Ask Datarella #4 – What Is A Consortium Blockchain?

Michael Reuter

2 October 2019

In its purest form, a blockchain is a public, permissionless network. Equipped with a consensus mechanism and an underlying incentive scheme that motivates participants to act in a fair and healthy way, making the network robust.

However, most so-called enterprise blockchains, i.e. DLT networks built in and for companies, are neither public, nor permissionless. Nearly all enterprise blockchains are designed as private, permissioned networks, i.e. only a specific set of participants is invited and each of them has to be permitted by the network’s operator. In case of blockchains with more than one operator or initiator, we speak of consortium blockchains.

When two or more organisations partner with the objective of operating a common blockchain, this consortium sets up rules that define the structure and processes of the network. In particular, the consensus mechanism and the underlying governance model must be defined, in order to allow for a decentralised decision making. Depending on the consortium’s specific purpose, a blockchain technology will be selected. Sometimes, you read about specific blockchain technologies as synonyms for consortium blockchains. Our understanding is that a consortium can use such diverse systems as Ethereum, Hyperledger, Corda, or Qtum, amongst others, to create consortium blockchains.