A Complete Guide to Consortium Blockchain And Its Features

Fatima Haider 11 Jan, 2023 • 7 min read

This article was published as a part of the Data Science Blogathon.

Introduction

A private blockchain is an excellent solution for individual organizations to work through a decentralized network, but what if you want multiple organizations to share a platform for cross-technology solutions? A consortium blockchain is the best fit as its features make it exceptional between public and private blockchains.

A consortium blockchain is a group of multiple financial institutions, each with its private blockchain; it allows a pre-selected set of nodes to control the consensus process. Let’s take the example of 10 institutes in a consortium where each act as a node having an equal say. That means the transaction will be valid if 8 nodes sign the block.

Further, in this article, you’ll learn about the consortium blockchain’s features, drawbacks, and real-life implications. Also, you’ll know the difference between consortium, public and private blockchains.

What is a Consortium Blockchain?

In a consortium blockchain, nodes from multiple organizations or enterprises govern the network with far more privacy. They collaborate to share and change information through this platform to maintain workflow, scalability, and accountability. As a type of blockchain, a consortium mirror some features of a private and public blockchain, like privacy and scalability.

Still, it maintains a difference by reducing the network load where a controlled number of nodes contributes; its voting base system through a few known participants is another. All these combine to make the network lightweight and secure.

The principal aim of a consortium blockchain is to help institutes resolve challenges and find solutions applicable through this platform. A few of the well-known consortium blockchains are CORDA and Quorum.

Consortium Blockchain
Figure 1. Consortium Blockchain

What are the Features of Consortium Blockchain?

The consortium blockchain helps transfer the data, but it’s separate from crypto creation and management, as that’s the department of a public blockchain. Where is consortium best? It’s best for collaboration between the organizations. Here are some essential characteristics of it:

  • Rules and Regulations

The consortium is specially designed for multiple companies and organizations, so regulations are far more critical to keep the juices flowing. Here, nodes have to work under the rules of this network. That helps to build a team environment and increase efficiency at an expedited pace.

  • Fast Pace Transaction

Consortium blockchain owns few participants. That’s why nodes from different organizations produce less competition for transaction verification. Controlled user groups also help to reach a consensus fast. All these factors contribute well to faster transactions.

  • Secrecy of Data

Apart from reduced network load, fewer nodes also underpin data privacy. Unlike private blockchains, here, datasets are exposed to a limited group of people. This system leverages the security and originality of data in the blocks. Only some nodes’ consent can change the info within the network.

Consortium Blockchain
Figure 2. Features of Consortium Blockchain 

 

  • Change of Data

In a public blockchain, a change of data is nearly impossible. A massive number of users contribute to the reason. While in the consortium, fewer users can change the data through the consensus rule with far more ease. Here, all nodes have an equal say, with zero monopolies on any decision.

  • No Criminal Act

As a federated blockchain is entwined with a few known members, it eliminates the risk of criminal or illegal acts because most anonymous users are notorious for hogging up the processes in a network. Everyone knows each other in this chain, creating an environment of checks and balances that minimizes the probability of illegal activity, making this platform a safe option for enterprises.

  • Zero Chance of 51% Act

51% of the user’s attacks can be dreadful for the blockchain platform. A private blockchain is more prone to this issue as more than half of the members of single organizations can collaborate and override or even make reverse transactions.

However, the consortium is far from this issue because of the proper authentication of every transaction by specified nodes from multiple enterprises. The reason is that collaborating with various companies to 51% for doing something fishy in the network is challenging.

Consortium Blockchain
Figure 3. Speed Transaction in Consortium Blockchain

 

  • Low Energy Consumption

Federated blockchain is designed for users’ needs. Therefore, it requires less energy for consensus, transaction verification, and document validation. However, data mining sucks immense computing power, which means burdensome energy bills, and that’s the case with a public blockchain.

If it continues, the energy supply will become insufficient to satisfy the mining needs. Federated blockchain offers a solution to this problem by using less complex algorithms in its processes, all to lessen energy consumption.

  • Reduced Transactional Costs

Consortium blockchain providers offer this platform to users with low transactional costs. Unlike a public blockchain, where more users can expand the transactional costs, in the federated network, transactional fees remain the same irrespective of the number of users. Indeed, this chain is far cheaper for enterprises than traditional banking schemes.

  • Scalability

In the consortium blockchain, you will face scalability issues at a minimized level. Why though? Well, this chain has controlled nodes for validation. Hence, it’s a cool feature of a consortium where selected nodes manage the network efficiently, lowing the probability of slow network output and delayed transactions. As a permission blockchain, federated elevates a better user experience with a timesaving feature.

What are the Drawbacks of Consortium Blockchain?

  1. The centralized network structure of a consortium facilitates vicious players to disobey the network rules.
  2. The upgrading of such a platform is not easy because of the increased number of members, as this process requires each network member’s permission.
  3. The consortium’s effectiveness is still under development.
  4. A corporation among the enterprises can help the field’s development. However, the probability of such a corporation is less here.
  5. Apart from solutions like R3’s Corda, Quorum of JP Morgan, and Hyperledger in a consortium, a unified framework is yet to be established.
  6. Building such a platform takes much work, requiring different organizations to sit at one table for communication protocols. 

Use Cases of Consortium Blockchain

The consortium is a dynamic innovation that provokes many industries to get their feet wet. Here are some sectors where this technology fits right.

Use cases
Figure 4. use of consortium blockchain in different sectors

 

Logistics

As a complex operation, logistics involves the management of articles from their origin to their destination source, all to help companies and customers. The consortium can make this process easy by putting all the supply chain participants on one network. It will help keep a clean track of logistics from its provenance point to the complete shipping process.

Finance & Banking

This industry deals with issuing and trading assets, including KYC. In a consortium, all the banks put their info on datasets in one place. Whenever a bank needs to verify or access the creditor’s info, this distributed ledger will be there to help. A datolite analysis shows that consortium is the most favorable option for cross sectors implementation.

Health & Insurance

If you opt for health insurance as security, you can claim it whenever you spend in the hospital. To speed up the process and timesaving factor, hospitals, and insurance companies can collaborate to exchange money and information through the consortium.

Difference Between Public Blockchain, Consortium Blockchain, and Private Blockchain

Difference Between Public Blockchain, Consortium Blockchain, and Private Blockchain
Figure 5. Difference between public blockchain, private  blockchain, and consortium blockchain

 

  • Time for Transaction

Being a permissionless, public blockchain leads to various unknown nodes that elevate a slow transaction process. While private and consortium blockchains only let the users in through a defined authentication process. Therefore, both these platforms have a regulated number of users, leading to fast and light transaction processes.

  • Control & Authority

No single entity or authority controls a public blockchain, forming a decentralized network. In contrast, in a private blockchain, the members of a single organization control the network, making it a centralized ecosystem. While in the consortium, multiple organizations or enterprises combine to control and manage a platform. That means this network is partially decentralized with sprinkles of centralization.

  • Immutability

Being highly decentralized, the data tempering in a public blockchain is impossible. While in a private blockchain, users of a single organization can read or write the data over a digital ledger through consensus agreement. For the consortium, nodes from multiple organizations can change the data through a voting system.

  • Resources & Costs

Unlike a public blockchain, consortium and private use fewer resources to set up a platform; for this purpose, in the initial stages, they demand investment that will pay off in the longer run. Also, the algorithm used in public blockchain for consensus sucks a lot of power, leading to high costs. Consensus algorithms are less power-hungry and cost-effective in private and consortium blockchains.

Conclusion

If you want to reap economic advantages for your business by collaborating with other enterprises, the federated blockchain can maximize communication and active workflow between the parties. Being the best of both worlds, such as public and private blockchains, it also facilitates you with a secure and partially decentralized network.

Hyperledger, Corda Ripple, Quorum, Ethermint, Multichain, and others are some open-source consortium solutions. With its help, you can build your consortium platform with one or multiple enterprises where you’ll have the privilege to set your own rule for which consulting a blockchain developer is advisable.

Here are some critical takeaways from this article.

  • Consortium blockchain facilitates multiple private organizations to bind and reap results, such as saving time and reducing operational costs.

  • Speedy transactions and scalability make this platform ideal for companies with common objectives.

  • Uses cases of this chain are health and insurance, logistics, and supply chain, as these are deemed as top industries for this platform.

  • The platform’s data is only shared with a controlled number of participants, a check and balance to lessen the likelihood of corruption.

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Fatima Haider 11 Jan 2023

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Responses From Readers

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BigMoney
BigMoney 08 Jan, 2023

I really like the guide, keep it up!

Fatima
Fatima 09 Jan, 2023

Thanks for your valued attention.

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