Permissionless

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What Does Permissionless Mean?

Permissionless describes the most popular kind of blockchain network. A permissionless cryptocurrency or blockchain is distinguished by its decentralized nature, granting unfettered access for anyone to join the network and actively participate in it without explicit permissions.

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In a permissionless system, users have the freedom to join the network, perform transactions, and contribute to the network’s operations without needing the approval of any third parties or “gatekeepers”. This fundamental openness serves as a catalyst for inclusivity, fostering a welcoming environment that encourages the engagement and involvement of individuals from diverse backgrounds, geographic locations, or affiliations.

Moreover, permissionless cryptocurrencies or blockchains typically strive for complete transparency of all conducted transactions. Each transaction is meticulously recorded on a distributed public ledger, thereby enabling unrestricted accessibility to the entire network. Such transparency ensures that every participant in the network possesses the capacity to validate and confirm the legitimacy of transactions, fortifying the foundation of trust while concurrently mitigating the prospect of fraudulent activities within the system.

Additionally, permissionless platforms are often open-source, meaning that the underlying code and protocols are publicly available. Users can access, review, and audit the code, ensuring the integrity of the system and promoting a collaborative development environment. This means that no one needs to trust anyone else as long as they can understand blockchain tech well enough to vet it themselves. This openness also allows users to propose changes, improvements, or new features to the network, enabling continuous innovation and evolution.

How Do Permissionless Blockchains Work?

Now that we have permissionless blockchains explained let’s take a look at how they work.

In a permissionless network, transaction information is verified by the users rather than a centralized authority. Network participants must agree on whether transactions or valid or not.

To facilitate this agreement, permissionless blockchains employ consensus mechanisms like Proof-of-Work (PoW) and Proof-of-Stake (PoS). These mechanisms incentivize honesty and adherence to the rules, ensuring the smooth functioning of the system.

The key elements of a permissionless include:

  • Decentralization: permissionless blockchains are decentralization by their nature, preventing a single entity from manipulating the ledger, shutting down the network, or modifying its protocols.
  • Transparency: in a permissionless network, users have access to all information except private keys. Transparency is highly valued as decentralization avoids reliance on central authorities, ensuring that transaction details are openly accessible within the network.
  • Anonymity: permissionless blockchains do not require users to provide any identification or personal information when creating an address, allowing for greater detail of anonymity.

Permissionless vs Permissioned Blockchains

Similar to traditional finance, many blockchains or cryptocurrencies can also be permissioned. Unlike permissionless, permissioned networks often have centralized control meaning they are controlled by specific entities or groups, requiring authorization or invitations to access the network and conduct transactions.

In addition, permissioned networks have restricted access as well as defined user roles and access levels.

The main difference between permissionless and permissioned networks is the fact that a permissionless cryptocurrency or blockchain emphasizes decentralization, openness, and inclusivity, while permissioned blockchains prioritize controlled access and privacy.

These kinds of permissioned networks are great for healthcare businesses and others that can benefit from distributed databases that also promote data privacy. Their use cases are often quite different from cryptocurrencies, but they can be extremely useful nonetheless.

Examples of Permissionless Blockchains

The most popular example is bitcoin (BTC), the largest cryptocurrency that runs on a permissionless blockchain.

The Bitcoin blockchain operates in a permissionless manner, meaning that anyone can join the network as a user or a node without having to seek approval from a central authority (or anyone, for that matter). Participants on the Bitcoin permissionless blockchain can also freely transact, validate transactions and contribute to the network’s consensus process.

In a permissionless blockchain like Bitcoin, the network’s security and consensus are achieved through a consensus mechanism called PoW, where miners compete to solve a number of complex mathematical puzzles (computational ‘work’). The first miner to solve the said puzzles gets to add the next block to the blockchain and is rewarded with newly minted bitcoins and transaction fees.

Anyone who has the scratch to buy the hardware and electricity necessary can start mining.

Bitcoin was the first and pioneering example of a permissionless blockchain. It was built around the idea of being run by its users. Nearly every other blockchain has followed in its footsteps to become permissionless networks.

Other prominent examples of permissionless blockchains include Cardano (ADA) and Ethereum (ETH).

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Iliana Mavrou
Crypto journalist
Iliana Mavrou
Crypto journalist

Iliana is an experienced crypto/tech journalist reporting on blockchain, regulation, DeFi, and Web3 industries. Before joining Techopedia, she contributed to a number of online publications, including Capital.com, Cryptonews, and Business2Community, among others. In addition to working in journalism, she also has experience in tech and crypto PR.  Iliana graduated from the City University of London with a degree in Journalism in 2021. She is currently pursuing a Master's degree in Communication.