Comparison of benefits and disadvantages of each

Now let’s have a look at potential benefits and disadvantages of the two models. In my opinion, complexity is the most critical aspect, but I’ll elaborate on that one last, just stick with me for a little.

Regarding throughput (i.e. transaction volumes or TPS), permissioned ledgers are ahead right now. Hyperledger Fabric can process up to 10k TPS, compared to Stellar’s 2k and Ethereum’s 20. This is temporary though: Protocols such as Zilliqa are designed for high TPS from the start, updates to Ethereum (e.g. Caspar, Plasma) will increase volumes, as will layer 2 solutions. So I think it’s fair to say, this will not be a bottleneck anymore soon.

There’s a lot of misconception about privacy. The only privacy that a permissioned network grants per se is from non-participants. Considering that blockchain networks only make sense if there are multiple participants — potentially competitors — there’s little benefit from being private from non-participants. Privacy needs to be solved differently anyway, e.g. through payload data encryption or zero-knowledge transaction. And here, permissioned ledgers actually aren’t that good compared to projects such as Enigma or Tezos.

Control is a tricky one, as the question is who you trust more: Your competitors to play fair or a machine-coded incentive system to work as intended. If you use a permissioned network for monetary value exchange, you might actually loose in case of a participant’s bankruptcy since there are no publicly tradable tokens. A public ledger on the other hand is at risk of being hacked. Let’s call it a draw on this one.

It’s similar when it comes to maintenance of the system. Since it’s not practical to set up and run a network by your own, the decision is between having your permissioned network run by a technology service provider (BaaS) or a public network run by a non-profit organization and a self-governed community. A draw again, it’s a bit like deciding between commercial and open-source software.

The ecosystem aspect refers to further development of the base layer protocols and solutions that are being built on top of it. Since big technology firms focus on permissioned systems, the solutions are more focused on enterprise use. Public ledgers have the much bigger ecosystem though and start to increase their enterprise focus with quite a few exciting solutions.

Illustration: Combinatorial complexity

The most critical aspect though is complexity: Managing the number of networks, and managing updates to networks. If everyone builds a permissioned network with their partners and suppliers, we’ll have a combinatorial explosion of different networks for which each firm would have to manage its membership. And every time a new member needs to be added to a network or a member leaves a network, agreements would have to be updated with the other participants; multiply that by the number of networks. In public networks those aren’t problems, just business as usual.