Permissionless blockchain

With a permissionless blockchain anyone can join the network, participate in the process of block verification to create consensus and also create smart contracts. A good example of permissionless blockchain is the Bitcoin and Ethereum blockchains, where any user can join the network and start mining.

In a permissionless world, you do not have to prove your identity to the ledger. As long as you are willing to commit processing power to be part of the network and extending the blockchain, you are allowed to play. Any miner who is playing the game by the rule may be able to solve the hash puzzle and verify the block of transactions to win the mining reward (Higher the mining power, better the chances of winning the mining reward). Ppermissionless blockchains use Proof of Work (PoW) mining where hashing power is offered to build trust. As long as 51% of the nodes are honest players, network consensus is reached. While Bitcoin uses PoW mining, Ethereum is proposing to use a Proof of Stake model (PoS) for reaching consensus.

Proof of stake mining asks users to prove ownership of a certain amount of currency (their “stake” in the currency). Instead of buying computers and electricity for mining in a PoW system, a PoS systems uses the capital to acquire the coins/tokens that allow you to validate transactions. In the permissioned blockchain world, you need to be an approved actor in the system to participate in growing the chain as well as building consensus. Many of the blockchain consortiums that build private blockchains for financial institutions and other enterprises follow this model.