Consortium Blockchain enables the new child on the block to join the established structure and share information instead of starting from scratch. So what exactly is Consortium Blockchain, what does it do?
What is Consortium Blockchain?
The term Consortium Blockchain refers to a group of private blockchains, each owned by individual institutions that come together to share information to improve existing workflows, transparency and accountability.
Blockchain technology is the storage of data and information in a digital blockchain that is interconnected by hash algorithms, increasing the security of the data in each block. The most widely known use of blockchain technology is in cryptocurrency, which is a digital ledger of transactions distributed across a blockchain. Basically, there are three types of blockchain technologies available in the form of public, private and consortium blockchains.
Public blockchains are openly accessible to anyone with access to the internet, while private blockchains are used by individual businesses to support business use by developing enterprise software solutions. A consortium blockchain is in the middle between public and private blockchain as it includes the blockchain of a cluster belonging to different organizations, not just an individual organization. Yet unlike a public distributed ledger, it still exists within a controlled user group.
Formation of a Consortium Blockchain
A consortium blockchain is a combination of multiple private blockchains belonging to different entities; where each forms a node on the chain as a stakeholder in the alliance and can only leave or leave the network with the authority of the stakeholders. While each organization manages its own node or blockchain, the data within it can be accessed, shared and distributed by organizations within the consortium. In doing so, inter-organizational and cross-tech solutions can be developed to improve existing workflows, accountability and transparency, thereby addressing the issues and challenges faced by individual blockchains.
Generally, only organizations with common goals and complementary blockchain technologies are successful in joining to form a consortium blockchain.
Benefits of Consortium Blockchain
The purpose of creating a consortium blockchain is a group of complementary blockchains to facilitate cooperation between This helps each to individually address the challenges they face and develop solutions that can be applied to the entire consortium. By building on built-in structures in each blockchain, solutions can be developed in a shorter time with shared resources. In this way, less development costs are required through economies of scale.
Also, there are no service or transaction fees for transactions within a consortium blockchain. Small organizations will reap the greatest benefits from participating in a consortium blockchain. An example of a supply chain consortium blockchain is between a logistics company and a manufacturer, where resolving issues in either of the organizations can help improve outcomes for both.
In addition to saving time, costs and resources, a consortium blockchain instills more than a private blockchain where consensus is centrally controlled. Because a consortium blockchain is created by multiple entities, each will have a stake in the decision-making process, ensuring that the blockchain is not managed by a single entity. This helps to share and disseminate control among participating organizations and provides checks and balances that reduce the possibility of corruption.
Unlike public blockchains, which maximize the user base to achieve decentralization, a consortium blockchain exists in a group of member organizations that share similar goals and objectives. This makes it much easier to reach consensus among stakeholders and accelerate transaction speed, thereby increasing scalability. With fewer nodes on a consortium blockchain, it’s also easier to make changes to block data once a consensus is reached by the majority of participating organizations.
Additionally, the consortium provides a level of security that instills trust in their customers, as information on the blockchain is shared only among participating organizations and is restricted from public access.
Therefore, collaboration between private entities on a consortium blockchain has numerous benefits, from solving common challenges to saving time and operational costs. This leads to faster transaction speed and higher scalability while maintaining privacy. Industries such as finance, banking, healthcare and supply chain logistics can benefit from such partnerships.
