Many of you are probably already very familiar with blockchain technology. Some of you are currently using it while others might only know what it is and why it’s significant. However, the type of blockchain that most of you are familiar with is the ‘public blockchain.’ There is, in fact, another blockchain that exists, and it’s called the ‘consortium blockchain.’
Blockchain is – in simple terms – literally a chain of blocks, with the “blocks” being pieces of digital information and the “chain” being the database that the system stores them in. This network for a public blockchain has no central authority, thereby making it a decentralized system. The information within it is open for anyone and everyone to see, which is why anything built on the chain is transparent.
The “blocks” on the blockchain database are each made up of digital pieces of data. They are split into three parts:
- The blocks store information surrounding the transactions, which includes the date, the time, and the dollar amount of your most recent purchase.
- They store information about those who are participating in transactions. Instead of your name, your purchase is recorded using a unique ‘digital signature.’
- They store information that will set them apart from other blocks. Each block possesses a unique code – a ‘hash’ – that allows us to distinguish it from other blocks. Investopedia editor, Luke Fortney, describes how hashing works: “Let’s say you made your splurge purchase on Amazon, but while it’s in transit, you decide you just can’t resist and need a second one. Even though the details of your new transaction would look nearly identical to your earlier purchase, we can still tell the blocks apart because of their unique codes.”
From here, we step out of the familiar territory of public, open blockchains and into the generally unfamiliar with consortium blockchains.
The best way to understand consortium chains is to compare them to the more widely known public blockchains. As previously mentioned, public blockchains are largely decentralized, possessing no access restriction of any kind. Anyone in the world can read the data residing on the chain and everyone has the ability to carry out transactions. Most importantly, there are no restrictions regarding who can participate in the consensus process. This procedure determines the individual or entity that is able to add a block to the chain.
Consortium blockchains differ from their public counterparts due largely to the fact that they function on granting permissions. This means that not just anyone who has an Internet connection can gain access to the chain. In a way, this kind of blockchain can be seen as semi-decentralized. The governing of a consortium blockchain is not done by or given to a single entity. Rather, its control is in the hands of a group of predetermined people, or nodes.
With this type of blockchain, the consensus process is more likely to differ from that of a public blockchain. As opposed to anyone being able to engage in the procedure, consensus participants of a consortium network will probably be a group of pre-approved nodes on the system. With that said, consortium blockchains have many of the security features that are essential for public chains. It also allows for a greater amount of control over the network.
Over the years, consortium blockchains have become prominent ways for enterprises to work harmoniously on blockchain technology. Over 40 consortium blockchains have come to fruition across the globe, some of which have managed to bag significant investments. These are primarily companies in the financial services industry like Citigroup, JP Morgan, Bank of America/Merrill, and numerous others.
Types of Consortium Blockchains
There are two main types of blockchain consortia: those that focus on business and those that focus on technology.
- Business – These aspire to build and operate blockchain-run business platforms in order to solve a specific business problem. A notable example of this is Digital Trade Chain, whose launch was back in January of 2017.
- Technology – These aim to develop reusable blockchain platforms that draw from and function on technical standards. An example of this is Hyperledger, which is an open-source collaborative project of blockchains and other similar tools.
There exist some consortium blockchains that simultaneously cover both types of activities. One noteworthy example of this is R3. This company’s consortium chain contains more than 80 of the world’s largest financial institutions, managers, and central banks. In fact, the consortium has recently released a comparatively stable version of its platform, entitled Corda.
Why join it?
A key reason for companies to join a blockchain consortium is that – for some, anyway – it represents a low-risk effort to stay up to date on trends. In addition, they can learn what their competitors are doing, defend against any potential threats, and prepare to implement the technology if they decide to do so. From the perspective of some industry analysts, a majority of companies are joining out of fear of possibly missing out.
Ledger vs. Chain
In the end, consortium blockchains function as a consequence of the technology itself. There are notable differences between ‘distributed ledger’ and ‘blockchain’. That being said, a very crucial element of blockchain technology is actually the distributed ledger.
Even though a ledger can have an instantaneous positive impact between two businesses, it draws most utility from network effects. To put simply, the greater the number of users, the more valuable the technology is to all of them. Consortia allow companies to take full advantage of the effects of a blockchain network from the beginning. It provides a way to create an administrative structure around this collaboration. This is frequently among players that compete against each other. Ultimately, if one wants to use blockchain effectively, a majority of enterprises need to be part of the consortium.
As the number of participants joining the blockchain grows, the relevance of the data – the authenticity and its technical security – gradually increases tremendously. To sum up, the more democratically-owned the data is, the more comfortable the users and contributors will be.
Examples of consortia
We will now get into listing various consortium blockchains that exist all over the world. Note that they are in alphabetical order.
This is a community of banks. It is mainly a way to explore, build, and implement blockchain solutions. Its formation was put into place by Primechain Technologies. They maintain, operate, and conduct the consortium. It came to fruition back in February of 2017 and has a substantial number of members and live projects.
Members of this platform are given access to all BankChain projects. These include Electronic Signature Engine, Corporate KYC (Know Your Client) and Charge Registry, Invoice Discounting, Stressed Assets Marketplace, and many others.
An acronym for Blockchain Insurance Identity Initiative, B3i came into being in late 2016. It’s a collaboration of insurers and reinsurers that explore the potential of using Distributed Ledger Technologies (DLT) within the industry for the benefit of the stakeholders in the value chain. The great success of the B3i system is shown in the inclusion of B3i Services G in Zurich in March of 2018.
The first product of B3i is a Property Cat XOL contract. It does not maintain information on separate ledgers of each contracting party. Instead, the B3i blockchain application runs a joint process, calculation, settlement, and reporting on a distributed ledger.
3) China Ledger
The idea behind this platform’s formation is to understand and explore blockchain technology. Moreover, it seeks to learn about the underlying encryption algorithms, private chain creations, sidechains, and lightning network technology. Investopedia editor, Jake Frankenfield, describes China Ledger as “…a second layer technology for bitcoin that uses micropayment channels to scale its blockchain’s capability to conduct transactions.”
As a whole, China Ledger wants to create solutions and blockchain foundations for the entirety of China.
Enterprise Ethereum Alliance (EEA) aims to accelerate the adoption of Enterprise Ethereum. The Alliance effectively sets global standards regarding architecture and specifications. It initiates testing and certification programs and privacy and performance improvements that are vital to EEA’s plans.
Enterprises (members of the network) work together to design the industry conventions. That being open-source and free to use blockchain solutions that will prove to be the framework for growing businesses.
Financial Blockchain Shenzhen Consortium came into existence in May of 2016. So far, it has more than 100 members, including financial organizations and information service companies. Since its launch, FISCO has set up research projects in a wide variety of areas. These include credit, loyalty point systems, equity, commercial bills, insurance, cloud services, digital assets, and wealth management issuance and trading.
The blockchain platform is collectively constructed by the FISCO open-source working group. Members of this working group include Beyondsoft, Digital China, Huawei, Forms Syntron, Tencent, WeBank, YIBI Technology, and many others.
The FundChain initiative was set in motion back in 2016 by Scorechain. It consists of about 10 key market players of the fund industry:
- BNP Paribas Securities
- European Fund Administration (EFA)
- ING Luxembourg
- RBC Investor & Treasury Services
- Société Générale Bank & Trust
- Professional Services firm PwC Luxembourg, the University of Luxembourg (SnT)
There are already some use cases for this platform. These include KYC onboarding, cash management, transfer agent, and regulation.
An acronym for Global Blockchain Business Council, this platform is made up of leaders and innovative companies from roughly 40 countries. It aspires to make blockchain a universally understood subject and at the same time, accelerate its adoption. They’ll do this by engaging with the global political and business leaders and regulators.
GBBC is a Swiss non-profit platform that partakes in advocacy as well as education of blockchains. Not just for all notable partners but also for – to an extent – everyone else.
8) Global Shipping Business Network
This is an open digital platform drawing from distributed ledger technology. The creation of this consortium (GSBN) is thanks to nine leading ocean carriers and terminal operators. The initiation of the network was done by software solutions provider, CargoSmart. It consists of such names like COSCO Shipping Lines, CMA CGM, Evergreen Marine, OOCL, Yang Ming, and many others.
The platform establishes a digital baseline that intends to connect an array of groups. These include stakeholders like carriers, terminal operators, shippers, and logistics service providers. This will enable collaborative innovation, not to mention digital transformation, within the supply chain.
9) Hashed Health Collective
This is a global community specifically for healthcare organizations, consumers, entrepreneurs, and developers. Really, anyone who wishes to be part of the conversations at the junction of blockchain and healthcare. It is an open community that’s free of charge where enthusiasts and novices alike can interact with industry leaders and entrepreneurs. As a bonus, there is no restriction to just one area of interest.
For enterprises, this consortium works with various teams to aid in unpacking and applying blockchain technology. This, unsurprisingly, is primarily for the healthcare industry.
10) International Organization for Standardization
This organization (ISO) is independent, non-governmental, and international. It has a membership of about 162 national standards bodies. Through these members, it brings experts together to share knowledge and also develop consensus-specific and market-relevant International Standards. These will support any further innovations and provide solutions for global challenges.
Furthermore, they give out excellent specifications for products, services, and systems. This guarantees great quality, safety, and efficiency. Overall, this platform is instrumental when it comes to assisting the progress of international trade.
11) ISITC Europe
The main goal of this platform is to promote operational efficiency in the global financial industry. This is done through education, design, standardization, and recommendation. It’s a voluntary, non-profit group made up of an array of members from the financial industry. These members include Investment Managers, Custodian Banks, Industry Services Providers, Consultancies, and Depositories.
In addition, it has numerous working groups. The blockchain working group put together the best ways to assist the financial services industry. This culminates into the idea of wide adoption for Blockchain DLT.
12) Japan Exchange Group
JPX came to be thanks to the collaboration of Japanese financial institutions and IT vendors. This way, they can explore and develop blockchain or DLT-type solutions for capital markets. The consortium consists of 33 Japanese financial solutions along with other similar organizations.
An acronym for Mobility Open Blockchain Initiative, this is a non-profit organization that works with more ‘forward thinking’ companies, governments, and non-governmental organizations. They want to make mobility services much more efficient, affordable, safer, greener, and less cluttered by promotional standards. Moreover, they wish to accelerate the adoption of blockchain, distributed ledger, and other similar technologies. Beginning with vehicle identity and history, the use cases of the platform span the entirety of the mobility services value chain.
Post Trade Distributed Ledger is a group that includes almost 40 financial institutions and notable market infrastructure players. The function of this system is to serve post-trade landscapes. Practitioners, managers, and central banks all connect via the PTDL to recognize and drive activities and position-specific recommendations. These may potentially leverage DLT for the benefit of the post-trading landscapes.
This platform provides an easy-to-use interface for banking customers to learn about potential vendors and sellers. Not only that but customers can also learn about potential place orders and how to manage payments. All businesses that exist on the blockchain are largely KYC’d. It essentially allows them to select any kind of banking product.
It is built on Hyperledger Fabric and 12 European banks are already taking part in it. These banks include Société Générale, UniBank, and UBS.
There are other consortia examples you can look into, such as Marco Polo Network and Trusted IoT Alliance (TIA). In fact, there’s quite a bit more that can be said about R3. Regardless, these are a collection of consortium blockchain systems that help further explain what this kind of chain really is. It’s a little more complicated than a public blockchain, but it’s still very handy in some ways.