What is Consortium Blockchain?

Consortium blockchains have evolved as a notable paradigm in the ever-growing space of blockchain technology. 

Consortium blockchains provide an intermediate approach, as opposed to the public blockchains that allow everyone or the private ones limited to a single company. 

The Networks are developed for the purpose of certain organizations, so a safe zone somewhere in between is created. This article is all about the meaning, features, benefits and uses of consortium blockchains.

Consortium Blockchain Meaning

A consortium blockchain—also known as a federated blockchain—is a private or semi-private, permissioned network where the consensus process is controlled by an operator with transparent rules. 

Consortium blockchains provide a middle ground between the types of private blockchain and public privilege, which makes them well suited to be used inside business processes and amongst distinct organizations with mutual interests.

Important Features of Consortium Blockchains

Semi-Decentralized Structure

Consortium blockchains are controlled by a pre-selected node set. This semi-decentralized feature means the decision-making authority is decentralized among all consortial members, eliminating any risks associated with centralization but guaranteeing less friction and more efficient operation than a fully decentralized network.

Access Control

The consortium blockchain can be accessed only by the consortium members. This controlled access increases security and privacy, making it perfect for enterprises that need to share information while keeping that data off the public internet.

Consensus Mechanism

A consortium blockchain often uses a consensus mechanism based on a predetermined set of participants. ”Practical Byzantine Fault Tolerance” PBFT and Raft are common mechanisms. 

These mechanisms are designed to be more scalable than proof-of-work (used by public blockchains) so that they can process transactions in bulk very quickly without the need for a huge amount of computational power.

Advantages of Consortium Blockchains

Enhanced Security and Privacy

These are being used for their high security through a process that limits access to individuals and allowed in by the consortium encryption. 

This way the critical data is protected against unauthorized access, making it appropriate for instance in applications where privacy is one of major issues like finance and healthcare.

Improved Efficiency

Consortium blockchains, due to fewer nodes in the consensus process, can have higher transaction throughput and lower latency. 

This lends them well for use in enterprise grade applications which need to perform fast and reliable transactions.

Regulatory Compliance

Consortium blockchains are more regulatorily friendly than public blockchains. The controlled environment is an advantage as far as the governance of the application and more compliance later on, especially in areas like finance and healthcare

Use Cases of Consortium Blockchains

Financial Services

Within the financial industry, consortium blockchains are being adopted to simplify interbank payments, trade finance and KYC (Know Your Customer) procedures. 

Consortium blockchains, which can have multiple financial institutions participating on a common platform, help to reduce the role of intermediaries and make transactions less expensive and more transparent.

Supply Chain Management

Consortium blockchain allows multiple companies in supply chain to share and verify the data securely. 

Such transparency could be vital for as it enables one to track the origin of goods, ensure their authenticity and increase efficiency within supply chain activities.

Healthcare

Consortium blockchains in healthcare enable hospitals, clinics, and other health professionals to share patient records securely. 

This helps the patient by making up-to-date, accurate information about them available for their healthcare providers when they need it and, at the same time protecting patients' privacy.

Challenges of Consortium Blockchains

Governance Issues

Governance is one of the hurdles against consortium blockchains. Choosing members and making decisions can be complex, challenging us to develop a more powerful and guiding governance to ensure both equity and effectiveness.

Scalability Concerns

Consortium blockchains are much more efficient than public blockchains but also kill scalability as soon as you need to bring a few hundred organizations on board.

A lot of emphasis is there in building scalable solution that can server load without degradation.

Interoperability

On a related note, interoperability is another rather pressing challenge between the various blockchain networks. 

However, what it counts for a consortium blockchain is its ability to create links and communicate in real-time with other blockchains and traditional systems too.

In Summary

As demonstrated above, consortium chains represent a good balance between decentralization and authority power, leaning towards authority, which makes it great for enterprise use cases where privacy as well as performance is key. 

By working on a common platform, these applications create efficiency in the market by providing organizations with a way to reduce costs and exposure, manage risk and maintain compliance. 

However, at the same time, those that hold the power they confer will need to license them and make them governable and interoperate.