Blockchains are a type of distributed ledger technology (DLT) that facilitate the exchange and storage of data and information in groups called blocks. This emerging technology has gained widespread popularity in recent years as it offers greater security, transparency and trust.
Cryptocurrencies use public blockchains, which is one of the four main types of blockchain. However, in this article we are going to talk about another type of blockchain called consortium blockchain. We are going to explain what they are, how they differ from other types of blockchain, as well as the advantages and disadvantages of using one.
What is a consortium blockchain?
A consortium blockchain, also known as a federated blockchain, is a type of semi-decentralized network controlled and maintained jointly by a group of organizations or institutions. A consortium blockchain is often considered the bridge between a private and public blockchain.
A consortium blockchain development services is formed when a group of organizations with a common goal want to work together. Consortium blockchains allow their members to share a database or information while maintaining workflow, scalability, data sharing, and accountability .
Unlike public blockchains, a consortium blockchain is permissioned and only allows previously authorized users access to the network. It differs from private blockchains because each member of a consortium has the same control as the next.
Each member of a consortium blockchain manages an individual node in the chain as a stakeholder. Consortium stakeholders would need authorization before being able to add or remove a new member from the blockchain. Although each organization manages its own node or blockchain, other organizations in the consortium can access, share and distribute the data.
Characteristics of a consortium blockchain
Consortium blockchains combine characteristics of private and public blockchain networks, but what qualities define this type of blockchain network?
Semi-decentralized
Private blockchains are completely centralized, while public blockchains are decentralized. Then there are consortium blockchains , which fall somewhere in between. The consortium members own, access and manage the network jointly. There are fewer nodes in a consortium blockchain network, making it easier for consensus to be reached compared to traditional blockchain networks.
Data privacy
Since consortium blockchains are permissioned networks, only authorized members can access the network. This means that data stored on the network is not tampered with and can be accessed securely by network members. In the event of a breach, it is also easier to identify the source because a limited number of members have access to the data stored on the network.
Greater speed in transactions
With so few nodes in a consortium network, transactions occur much faster than on private and public blockchain networks.
Achieving consensus on a consortium blockchain
Like all types of blockchain, a consortium blockchain needs a consensus mechanism to function. The process called "shared consensus" involves a group of trusted nodes agreeing on the validity of transactions to maintain the integrity of the network.
Common consensus mechanisms for consortium blockchains are Proof of Authority (PoA), Proof of Voting (PoV), Practical Byzantine Fault Tolerance (PBFT), and Raft. Like other types of blockchain, consortium blockchains use smart contracts to automate the transaction execution process.
Offer greater control of data
A key feature of public crypto blockchains is immutability, which prevents data stored on the blockchain from being modified. However, data can be modified in a network of consortia after reaching a shared consensus. Reaching a shared consensus allows consortia to maintain the principle of transparency of blockchain technology.
Advantages of consortium blockchains
The combination of features of a private blockchain development company and a public blockchain provides consortium networks with some unique advantages. The benefits of collaborating in a consortium network include:
Greater privacy – The limited number of members with access prevents data from being released to the public, allowing for greater data privacy and security in a consortium. Consortium members typically have a higher level of trust, as each consortium member participates in the network's decision-making process.
Reduced transaction costs – Compared to other types of blockchain, there are also no service or transaction costs when operating within a consortium blockchain. Smaller organizations will reap the benefits of reduced operational costs by participating in a consortium blockchain.
Greater scalability : Consortium blockchains only have a handful of nodes compared to the thousands that make up public blockchains. The smaller number of nodes means the network is less congested, which improves the overall scalability of the network.
Flexibility – Consortium blockchains are typically more flexible than other blockchain networks, as a shared consensus can be reached to make changes to the network. Additionally, since there are fewer nodes in the network, changes can be made much faster than in public blockchains.
Lower energy consumption : Energy consumption in pool networks is usually used for routine operations. The consensus mechanisms used by consortium blockchains do not require mining, further reducing their energy requirements.
Disadvantages of consortium blockchains
As with the other types of blockchain, collaborating in a consortium has its disadvantages. The main drawbacks of consortium blockchains are:
Centralization – The small number of members means that consortium blockchain networks are more prone to centralization problems. The centralized structure also means that consortium blockchains are less transparent.
Additionally, because there are few members, the network is more susceptible to 51% attacks , in which more than half of the network collaborates to make changes to the network.
Building a consortium blockchain requires a lot of work : Although sharing a network has its advantages, the process of building a consortium blockchain between organizations is often a stressful process. The process of getting multiple organizations to contribute ideas and collaborate on the project is often plagued by bottlenecks.
Lack of cooperation – The success of a consortium blockchain depends on the willingness of members to collaborate and work together. If some of the members decide not to cooperate with the consortium, the blockchain network may not be successful.
Consortium Blockchain Examples
A consortium is the newest type of blockchain and is currently in the development phase. However, several use cases already exist. The most popular examples of consortium blockchain are:
Hyperledger In 2016, the Linux Foundation launched Hyperledger , an open-source blockchain consortium created to provide a set of tools and frameworks for building blockchain applications. Hyperledger initially had a technical and organizational governance structure, consisting of 30 founding corporate members. Currently, the consortium is used by companies creating blockchain applications in various sectors.
R3 In 2014, nine banks, including industry titans Goldman Sachs, Credit Suisse and JP Morgan, created the R3 blockchain consortium. The consortium's network has been used to develop a network called Corda to facilitate secure and transparent financial transactions. Currently, more than 200 financial institutions collaborate on R3.
Energy Web Foundation (EWF)
In 2019, the Energy Web Foundation (EWF) launched the Energy Web Chain , a blockchain consortium designed to meet the needs of the energy sector. The Energy Web Chain is the world's first open source, enterprise-grade blockchain platform designed to meet the regulatory, operational and market needs of the energy sector.
Global Shipping Business Network (GSBN)
In 2021, nine ocean carriers and terminal operators launched GSBN , a supply chain-based blockchain consortium. GSBN offers software and hardware solutions to its members in the supply chain sector. GSBN members operate on a single network to exchange information efficiently and quickly using distributed ledger technology.
Enterprise Ethereum Alliance (EEA)
The EEA is a 30-member consortium created in 2017 to collaborate on the development of a version of the Ethereum blockchain optimized for use in enterprise environments. Notable members of this consortium include Accenture, JP Morgan and Microsoft.
Consortia, the blockchain that attracts organizations
Consortium blockchains are considered the bridge between private and public blockchain networks, making them the best option for collaboration between organizations. Cooperation between private organizations on a consortium blockchain has numerous advantages, such as sharing data, solving common challenges, and saving time and operational costs.
Despite being one of the most recent types of blockchain, it has already been implemented in several sectors. However, the effectiveness of this type of blockchain for widespread adoption is still being tested. As it is still a relatively new concept, it is likely that there will be more consortium blockchain development services in the future.