Blockchain technology forms the base of a billion-dollar industry, and it helps us to store data in a decentralized manner. Development of blockchains has come far enough that blockchains are now divided into categories. One category of this blockchain system is consortium blockchain.
Consortium Blockchain is a group of multiple companies or financial institutions, each with its own private node. It is also known as Federated Blockchain. It comprises the features of public and private blockchains. The consortium blockchain’s main idea is to provide solutions to various industries’ problems.
The Need of Consortium Blockchain
Consortium blockchain is needed to meet the specific challenges in particular industries. It helps in collaborations and also enhances transparency, accountability, and effectiveness. According to research from Deloitte, 74% of organizations want to opt for the consortium blockchain.
Advantages of Consortium Blockchain
- It helps in collaborations as organizations having the same goals can share the blockchain platform.
- It helps in reducing costs as organizations can work together by dividing their expenses equally.
- It helps in greater scalability as they can handle large numbers of transactions.
- It can be more securable as it allows a predetermined number of nodes that can access the network.
- It can help in decision-making as the organizations can conduct meetings and work for their well-being.
Disadvantages of Consortium Blockchain
- It is a centralized form of blockchain as it can be handled by the organization or group of individuals.
- It has limited accessibility as only a predetermined number of individuals can participate in the blockchain system.
- Its success highly depends on consortium members which may be seen as a disadvantage if they do not work effectively.
- They are complex to set up and require specialized technical expertise.
- They are more rigid and less flexible as they are under a centralized authority.
How to build a consortium blockchain for your organization?
- Identify the problem: The first step in building a consortium blockchain is to identify the problem or use case that the blockchain will be used to solve.
- Forming the consortium: The second step involves the organizations and companies that will operate the blockchain systems. They are basically called consortiums. These companies should have a common interest.
- Choosing a blockchain platform: The third step involves choosing a blockchain platform which suits your use case or problem. There are many blockchain platforms available such as Etheruem, Hyperledger, and many more.
- Develop your blockchain: The fourth step involves the development of your blockchain including smart contracts and other components that will help to run the network. Development of blockchain is a lengthy process.
- Testing of blockchain: The fifth step involves testing of the blockchain before deploying it. It includes conducting functional tests, performance tests, and security tests.
- Deployment of blockchain: The sixth step involves the deployment of blockchain to the consortium members. It includes checking consensus mechanisms and other network parameters.
- Deciding of Governance structure: The seventh step involves establishing a governance structure. It includes setting up protocols for the governance mechanism. It includes setting up rules for consortium members.
Examples of Consortium Blockchain
- R3
R3 is a consortium blockchain that is working to develop a blockchain-based platform for financial services called Corda. Corda provides secure and transparent financial transactions.
- Hyperledger
It is an open-source consortium blockchain project led by the Linux Foundation. It can be used to build blockchain-based goods. Because it is open-source, anyone can freely expand on it.
- EEA
Enterprise Ethereum Alliance(EEA) is a consortium of blockchain leaders, adopters, innovators, developers and businesses. It includes major companies such as J.P. Morgan, Accenture, and Microsoft.