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

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:  

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.