Should I use consortium blockchain, or should I consider another approach for my business case? This short post helps you to make the right decisions.

It’s all about bringing in trust.

Consortium blockchain idea is to bring trust between parties that by nature don’t trust each other. Blockchain implementation aims to solve this lack of trust with a distributed database, which contains “the universal truth” that all the parties involved can agree on.

Prerequisites to success

First of all, the paradigm needs at least two parties who share a common interest to store and share information in a trustworthy way. To enable that trust (= make sure nobody cheats),  the technical solution also requires minimum of four – or preferably more – parties to separately verify every transaction on the distributed database before the data becomes the “undeniable truth”. These parties verifying the data in a blockchain system are called “miners”. Usually the consortiums involved also act as miners on the system (but this is not a requirement).

When blockchain is not your choice

Implementing a blockchain just by yourself doesn’t make sense. The truth comes from multiple, separate parties constantly verifying (mining) the blockchain transactions. Otherwise – it’s just your private database which you can alter, delete and make up transactions as you please without anybody knowing. Not much of a trust here, and we do have much better databases than blockchain for private needs.

The nature of technical solution

Blockchain is a distributed database. The data contained in the blockchain is replicated into each participating mining party servers, and every miner has access to read all the data that the shared database contains. So put in only data that can be read by all parties.

The loss of decentralization is a potential threat and known “feature” of all blockchains. This happens when any miner validating the blockchain gains over 50% of mining capacity. By capacity we mean the raw computer processing power to verify the content. In this case, the miner is able to privately alter the contents of the blockchain – deleting transactions, adding fake ones. The blockchain trust is lost. You don’t want that to happen. ( This has happened a few times to bitcoin – the community just chose to ignore the incident, mostly for practical reasons). I recommend minimum of four independent mining parties, preferably more. If one fails, no miner gets the upperhand. With three miners and one fails, either of the remaining miners will inevitably get the upper hand.

As with any other software, the blockchain infrastructure contains bugs. Or the smart contracts stored inside the blockchain contain bugs. Problem like this forced the Ethereum consortium to start a new Ethereum blockchain. These incidents where existing blockchain needs to be split and start over are called “forks” in blockchain scene.

Checklist: Does my idea fit the consortium blockchain?

To wrap up, here’s a short list when I would say that blockchain fits:

  • Number or participating parties (organizations, companies etc.) sharing an interest in storing the information in blockchain is equal or greater than two (and preferably even more).
  • Number of mining parties is enough to guarantee that in any imaginable scenario single party mining power won’t exceed 50% of the total mining capacity (Party servers may be offline, hardware failures, network problems, OR involved parties have a merger, bankrupt etc?).
  • Mining parties are willing and able to invest on infrastructure, networking and computing power and act as miner for the blockchain.

If the answer is YES to all of the above, I’d say you may have a case.