Permissionless

Understanding Permissionless

A system is considered permissionless when it operates without any “gatekeepers.” In the context of blockchains, Bitcoin serves as a prime example of a permissionless system. This implies that no entity possesses the authority to forbid or limit others from utilizing Bitcoin for any purpose.

In simple terms, Bitcoin is permissionless because anyone can employ it in any manner they wish, as long as the protocol allows it. No one holds the power to interfere and prevent them from doing so.

The permissionless nature of cryptocurrency, particularly Bitcoin, is frequently highlighted by its proponents as one of its fundamental characteristics. Owing to its permissionless nature, Bitcoin and its blockchain can be utilized by political dissidents, organizations that have been blacklisted by the banking systems (such as Wikileaks), and even criminals. Transactions on a permissionless blockchain cannot be censored by any state.

In contrast, permissioned systems have entities that impose restrictions on who can access the system and how it can be used. The traditional financial system serves as an example of a permissioned system, as banks and states restrict individuals and their purposes for utilizing financial entities.

Similar to the traditional financial system, some blockchains are also permissioned and cannot be accessed by anyone for any reason. These blockchains are typically employed by enterprises for specific purposes and can only be utilized by whitelisted addresses.

The term “permissionless” pertains to the characteristic of a protocol being accessible to everyone without restrictions, eliminating the necessity for prior permission.

It aligns with the decentralized spirit and open-source ethos of the crypto and blockchain community, where no central party should possess the authority to permit or prohibit individuals from utilizing a permissionless platform. Consequently, individuals seeking to access a blockchain generally do not need to provide identification or undergo KYC requirements.

Permissionless or public blockchains ensure that no one encounters discrimination or censorship based on any criteria, and that everyone possesses an equal opportunity to participate, irrespective of their identity or location.

Generally, permissionless networks rely on consensus mechanisms such as proof-of-work (POW) or proof-of-stake (POS). These mechanisms incentivize network participants (miners and stakers) to act honestly and in favor of the system’s smooth operation. Prominent examples of permissionless networks include Bitcoin, Ethereum, and Monero.

This stands in contrast to permissioned networks like Facebook’s Diem or enterprise blockchains, where a central party can restrict or censor network users or specific types of activities/transactions. These networks also require user identification to be disclosed and recorded. Most permissioned networks are secured by a small number of authorized validators who produce blocks and contribute to the network.