks, where only invited participants are allowed to have a say. Can Ethereum enable such a permissioned arrangement? Let us explore.

Is Ethereum permissionless or permissioned?

‘Mainnet’ is the term ascribed to a fully functional blockchain. Bitcoin has its own mainnet and so do Ethereum and many other blockchains. Ethereum’s mainnet is a public and permissionless network, which means it does not exclude anyone from participating. A transaction can be recorded by any participant, and there is no concept of permissions or privacy. The main cryptocurrency to pay the gas fee is the native ETH token, and it can be mined by those who participate in the Ethereum network’s record-keeping. A majority of cryptocurrency networks are permissionless with distributed powers.

Ethereum, however, also allows the use of its network to build new private blockchains. Inside a private version, restricted access is available to only a few permissioned participants. Ethereum’s enterprise solution provides an option to build and deploy Layer 2 protocols, which can suit the specific blockchain-related needs of any enterprise. The blockchain states this can help add operational efficiency while making the specific network inaccessible to any third-party participant.

Rise of permissioned blockchain

Hyperledger, a project supported by the Linux Foundation and such tech players as IBM and Intel, focuses primarily on permissioned blockchain solutions. Hyperledger Fabric underpins IBM’s enterprise-grade open and distributed platform and comes with ‘advanced privacy controls’. Here, smart contracts with self-executing terms can be deployed with limited participation, in contrast to a permissionless arrangement where unlimited anonymous participants can exercise control.

Cryptocurrencies, including Bitcoin and Ether, have exhibited ultra-volatility in their values, with doubts being raised over how the so-called decentralised set-up, powered by permissionless blockchains, would sustain over the long term. On the other hand, permissioned networks, which add restrictions to the extent of the distribution of control, are considered a better enterprise-level use of blockchain technology, particularly to reduce operational costs.

Bitcoin price

Data provided by CoinMarketCap.com

Bottom line

Ethereum’s mainnet is an open and permissionless network primarily focused on cryptocurrency records. Permissioned solutions can be added to this mainnet as a Layer 2 network. Separately, Hyperledger Fabric by IBM also provides permissioned blockchain solutions.

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