What Does Permissionless Mean?

Permissionless Explained

Permissionless is a common word that many may be at least generally familiar with in crypto and blockchain circles. That said, the concept is often misunderstood, with many completely unaware of this idea’s conceptual underpinnings. So, what does permissionless mean?

Put simply, permissionless means you can freely join and use a blockchain network and participate in consensus without first obtaining permission, approval, or authorization. In contrast to permissionless blockchains, permissioned blockchains have gatekeepers that decide who can and cannot access, use, and govern the blockchain.  

Permissioned and Permissionless Blockchains

In the physical world, some of our customs and protocols might be considered permissionless, while others might be considered permissioned — for example, you might freely sit down in your own house, but you might ask permission of a host to sit down in a restaurant. 

Similarly, blockchain protocols come in two primary variations: permissionless and permissioned. While both permissioned and permissionless blockchains have their benefits and downsides, the most widespread blockchains are of the permissionless variety. Permissionless blockchains are more often referred to as public blockchains due to their open nature. 

Examples of popular permissionless blockchains include Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), and Dogecoin (DOGE). With these blockchains, practically anyone can join the network; send and receive transactions; operate a node; view, copy and contribute to the code; and participate in the consensus process. Part of what gave the Bitcoin protocol notoriety is the way it revolutionized online payments. Prior to Bitcoin, you generally needed approval from a credit card network or bank to send a digital payment. These are called permissioned payments. First through Bitcoin, and then via the numerous public blockchains that followed in its footsteps, permissionless crypto payments have become increasingly widespread.

Permissioned blockchains, on the other hand, limit who is allowed to participate in financial (or other) activities, and are typically controlled by a specific individual, entity, or group. These permissioned blockchains are more commonly called private blockchains. They are often used by businesses and political organizations that desire a secure database with controls. This allows an organization to keep private data confidential, while allowing it to leverage other benefits of blockchain. Use cases for these systems include data storage, digital ID systems, and inventory and supply-chain management. Popular permissioned blockchains include Quorum, R3 Corda, and Hyperledger Fabric.

Permissionless Crypto Protocols and DeFi

Expanding beyond censorship-resistant payments, DeFi protocols are pushing the boundaries of what’s possible when it comes to online financial activity. Through a decentralized exchange (DEX), you can execute permissionless crypto trades. On other DeFi platforms, you can get a permissionless crypto loan by depositing collateral. A selling point for many crypto enthusiasts is how these permissionless systems can free up capital, help bank the unbanked, and promote peer-to-peer (P2P) lending and borrowing.