How to build a consortium blockchain – brought to you by KPMG- PBWS 2020 Panel Recap

Many consortia have emerged in recent years, allowing major companies to collaborate with each other in unprecedented ways.  Traditionally on private blockchain networks, consortia use blockchain technology to facilitate data transfer and validate transactions between separate entities, even competitors in some instances.  There are a myriad of use cases for consortia, and we hear a lot about how they increase efficiency and privacy, but how can companies go about considering whether a consortium is the right choice for a project? At PBWS 2020: Online Edition, we invited experts from leading consortia companies to provide their invaluable insights on the subject.  

We were proud to welcome the following speakers for this panel discussion: 

  • Catherine Philippe (KPMG)
  • Guillaume Déchaux (Consensys)
  • Richard Gendal Brown (R3) 
  • Moderator: Liat Aaronson (Horizen Labs)

Here’s a preview of some key takeaways : 

  1. For what kind of use cases does a blockchain consortium make the most sense ? 
  2. What are the challenges of building a successful consortium ?
  3. What role does governance play in consortia? 
  4. Is blockchain always necessary for consortia, or is a distributed ledger sufficient in some instances? 
  5. Can consortia ever be truly decentralized ? 

  1. For what kinds of use cases does a blockchain consortium make the most sense ? 

Overall, consortia tend to aim to improve operational efficiency, although it depends on the industry and the use case.  Some other use cases include reducing the cost and time of processing, auditability, and the synchronization of different participants and ensuring privacy. It is important to identify the key problems that the consortium should address at the start of the project. 

  1. What are the challenges to building a successful consortium ?  

Since by definition consortia facilitate secure collaboration between separate parties, there are a lot of moving parts to manage.  It is a complex process, and therefore successful consortia tend to aim to make the existing processes more efficient instead of trying to completely reinvent them. The goal should be to find wins for all participants and customers. Another challenge that companies face in consortia is talking about strategy or technology with competitors as well as finding the appropriate legal expertise.  It is also challenging to find developers to build blockchain projects because the technology is new, however communities like Ethereum are growing rapidly, therefore this is a good sign for the industry. 

  1. What role does governance play in consortia? 

There are three layers of governance in consortia: strategic and business governance, operational governance, and network governance. Crucial decisions about how the consortium will be governed need to be made at the beginning of the project in order to ensure success, including which technology will be used, which network, who will be in charge, and how the different stakeholders will interact with each other.  

  1. Is blockchain always necessary for consortia, or is a distributed ledger sufficient in some instances? 

It depends on the requirements, and it is important to identify what factors are the most important, who needs to communicate with whom, if there should be an intermediary, how much privacy and consensus is necessary.  From there project leaders can see if blockchain would be the right solution instead of the other way around, looking into blockchain and trying to make it work for the project. 

  1. Can consortia ever be truly decentralized ? 

Traditionally the first consortia were built on private networks in order to ensure scalability and privacy, however bigger companies have been slowly migrating to the mainnet. There is decentralized meaning that anyone can have access, and then private networks only allowing certain actors to participate, but there is also decentralized in the sense of who is validating the transactions. This can be a centralized party or a peer-to-peer network. At this time it is not possible to get this kind of finality on proof-of-work chains, which is why it is problematic for corporates or more highly regulated companies to migrate to public networks. The inability to reach finality is a major barrier to having consortia be even partly decentralized. Industry leaders can drive adoption of consortia and also decentralized networks by providing use cases and influencing the market. 

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