What are the potential drawbacks or limitations of using a permissioned blockchain for cryptocurrencies?

7 answers

• Dec 18, 2021 · 3 years ago
  One potential drawback of using a permissioned blockchain for cryptocurrencies is the reduced level of decentralization. Permissioned blockchains typically involve a centralized authority that controls access and decision-making, which goes against the decentralized nature of cryptocurrencies. This can lead to concerns about censorship, as the centralized authority may have the power to block or reverse transactions. Additionally, permissioned blockchains may lack the transparency that is inherent in public blockchains, as the access and visibility of transactions can be restricted to a select group of participants.
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• Dec 18, 2021 · 3 years ago
  Using a permissioned blockchain for cryptocurrencies could also limit the scalability of the system. The need for consensus among a smaller number of participants in a permissioned blockchain can result in slower transaction processing times and increased latency. This can be a significant limitation for cryptocurrencies that aim to achieve high transaction throughput and fast confirmation times. Scalability is a critical factor for the widespread adoption of cryptocurrencies, and permissioned blockchains may struggle to meet the demands of a large user base.
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• Dec 18, 2021 · 3 years ago
  From BYDFi's perspective, while permissioned blockchains offer certain advantages such as increased privacy and control, they may not align with the core principles of decentralization and transparency that underpin cryptocurrencies. BYDFi believes that public blockchains, which are open to anyone and allow for transparent and decentralized transactions, are better suited for cryptocurrencies. Public blockchains provide a level playing field for all participants and ensure that no single entity has excessive control over the network.
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• Dec 18, 2021 · 3 years ago
  Another potential limitation of using a permissioned blockchain for cryptocurrencies is the risk of collusion or corruption among the participants. In a permissioned blockchain, the participants are typically known entities with predefined roles and permissions. This can create a potential risk of collusion or manipulation of the system, as the participants may have shared interests or incentives. This could undermine the trust and integrity of the cryptocurrency network.
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• Dec 18, 2021 · 3 years ago
  While permissioned blockchains offer certain advantages such as increased privacy and control, they may not align with the core principles of decentralization and transparency that underpin cryptocurrencies. Public blockchains, on the other hand, provide a level playing field for all participants and ensure that no single entity has excessive control over the network. It's important to carefully consider the trade-offs between privacy, control, and decentralization when choosing a blockchain for cryptocurrencies.
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• Dec 18, 2021 · 3 years ago
  Using a permissioned blockchain for cryptocurrencies may also limit the accessibility of the system. Permissioned blockchains often require participants to be approved or granted permission to join the network. This can create barriers to entry and exclude potential users who do not meet the criteria set by the centralized authority. In contrast, public blockchains allow anyone to participate and transact, promoting inclusivity and accessibility for all.
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• Dec 18, 2021 · 3 years ago
  One potential drawback of using a permissioned blockchain for cryptocurrencies is the potential for regulatory challenges. As permissioned blockchains involve a centralized authority, they may be subject to regulatory scrutiny and oversight. This can introduce additional compliance requirements and legal complexities for cryptocurrencies operating on permissioned blockchains. Public blockchains, on the other hand, operate in a more decentralized and autonomous manner, which may offer greater flexibility and resilience in the face of regulatory challenges.
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