Blockchain is a technology that stores data and information in a chain of blocks. Every block links to each other by using hash algorithms. This technology uses cryptographic protocols to enhance security. This technology makes it impossible to change, edit or delete the information in blocks.
Those familiar with cryptocurrency like Bitcoin are also familiar with blockchain technology. Precisely, it is a variant of a digital ledger of transactions distributed and duplicated over the network architecture of blockchains. This technology is emerging with remarkable developments in the field of digital transactions despite being in the growth stage.
There are three types of blockchain technology:
In this article, we are going to discuss consortium blockchains in detail.
Overview: Consortium Blockchain
Public blockchains or open blockchains are accessible to anyone with an internet connection. Private blockchains generally serve an enterprise for corporate software solutions and resolve business cases.
A hybrid of the former two blockchains is the consortium blockchain, which is more of a private type of distributed ledger.
The primary objective of a consortium blockchain is to ascend cooperation effects to meet the constant challenges of a particular industry. Organizations with common goals can opt for consortium blockchain to revamp transparency, accountability, and workflow. The Deloitte research exhibits that approximately 74% of organizations are opting for blockchain consortiums. Many blockchain platforms are offering themselves as a backbone for various organizational solutions.
Consortium blockchain offers the new kid on the block to join the established structure and share information instead of starting from scratch. This technology helps organizations to find solutions together and save time and development costs. Consortium blockchains are also known as Federated blockchains.
Advantages of consortium blockchain
Exercising consortium blockchain technology serves the following benefits to the organizations:
Validation: The number of participants in the consortium blockchain is known and verified. Authentication conducted by them reduces the risk of data threats. The nodes violating the set protocols are immediately identified and suffer the consequences of violation. The other threats like SQL injection, DDoS, “man in the middle” are insignificant in consortium blockchain.
Control: Instead of a sole entity, a particular group of authentic participants controls the blockchain. This control helps to set rules, amend balances, edit or cancel an incorrect transaction, and encourage full cooperation for companies with common goals upon confirmation from each participant.
Security: The information on the authentic blocks is not permissible for access to the public. But the consortium participants can access the information quickly, ensuring high-end security. It builds high levels of confidence and trust for the platform clients.
Economic: As compared to other blockchains, consortium blockchain charges no service or transaction fee in the consortium setting.
Agreement: According to the governance scheme, a contract is often made by a relatively fewer number of nodes. This type of consensus is easier to reach as it is less demanding. These aspects directly affect the transactional outputs leading to speedy operations and improved scalability.
Flexibility: The involvement of several validators in other blockchains leads to mutual consensus and synchronization issues. However, such issues are avoidable in consortium blockchain due to the limited number of participants.
Energy requirement: Nonessential data mining directs the exclusive use of energy for routine operations only. Also, the Proof-of-vote type agreement doesn’t employ much energy.
Disadvantages of consortium blockchain:
Consortium blockchain offers several benefits over other blockchains, but certain aspects prove disadvantageous for consortium blockchain.
Network structure: The centralized network structure makes consortium blockchain vulnerable to vicious players. The limited number of participants leads to the assumption that one or more participants may be corrupt. The designing of a shared infrastructure guarantees more security than a single enterprise.
Effectiveness: The efficiency of consortium blockchain technology is yet to be proven.
Framework: Consortium blockchain lacks the feature of a unified framework. Solutions like R3’s Corda, Quorum of JP Morgan, Hyperledger provide the industry standards required by private blockchains.
Delicate launching process: Due to less flexibility, setting a standard network between several enterprises is sluggish. Since all the participants must acknowledge the protocols, introducing a new blockchain is not an easy process.
Lack of cooperation: Sometimes, the participants cannot cooperate and reach an agreement, which hampers the development speed.
Upgradation: In situations when there is an increasing number of participants than at the beginning, upgrading the protocols can be troublesome.
Examples of Industries deploying Consortium Blockchain
Undoubtedly, consortium blockchain is a significant innovation propelling the adoption of blockchain in industries. Some of the sectors where consortium blockchain technology fits the best are :
- Insurance and Healthcare
- Banking and Finance
Logistics is the explicit organization and implementation of complex operations. It is the management of the flow of articles between the source point and the destination point to fulfill the requirements of enterprises or consumers. Consortium blockchain provides optimum solutions to create a network for all supply chain participants. It is beneficial for tracking products to identify their origin and the supply process.
Insurance and Healthcare
Healthcare and insurance are related to each other. These days people often opt for health insurance as security. The set insurance is claimable when a person spends in hospital. Hospitals and insurance companies join the consortium to digitally exchange information and money to speed up the process and reduce time consumption.
Banking and Finance
This industry deals with trading assets. A group of banks establishes a database that shares the required information about the creditors. Whenever the bank requires authenticating and assessing a consumer, it accesses the information from the distributed ledger.
An analysis conducted by Deloitte proves that the financial and cross-sector implementations are the best suited for consortium blockchain adoption.
Open-source solution platforms like Hyperledger, Corda, Ripple, Multichain, Ethermint, Tendermint, Quorum, etc., are used by enterprises to establish their consortium blockchain.
Ongoing Consortia Projects
Some of the working consortia projects are:
This project was launched in 2018 by CryptoBLK and R3. The objective of this consortium is the digitization of documents and decentralized blockchain sharing. It involves a group of twelve banks, namely BBVA, SEB, Scotiabank, ING, Mizuho, Intesa Sanpaolo, CTBC Bank, U.S. Bank, Bangkok Bank, Natwest, BNP Paribas, and HSBC. The requested transactions are quick and usually take less than 24 hours to process.
Established by IBM in 2016, this project consists of a group of five banks only: Bank of Montreal, UBS, Erste Group, Commerzbank, CaixaBank. This consortium enables trading around the globe by building a collaborative network. Information exchange and trading transactions in a digital and automated way using blockchain ledger. This consortium was able to conduct five successful live transactions between different trading parties and countries.
The primary goal of this consortium is to simplify the process of trade flow by positioning supply chain issues and trading relationships to a blockchain platform. Marco Polo is one of the projects based on R3’s Corda. This consortium platform is a collaborative project of TradeIX and ten other financial ventures: Bangkok Bank, DNB, ING, Natixis, Standard Chartered, CommerzBank, BNP Paribas, OP financial,SMBC, and Natwest. This project is seamlessly secure and handles credit and money assets, goods, and appropriate information exchange.
Established in 2017 by Primechain technologies, this consortium comprises 37 members and partners. It is a banking blockchain consortium that initiated eight live projects: Charge Registry, Corporate KYC, Global marketplace for invoice discounting, Global marketplace for government securities, Global marketplace for private debt instruments, Document authentication and verification using electronic signatures, Issuance storage and distribution of Trade documents, Transparent rating and review. This consortium implements, explores, and builds different blockchain solutions. And is also responsible for governing, operating, and managing the system.
This is a trading platform built by IBM or Hyperledger Fabric. KBC, HSBC, Natixis, Nordea, Santander, UniCredit, Deutsche Bank, and Rabobank are the eight participating members. This consortium allows creating trade orders, requesting bank payment undertakings, requesting invoice financing, selecting banking products and payment conditions, and even monitoring the entire trade route on the dashboard. Also, it offers the clients a completely automated order-to-payment process on intelligent contracts and aims to exclude pitfalls of international transactions and payments.
Global shipping business network:
This consortium provides both software and hardware solutions, launched by CargoSmart. A supply chain project, this consortium develops a single shared digital database rather than multiple businesses across the chain. Presently, it is a collaborative project of nine ocean careers and terminal operators: OOCL, Yang Ming, DP World, COSCO Shipping Lines, CMA CGM, Evergreen Marine, PSA International, Hutchison Ports, and Shanghai International Port. This platform works as a network of supply chain participants that can exchange information efficiently and quickly through a distributed ledger.
A consortium blockchain is suitable for organizations where there is a need for both public and private blockchains. This blockchain optimizes and enhances operational and communicational flow between the members and proves economical for your organization. Blockchain platform coordination between members makes problem-solving easy and less time consuming. Scalability of transactions, fast delivery speed, security, and automation are the primary benefits of consortium blockchain. Any organization can create it by using open source platforms according to the industry and set goals. Although organizations are free to set their standards and conditions, consulting with professional blockchain developers can be more fruitful.