Permissioning Validators

The ability to control a blockchain's validator set has many benefits that can significantly enhance the efficiency, security, and governance of the network. It allows blockchain participants to have greater influence over the consensus process and decision-making, leading to a more robust and adaptable ecosystem. There are two ways to structure the validator set:

• Permissionless Validation: Anyone can participate in the validation process and be rewarded in tokens to cover their costs for the hardware and running the validator. In Avalanche, we call Avalanche L1s that take this approach Elastic Avalanche L1s.
• Permissioned Validation: Only whitelisted validators can validate the Avalanche L1. A permissioned Avalanche L1 can be turned into a Elastic Avalanche L1 at any time, but not the other way round.

There are many reasons why the creators might want a permissioned validator set for their Avalanche L1.

Enterprises and Corporations:

Large enterprises and corporations often require blockchain solutions for their internal operations or specific industry use cases. A permissioned validator set allows them to control who can participate in the network and validate transactions. This is particularly relevant in industries with strict regulatory requirements, where entities need to ensure compliance and data privacy.

Consortiums and Industry Associations:

Consortiums or industry associations comprising multiple organizations with shared interests can benefit from a permissioned validator set. These entities often collaborate on initiatives requiring a distributed ledger, such as supply chain management, healthcare data sharing, or financial transactions. By establishing a permissioned validator set, the consortium can ensure that trusted participants from within the consortium validate the transactions.

Government Agencies:

Government entities may find value in launching a blockchain with a permissioned validator set to manage critical infrastructure, public services, or regulatory processes. They can select validators from trusted institutions or stakeholders to maintain control over the network while ensuring compliance with legal and governance requirements. Examples include land registry systems, voting platforms, or identity management solutions.

Financial Institutions:

Banks, payment processors, and other financial institutions could be interested in a permissioned validator set for blockchain solutions related to payments, remittances, or settlement systems. These institutions often require a level of control over the network to maintain regulatory compliance, prevent money laundering, and ensure adherence to Anti-Money Laundering (AML) regulations.