Blockchain Beyond Crypto: What Is a Permissioned Blockchain

What is a permissioned blockchain and why might you use one?

March 1, 2021 | 2 minute read

Back in September 2018, the Taipei Medical University Hospital in Taiwan announced the release of a new platform to store and secure patient medical records. Digital and cloud infrastructure have seemingly affected ever corner of society, so transforming to a digital infrastructure for medical records isn’t novel in and of itself. But what made this announcement especially interesting is the fact that it used a blockchain.

If you’re familiar with Bitcoin, then you’re familiar with one use case of blockchain: a token of value that can be exchanged like a currency. While Bitcoin is a really cool technology with a lot of potential, its popularity overshadows the usefulness of the underlying technology. Cryptocurrencies, like Bitcoin, are blockchains but not all blockchains are cryptocurrencies.

Types of Blockchain Networks

There are two ways of thinking of a blockchain network: public and permissioned. Bitcoin is a public blockchain. Anyone can participate by setting up a wallet and making a purchase. Contrast that with a permissioned blockchain, which requires authorization to participate in the network (in the form of ownership or membership). In the Taiwanese system, you have to be a patient of the hospital network in order to participate.

What is a Permissioned Blockchain

The underlying technology works in the same way: a distributed, immutable ledger with a consensus protocol. But permissioned blockchains have two key differences. First, they introduce a control layer that works across up to two levels: participation and authorization. Second, consensus can be customized to accommodate the use case.

Controlling Network Participation

One way to make a blockchain network permissioned is to modify how actors can participate in the system.

In a national voting system based on blockchain, casting a vote would be restricted to citizens. Participation in the network is limited by external criteria. In this case, that criteria is citizenship.

In a medical record blockchain system, like the one used by the Taipei Medical University Hospital in Taiwan, a patient can freely access all their data, but only doctors who have been authorized to do so can access a patient’s health records. Different members of the network have different levels of access and control. Participation is limited by authorization.

Customized Consensus

In addition to customizing participation, permissioned blockchains can customize how consensus is formed in the network. The simplest example of this is weighted consensus where some participants have more sway.

Something like this is common in voting systems. Corporate voting is sometimes weighted by stock position - the more shares of a company you hold, the heavier your vote is weighted. You could build a similar system on a blockchain where a peer’s weight is determined by the number of tokens they hold.

Why Permissioned Blockchains

One of the big criticisms of blockchain is that their utility is limited. While this critique is misguided overall (a topic for a future article), it is true that public blockchains have limited utility. This is where permissioned blockchains step in.

With a permissioned blockchain, you get all the advantages that come with a decentralized, immutable system. But you have the flexibility to adapt the system to your needs by customizing how consensus is formed and how peers participate in the network.

The new medical record system used by the Taipei Medical University Hospital is just one such example. Over the coming years, we’ll start to see many more.