Permissioned DLT Compared — What’s so Special About it?

Many believe blockchain and distributed ledger technology to be the same thing. It isn’t true, though! The distributed ledger consists of three types, and these are permissionless, permissioned, and hybrid. Blockchain is a type of DLT, and it is permissionless. There are some commonalities between blockchain and permissioned distributed ledger technology as blockchain is a type of DLT. But, at the same time, there are a few differences as well.

Both blockchain and DLT have achieved immense popularity since the crypto bull run of 2017. Thus, the terms — blockchain and DLT started being recognized among the tech-savvy crypto enthusiasts. Let’s have a look at the common quality of blockchain and DLT first. Blockchain and DLT enable an information record system, which is transparent and open. Hence, it is better than centralized database records. That’s where the commonality ends.

Distributed ledger Technology vs Blockchain

People who prefer Bitcoin-style blockchain feel that it is superior to permissioned DLT. That, of course, depends on one’s preference and outlook. They believe that blockchain is more innovative than its permissioned counterpart. On the other hand, permissioned DLT enthusiasts believe that it is more suitable for solving day-to-day real-world problems.

Blockchain is permissionless. On the other hand, permissioned DLT is permissioned and private, as the name indicates. It means that all the transactions on the permissioned DLT are available for public scrutiny as it is permissionless. In the blockchain network, anyone can participate as it is open. But in permissioned DLT, the only people who have received an invite can access it.

There is one more difference between permissioned DLT & blockchain. It is the most significant one. Blockchain consists of time-stamped blocks. These blocks are important in portraying the current state of the blockchain network. For becoming the next entry to the chain, the majority of the network must validate it cryptographically.

When it comes to permissioned distributed ledgers, most of them do not consist of blocks that require cryptographic validation. But some distributed ledgers still require cryptographic validation i.e. R3 Corda. In a nutshell, the major difference between a blockchain and permissioned DLT is that one is permissionless, and the other is permissioned.

Most Popular Types of Permissioned DLT

Permissioned DLT is popular because of its usefulness in a variety of use cases. It is faster, is legal, offers private membership, is managed by a group of pre-defined nodes, and is cost-effective.

There are a few disadvantages of permissioned DLT as well. Permissionless DLT is more secure and is truly decentralized, compared to permissioned DLT. The top permissioned DLT in the market today are Quorum, Corda, and Hyperledger Fabric. Let’s explore them in detail. We will compare Quorum, Corda, and Hyperledger in terms of the process of permitting the nodes, consensus algorithm, smart contracts, and token aspects.

The Process of Permissioning

Being private and permissioned, Quorum, Corda, and Hyperledger only allow participants that have received permission to access it beforehand. It means that Quorum, Corda, and Hyperledger are not open to the public. The permission to enter the network is granted by a set of participants, acting as a governing body. This set of participants also decide the permission of other nodes. This process differs among Quorum, Corda, and Hyperledger.

In Quorum, it’s the smart contracts that handle the participation of peers. If we speak in technical language, it’s the JSON file that consists of the permission flag. Whereas, in Corda, it’s the file-based configurations that host the accessing nodes and their permissions. Unlike other blockchains, there is no global broadcast of data. Instead, the sharing of data happens only on a need-to-know basis.

When it comes to Hyperledger, permission to other nodes is granted by the governing peers for any sort of transaction. One can implement this control over channel, node, or even consortium levels.

Consensus Mechanism

Notaries are the key concept developed by the Corda team. It is responsible for validating the transactions and adding the blocks to the chain. It is important to note here that Corda specifically aims to solve the challenges that banks and other financial institutions face. I’m Quorum, QuorumChain protocol helps reach consensus. A combination of BFT and RAFT algorithms, along with a majority from a simple voting process confirms transactions in Quorum.

When it comes to Hyperledger, the consensus mechanism is broad. It consists of the entire transaction process. The consensus mechanism of Hyperledger fabric is very different from the other blockchains of order-execute models. The Hyperledger consensus mechanism enables blockchain to execute multiple nodes. It results in better performance and makes the network even more scalable.

The introduction of Hyperledger Fabric v2.0 made the consensus mechanism even better. It introduced Raft as a crash fault tolerance consensus. That, too, without KAFKA. The underlying concept behind Raft is that of a leader and follower model. It means that within every channel, there’s a leader node. Whatever decision that the leader node takes, is replicated by the follower nodes. This system ensures that even when there’s a failure, the process of decision making and processing of client requests goes on unhindered.

Smart Contracts

As Corda was specifically developed to solve the challenges for financial institutions such as banks, there is a paramount need for a legal agreement between participants. Corda makes smart contracts valid and secure by coupling Ricardian contracts with smart contracts. Any programmer who wants to develop smart contracts for Corda can use both Java or Kotlin programming languages. Quorum, on the other hand, supports smart contracts written in Solidity.

The underlying business logic of Hyperledger is known as Chaincode. A programmer can use Java, Go, and Node.js to create smart contracts in Hyperledger.

Tokens

Corden’s Token SDK makes it possible to create native tokens on the blockchain. R3 Consortium made it possible through its Corda OS 3.0. Developers used to create tokens even before SDK. But Token SDK streamlined the process for developing a native token.

Unspent transaction output model is a very important aspect of tokens, and Corda’s UTXO model is the most powerful and robust way of recording tokens on the blockchain. Now, when it comes to Quorum, most of us already know about the JPM coin. It is a kind of tokenized currency available on Quorum.

The initial iteration of Hyperledger did not support crypto tokens. But it does not mean that one could not develop support tokens as it was possible to create support tokens in Hyperledger Fabric. After the launch of Hyperledger Fabric version 2.0, it is possible to develop both tokens and cryptocurrencies. It was made possible by the open-source community. One can use Fabtoken along with Chaincode to develop both digital tokens and native cryptocurrencies.

Summary

With more and more companies working on supporting protocols such as Corda, Hyperledger, and its likes, we will see an increase in the adoption of enterprise blockchain. Permissioned DLT is especially useful for enterprise use cases where there is no alternative to centralization.

Permissioned distributed ledger protocols such as Quorum, Hyperledger, and Corda amplifies the performance of blockchain. They make it more scalable. If the user is from the financial industry, they should opt for either Quorum or Corda. They have been specifically designed to solve issues that financial institutions such as banks are facing. On the other hand, Hyperledger is more flexible, and one can modify it to their needs.

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