Permissioned blockchain (2024)

Introduction

What is a blockchain?

In broad terms, a blockchain is an immutable transaction ledger, maintained within a distributed peer-to-peer(p2p) network of nodes. In essence, blockchains serve as a decentralized way to store information.

Each of these distributed nodes maintains a copy of the ledger by aggregating transactional blocks that havebeen verified by a consensus protocol and signed with a hash (or cryptographic signature) that binds thatblock to a preceding one. This way, the network maintains an unbroken chain of events.

Key properties of blockchains

• Shared and transparent data access
• Immutable/tamper-evident ledgers
• Validated /non-repudiable transactions
• Confidential records and transactions

Types of blockchains

Blockchain applications can be used for a variety of operations such as finance, supply chain monitoring, andidentity validation. Depending on the application and the need of participating entities (security,performance, etc.) there are two types of blockchains available, permissioned and permissionless. We’ll takea brief tour of both below and then explore permissioned blockchains in greater detail below.

Permissioned blockchains - Closed networks with limited decentralization, an additional access control layer,and designated entities.

Permissionless blockchains - Open, decentralized networks with universal consensus validation; anyone canjoin the network and possess a copy of the ledger.

Permissionless and permissioned blockchains compared (overview)

Permissioned blockchains

Now, let’s take a closer look at permissioned blockchains. Permissioned blockchains areblockchains that are closed (i.e., not publicly accessible) or have an access control layer. This additionallayer of security means that the blockchain can only be accessed by users with permissions. Permissionedusers are only able to perform blockchain operations within the strict confines of roles assigned to them bythe ledger administrators and require that they authenticate themselves through certificates or digitalidentifier methods. In addition, the roles would dictate what information a user would be able to access.

Aspects of a permissioned blockchain

Decisions are authorized by a private group

Decisions are made by the owners of the network through a central, pre-defined level.

Security

Permissioned blockchains provide the operating organization granular control over permissions, data access,and the scope of user roles.

Decentralization isn’t fixed

Permissioned blockchains can either be fully centralized or partially decentralized. Its members typicallydecide on the network’s level of decentralization and the mechanisms for consensus.

Transparency is not required

Unlike permissionless blockchains, permissioned blockchains do not need to be transparent. Transparency isoptional, as most permissioned blockchain networks are specifically intended to not be transparent forsecurity purposes. Levels of transparency usually depend on the goals of the organization running theblockchain network.
In the meantime, the ledger maintains a record of every transaction and the identities of the participatingparties.

Lack of anonymity

Access to the identify of every transactional participant can be crucial information for private entitiesconcerned with accountability and a provable chain of custody. Every change is tracked to a specific user,so network administrators can have instantaneous access to has made a change to the system and when.

Consensus mechanisms

Because of the structure of permissioned blockchains, they don’t use the same types of consensusprotocols as permissionless ones. Most commonly, organizations that deploy permissioned blockchains use one(or more) of the following three protocols: Practical Byzantine Fault Tolerance (PBFT), federated, orround-robin consensus.

PBFT – PBFT is an improved version of the original BFT protocol where all voting nodesmuchreach a consensus, but one or more parties are considered unreliable. In this model, a network’ssafety and stability are guaranteed so long as the required minimum percentage of nodes are behavinghonestly and properly.

Federated (or Federated Byzantine Consensus) - In a federated consensus, there’s a setoftransaction validators trusted by each node in the blockchain that receives and sorts the transactions. Oncea minimum number of these validators agree, a consensus is reached.

Round-robin - In a round-robin consensus, nodes are selected pseudo-randomly to createblocks. Oncechosen, a node must pass through a cooling-off period before it can reenter the pool and be available againfor consensus participation.

Advantages of permissioned blockchain

One of the most significant advantages of permissioned blockchains is the high level of privacy and securitythey can provide. Without a verified set of credentials and access, no user can access or alter transactioninformation without permission.

Another advantage is flexibility when it comes to decentralization. It can be incremental or fullycentralized, giving businesses more freedom to participate without having to worry about the risksassociated with a highly centralized network.

Permissioned blockchains are also highly customizable and can accommodate configurations and integrationsbased on an organization’s needs. And with knowledge of every user and their actions on the network, averifiable chain of custody can be established for every transaction.

Lastly, these types of blockchains are both scalable and highly performant due to the limited number of nodesneeded to manage transaction verifications.

Disadvantages of permissioned blockchain

While lack of transparency can be a potential point of concern for permissioned blockchains, the issue isusually mitigated by the implicit trust placed in the governing authority. In a business context, consensusmechanisms and the smart contracts that moderate transactions on the network are agreed upon by theparticipating parties and maintained in secure, isolated containers. With this additional layer ofcomputational security and measure of implicit trust, a properly provisioned permissioned blockchain canoffset the security risk posed by bad actors.

Why permissioned blockchains are ideal for business applications

Many enterprise use cases require performance characteristics that permissionless blockchain technologies arepresently unable to deliver because of limitations due to inefficiency and scalability. Additionally, ininstances where permissioned blockchains are replacing existing secure, centralized networks, the identityof the participants is an essential requirement, such as in the case of financial transactions whereKnow-Your-Customer (KYC), Anti-Money Laundering (AML), and supply-chain provenance regulations must befollowed.

In general, then, for a blockchain network to be ready for enterprise use, it should possess the followingrequirements:

• Participants must be identified/identifiable
• Networks need to be permissioned
• High transaction throughput performance
• Low latency of transaction confirmation
• Privacy and confidentiality of transactions and data pertaining to business transactions

Business value

Let’s quickly review and see how permissioned blockchains stack up against these requirements. In termsof added value, permissioned blockchains:

• Increase business velocity by accelerating transactions, enabling new business models and revenuestreams
• Automate multi-party business processes
• Reduce the cost and risk of using intermediaries
• Reduce the cost of fraud and regulatory compliance
• Improve data quality and timeliness by avoiding offline reconciliation and manual exception handling
• Increase auditability and trust; reduce audit costs

Comparing the two, permissioned blockchains are well positioned to achieve all the stated businessrequirements.

Use case examples

So, how are permissioned blockchains being used by businesses? While still an emerging business model, theyhave already found a wide variety of applications. Permissioned blockchains have been used to manage supplychains, create contracts, handle claims, verify payment between parties, and administer user identity.

Oracle Blockchain Platform (OBP) – extending the paradigm

Now that we’ve explored permissioned blockchains and the ways in which they can be ideal for business,let’s take a quick look at how Oracle is adding value to the blockchain platform. The Oracle CloudInfrastructure Blockchain Platform is a tokenless managed blockchain service for running smart contracts andmaintaining a tamper-proof distributed ledger. Built on the open source Hyperledger Fabric, it simplifies thedevelopment ofsecure and verifiable applications that share immutable, trusted data with third parties such as suppliersand financial institutions. OBP goes further by extending Hyperledger Fabric with several enhancements forgreater resilience, performance, scalability, security, manageability, and enterprise integration.

As a preassembled Platform as a Service (PaaS), OBP includes all the dependencies required to support ablockchain network: compute, storage, containers, identity services, event services, and managementservices. OBP is deeply integrated with foundational services in Oracle Cloud and provides additionalcapabilities (e.g., REST proxy for synchronous transactions and an operations console with severalconfiguration, administration, and monitoring capabilities) while maintaining compatibility with HyperledgerFabric at the protocol and API level.

Additionally, OBP includes the blockchain network console to support integrated operations. This helps youstart developing applications within minutes and enables you to complete a proof of concept in days or weeksrather than months.

OBP has had proven successes in a wide variety of settings, including:

• banking and financial services
• retail
• manufacturing and logistics
• food, agriculture, and Consumer Packaged Goods (CPG)
• transportation and logistics
• healthcare and life sciences

How to get started with OBP

If you’d like to learn more about OBP and begin your development journey, check out some of thefollowing resources:

• UsingOracle Blockchain Platform
• Oracle BlockchainPlatform tutorials
• REST API for OracleBlockchain Platform on Oracle Cloud Infrastructure

Glossary of terms

• Consensus protocol
  

  A consensus mechanism is the way in which blockchains come into agreement about how transactions areprocessed and immutably stored on the platform.

  Since blockchains are dynamic and constantly changing states, the shared ledger technologies thatthey relyupon require an efficient, reliable, and secure mechanism to ensure that all the transactionsoccurring onthe network are genuine and that all participants agree on the state of the ledger. This way,ledgers areprotected against potential threats or anomalous states by reaching a mutual agreement about how theledgershould look.

  At its core, the consensus mechanism is a fault-tolerant set of rules that decides on the legitimacyofcontributions made by the various participants of the blockchain.

• Distributed ledger
  

  A distributed ledger is a database that is synchronously shared across different nodes in a network.It helpsretain a record of transactions or contracts that have been created by participants in the system.

  Participating nodes are expected to be able to access the shared ledger and possess an identical copyof it.Any changes or additions made to the ledger are reflected and copied to all participants.

• Smart contract
  

  Smart contracts are essentially self-executing pieces of business logic that mediate a specifictransactionon the blockchain.

  Contained within the code of the transaction is details of the agreement between each of theparticipants.This code autonomously controls the execution of the smart contract and ensures transactions aretrackableand irreversible.