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A Starter's Guide to Creating a Blockchain Consortia - Part 1

In Part 1 of this Blockchain blog post series, learn about what a consortium is and why you may need one.

What, how and why?  

One of the inherent characteristics of Blockchain technology is that it is distributed. In a Blockchain, every node connected to the network owns a copy of the ledger. It is one single source of truth shared by everyone. As such, it makes little to no sense to set up a single user Blockchain. It would be like setting up a Local Area Network but connecting only 1 device.  

Because of this, the term `consortium’ has been buzzing around a lot and became a very important term in Blockchain vocabulary. The term is nothing more than a fancy way of describing an association (of several groups, typically companies in this case). So, in a nutshell, when creating a consortium, we are bringing companies together.  However, what must one keep in mind when doing so? The scope of this article is not to discuss use-cases but to go over the setup of a consortia. 

Why would I form a consortium?

The point of a Blockchain is to bring players together that usually operate in a trustless environment. The term ‘trustless’ does not denote any form of hostility! It rather shows a lack of competitiveness or standards and agreements. Hence a consortium is the first step into bringing together those parties who have one common intent: collaboration.  

The initial question to ask is, “what is the scenario?”. Is there a use case? For any given technology, a solution could be business driven – we know what problem we want to solve – or technology driven, that is, we want to use a specific technology in our business to improve and leverage the benefits of this technology.  

In any case, the formation of a consortium starts during the scenario definition to understand who can contribute to this solution. A consortium can have varying structures. 

The composition of this ‘get together’ depends largely by the use-case at hand. For clarity, four contexts have been identified:  

Type  Description  Example 
     
Internal 

 

Autonomous departments within a same holding company 

 

Risk Department, Legal Department, Investment Banking, Retail Banking within a bank 

 

Company Family 

 

Different companies belonging to the same group? 

 

Codit CH, MT, UK, NL, BE 

 

Same Industry 

 

Direct Competitors within the same industry to improve collaboration? 

 

Insurance companies, Banks, Retailers, Shipping companies 

 

Given Process 

 

A supply chain process 

 

Different Suppliers, manufacturers, transporting companies and retailers.  

 

In the above cases, the common intent is that of creating some sort of audit trail that can allow any one participant to view a reliable log of events that occurred during a specific business process or workflow. For example, if a request (such as opening a bank account) must undergo several phases between different departments, or a product is being manufactured using several parts from different suppliers. Using Blockchain’s immutability one can trace when a request was handled and by whom, and where specific parts came from.  

In Part 2 of this series I will discuss how to get started with a Consortium and which questions you need to be asking. 

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