What is Permissionless?

A permissionless system is a term used to describe most blockchain networks. In a permissionless system, no central entity can control who can use it nor limit its utility. The users are not constrained by any restrictions and do not require permission to use the system in question.

The permissionless systems used for cryptocurrencies and other blockchain-based technologies are among the standout features. Blockchain-based cryptocurrency Bitcoin (BTC) is considered permissionless as it can be used by anyone to the extent that the protocol itself can handle.

Cryptocurrencies can be used by entities that, for various reasons, cannot use central banking systems, such as political dissidents, blacklisted organizations, or criminals. Transactions on permissionless blockchains can’t be censored.

Permissioned systems, like traditional financial institutions, are overseen by a central entity that can limit access to the system and how it can be used. Institutions like banks can restrict who can open accounts and use financial services, as well as which services they can access in particular.

Some blockchain systems may be permissioned and have limited accessibility to the broader audience. Private blockchain networks are used by large-scale organizations and the access is only granted to the market participants by whitelisting certain addresses.

The core idea of the blockchain and crypto communities is decentralization. Based on this principle, no central party should have the authority to allow or deny access to the services provided by permissionless platforms. In many cases, entities that want to access a permissionless network do not need to provide any proof or meet KYC requirements.

Permissionless blockchain networks ensure that the users cannot be censored or discriminated against on any grounds. All users have equal opportunities to participate in and utilize the system as they please, regardless of their identity.

Many permissionless networks use decentralized consensus mechanisms like Proof-of-Work (PoW) or Proof-of-Stake (PoS). Relying on such measures ensures that the system is managed by a network of participants or nodes, known as miners and stakers.

The network nodes work on maintaining the system viability and ensure the operations are seamless and honest. Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Monero (XMR) function as permissionless networks.

Permissioned networks, like Meta’s Diem or blockchains developed for enterprises, can be restricted by a central authority who can limit the overall access to the network or some of its functions. Such networks also typically require the users to provide proof of identification.

Permissioned networks use a limited number of validators who provide cryptographic security, and are given authority to produce new blocks and otherwise contribute to the network development.