Consortium Blockchain: Definition, Features, and Applications

Salomon Kisters
Salomon Kisters
Feb 16, 2023

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In recent years, the use of blockchain technology, and with it the use of consortium blockchains, has increased exponentially. But what are consortium blockchains exactly?

Blockchain is a technology that enables the secure storing and exchange of data sets. Each block has a data collection that is added to the block using complex algorithms. These approaches called hash functions, provide the block with cryptographic security.

Members on each blockchain, called nodes, can see and update this data continuously. Anyone may become a node on a public blockchain, while private blockchains have additional requirements.

With that, let’s look at consortium blockchains specifically.

What is Consortium Blockchain?

A blockchain consortium is a group of businesses that collaborate to administer a blockchain network. These organizations frequently share the same objective or set of goals related to using blockchain technology, and they work together to keep the network functioning properly.

This may be part of establishing network rules and regulations, managing network access, and coordinating efforts to develop and update equipment. Consortiums can build, among other things, a shared supply chain management system or a decentralized digital identity framework.

Public or open blockchains are open to the public and may be accessed by anyone with an internet connection. On the other hand, enterprises typically use private blockchains for specific software solutions and to address particular business needs.

A blockchain consortium is a type of blockchain that combines public and private blockchain characteristics. It is most commonly used within a corporation or group of enterprises.

A consortium blockchain’s primary goal is to promote organizational collaboration to address industry-specific challenges. Blockchain consortiums can assist organizations with similar interests in improving transparency, accountability, and efficiency.

Many businesses favor consortium blockchains, with 74% choosing this type of network. Many blockchain systems promote themselves as the foundation for various organizational solutions.

Instead of starting from scratch, blockchain consortiums allow new members to join an existing network and exchange information. This technology enables businesses to work together to find solutions while minimizing development time and expenses.

Consortium blockchains are also known as federated blockchains.

How does Consortium Blockchain Work?

A group of businesses manages a consortium blockchain network. Rather than starting from scratch, more participants may join a consortium and contribute to managing an already existing structure and shared data. Businesses may reduce costs and drive growth by working together to solve common problems.

Coordination of activities and information sharing, thus, aid in avoiding task duplication by allowing various entities to share responsibilities. A consortium blockchain has a limited number of known members, resulting in low latency and high performance because it frequently uses a voting-based approach.

All nodes can write and see transactions, but only a supermajority of nodes may contribute to a block. The block can only be put in if this rule is followed.

Attributes of a Blockchain Consortium

Rules and Regulations

Because the consortium comprises numerous businesses and groups, laws are much more vital to keep the juices flowing. This network’s nodes must adhere to its regulations. This, in turn, aids in the building of a team and accelerates efficiency.

Faster Transactions

The Consortium blockchain has a modest number of participants. As a consequence, nodes from different firms compete for transaction verification. Controlled user groups also assist in reaching an agreement quickly.

All of these factors contribute to faster and more secure transfers. This is especially true when compared to the transaction times of Bitcoin.

Data is Kept Secret

In addition to decreasing network traffic, the presence of fewer nodes helps increase data privacy.

In this way, unlike private blockchains, datasets are exclusively accessible to a select group of people. This method makes use of the security and uniqueness of the blocks. Only one node’s consent can change the information in the network.

Data is Mutable

A change to data on a public blockchain is nearly impossible. This is only made possible by a significant number of users. Fewer consortium members can readily change the data using the consensus rule. In this system, all nodes have an equal say, and no node has a monopoly on any decision.

Because a federated blockchain is intertwined with a few recognized members, it minimizes the risk of illicit or illegal activities, as most anonymous users are renowned for clogging up network procedures.

Everyone in this chain knows one another, resulting in a system of checks and balances that reduces the likelihood of criminal activities, making this platform a safe alternative for businesses.

51% Attacks

51% of user attacks are potentially damaging to the blockchain platforms.

A private blockchain is especially prone to this problem since more than half of the members of a single organization can collude and veto or even reverse transactions. This is due to the problem of collaborating with numerous firms to 51% for doing something nefarious in the network.

On the other hand, the consortium mitigates this problem because designated nodes from various businesses usually correctly verify each transaction.

Lesser Utilization of Energy

Federated blockchain is designed to suit user needs. As a result, achieving consensus, verifying transactions, and validating documents require less energy.

On the other hand, data mining demands a lot of processing power, which entails significant energy costs, which is the case with most public blockchains. If this trend continues, the energy supply will need to be increased to fulfill the mining industry’s demands.

Federated blockchain helps overcome this issue by using less advanced algorithms in its protocols while using less energy.

Transactional Costs are Decreased

As a result of a consortium of blockchain providers, users may utilize this platform with low transaction fees.

In contrast to a public blockchain, where new users may increase transaction costs, transaction fees in a federated network remain constant and independent of user count. This network is, in fact, substantially less expensive for businesses than traditional banking programs.


Concerns about scalability in the consortium blockchain will be kept to a minimum. But why is this so? This kind of blockchain has controlled nodes for validation.

As a result, it’s an intriguing feature of a consortium in which selected nodes efficiently govern the network, reducing the possibility of sluggish network output and delayed transactions.

As a permission blockchain, federated blockchains provide a better user experience by reducing the time involved in various processes.

Drawbacks of a Consortium Blockchain

A consortium blockchain is vulnerable to hostile actors due to its centralized network structure.

Because of the limited number of participants, one or more of them is likely to be corrupt. The establishment of a shared infrastructure provides more security than a single enterprise. The efficacy of consortium blockchain technology has yet to be shown.

In fact, a consortium blockchain does not have a standardized foundation yet. Private blockchains necessitate industry standards, such as those given by R3’s Corda, JP Morgan’s Quorum, and Hyperledger.

Due to limited flexibility, establishing a standard network connecting numerous firms is challenging. Launching a new blockchain is difficult since all parties must agree with the protocols.

When the parties cannot collaborate and achieve an agreement, the development process is slowed. Upgrading processes may be problematic when the number of participants grows from the start.

Applications of Consortium Blockchains

We hope that the meaning of consortium blockchain is now clear. The consortium blockchain concept is particularly well-suited to the following industries:

  • Know Your Customer includes finance and banking, insurance, and asset trading (KYC). Banks join forces to form a group that collects and stores needed information on all debtors in a database. Banks refer to distributed ledgers when such information is required to identify and access them.
  • In the case of logistics, many parties must work together to keep track of the items. When a product is delivered, all logistics centers may create a consortium blockchain with a smart contract that quickly updates the data at all locations. This will be tremendously advantageous to the logistics industry.
  • Every time you visit a hospital, you must make an insurance claim because hospitals and insurance companies must store massive volumes of data. Hospitals and insurance companies may create consortiums to streamline paperwork and transactions.

Final thoughts

We hope that our detailed explanation of a consortium blockchain has helped you to comprehend it better. You must have realized by now how advantageous consortium blockchains are by examining their advantages and disadvantages.

A consortium blockchain assists firms in maximizing their economic benefits by collaborating with other firms. Aside from cryptocurrencies, blockchain technology has the potential to benefit a wide range of enterprises; this is where the consortium blockchain comes in.

Collaboration among private enterprises in a blockchain consortium provides various benefits, ranging from resolving common problems to saving time and money. This leads to faster transaction rates and increased scalability while protecting anonymit

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Please note that the Content may have been generated with the Help of AI. The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.

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