Consortium Blockchain Definition
A consortium blockchain is essentially a private blockchain where the consensus process is controlled by a pre-selected set of nodes. These nodes could be one specific organization or multiple organizations. A consortium blockchain is a partially private, partially public decentralized network where the governing, decision-making, or consensus power lies in a predefined group or groups, as opposed to being open to the public.
Consortium Blockchain Key Points
- A consortium blockchain operates under the control of a group rather than a single entity.
- It offers the privacy of a private blockchain with the transparent governance of a public blockchain.
- This type of blockchain is often suitable for business and industry use where privacy, efficiency, and reliability are needed.
What is Consortium Blockchain?
A consortium blockchain differs from both private and public blockchains by providing the hybrid benefits of both. While it is private and only allows a predefined list of nodes to participate in the consensus process, it also provides transparency. This transparency is provided by the involvement of multiple organizations. The data on this blockchain is typically only available to participants of the consortium – hence a medium channel of privacy.
Who uses Consortium Blockchain?
Typically, business consortia use consortium blockchains. It’s used across various industries including finance, supply chain, healthcare, and more. Considering its nature, it’s used where privacy and security are crucial but certain information sharing is also needed. It can allow businesses to collaborate with each other, share data securely, and streamline processes, while also maintaining transparency amongst themselves.
When is a Consortium Blockchain used?
A consortium blockchain is generally used when a group of businesses or organizations wants to share information or carry out transactions without involving a third party, yet wants to maintain an agreed-upon level of privacy, transparency, and mutual trust. It is used when private blockchains are too restrictive and public blockchain lack the needed privacy.
Where is Consortium Blockchain applied?
Consortium blockchains can be applied to several industries. In banking and finance, they are primarily used to streamline processes, build faster payment systems, and reduce fraud. In the supply chain sector, they are used to improve traceability and transparency. Similarly in healthcare, they can securely share patient data across different stakeholders, enhancing the treatment process.
Why is it important to use a Consortium Blockchain?
The importance of consortium blockchain lies in its ability to merge the benefits of private and public blockchains. This type of blockchain can increase efficiency and speed, while still maintaining transparency and a certain level of privacy. It also helps to reduce costs as the need for intermediaries is removed, transactions are streamlined, and fraud is reduced.
How does a Consortium Blockchain work?
The working of a consortium blockchain is much like other blockchains. Transactions are bundled into blocks and added to the chain after validation. However, only pre-selected nodes are allowed to participate in the transaction validation process. The decision for block validation and addition to the blockchain, is made through a process known as consensus, which is controlled by these pre-selected nodes.
