At the close of 2016, more than 40 blockchain consortia had been formed. They totaled more than 550 members. What’s more, of all the business executives with knowledge of the blockchain, 77 percent of them were in a consortium or either planning to join or start one.
In his Coindesk article, “The State of Global Blockchain Consortia,” William Mougayar says B2B consortia were “all the rage” in 2000, based on the belief that the web could enable a new level of collaboration among industries by eliminating redundant processes. He likens the rise in blockchain consortia to this wave, as he reminds us that, of the nearly 200 that existed then, only two still existed after the financial crisis. It’s certainly a necessary parallel to keep in mind.
While most of these blockchain consortia are found in the finance industry, other industries are getting involved as well.
The Benefits of Blockchain Consortia
- Stay current on blockchain trends with low-risk
- Learn what the competition is doing
- Defend against potential new threats
- Prepare to implement the technology should they decide to
- Derive more utility from network effects
- Gain financial stabiity from the union
- Participate in the gathering of shared technology
Types of Blockchain Consortia
The two main types of blockchain consortia are business-focused, which are built with the goal of solving a specific business problem, and technology-based, which are designed to develop reusable blockchain platforms based on technical standards. Some consortia cover both types of activities.
While looking at any of these should aid both investors and professionals in any industry who might be considering the value of consortia existence and/or membership, this article focuses on five of them to frame the trend with a look at some of the major players and their goals for inclusion.
Five Blockchain-based Consortia Moving the World Forward
Begun in December 2015 by the Linux Corporation, the Hyperledger Project is an umbrella project of open source blockchains and related tools, designed to support the collaborative development of blockchain-based distributed ledgers. In May 2016, Brian Behlendorf, a primary developer of the Apache Web Server and a founding member of the Apache Software Foundation, was appointed executive director of the project.
With an objective to advance cross-industry collaboration through the development of blockchains and distributed ledgers, the project focuses on improving the performance and reliability of these systems. The goal is to make these systems capable of supporting global business transactions by major financial, technological, and supply chain companies.
The project began accepting proposals for the incubation of codebases and other technologies as core elements in early 2016. Fabric, one of the project’s first proposals, a codebase that combined previous work Digital Asset, Blockstream’s libconsensus, and IBM’s Open Blockchain, was announced soon after. In May of that year, Sawtooth, Intel’s distributed ledger, was announced.
On July 12, 2017, the project announced that Fabric was production-ready. A month later, Oracle joined the project and announced its own blockchain cloud service offering.
Also in July 2017, IBM and London Stock Exchange Group announced a partnership to create a blockchain platform designed for the digital issue of shares of Italian companies, with Fabric forming the basis of the platform. Then, in September, The Royal Bank of Canada (RBC) began using Hyperledger for its U.S./Canada interbank settlements.
Aside from those mentioned, other members in the project include Cisco, JP Morgan, Wells Fargo, and SAP.
2. Enterprise Ethereum Alliance (EEA)
When looking at the number of members and the clout and position these companies wield, it shouldn’t be difficult to see why the Enterprise Ethereum Project is a good one to focus on. Founded in March 2017, the EEA was formed by 30 founding members including blockchain start-ups, research groups, and Fortune 500 Companies.
By July 2017, membership in the EEA had grown to 150 members, with Microsoft, MasterCard, ConsenSys, Cisco, Intel, JP Morgan, ING, Cornell University’s Research Group, and Toyota Research Group among the many notables.
Prior to the official launch of the Frontier Network, in July 2015, the Foundation developed several code-named prototypes as part of its Proof-of-Concept series. There are at least two other protocol upgrades planned in the future. “Metropolis” is intended to reduce the complexity of Earned Value Management (EVM) and provide for a more flexible smart contract platform while “Serenity” looks to bring about a basic transition from hardware mining (proof-of-work) to virtual mining (proof-of-stake) and to, among other things, make improvements in scalability.
3. PTDL Group (Post-Trade Distributed Ledger Group)
The PTDL Group’s website states that it “provides a trusted environment for key post-trade participants to collaborate and share information for the best interests of our industry.” The group is comprised of nearly 40 world-wide financial institutions and prominent market infrastructure players with a shared vision of the use of distributed ledger technology.
Practitioners, regulators, and central banks across the globe scale to identify and advance activities and position specific recommendations with the goal of leveraging distributed ledger technologies to benefit the post-trade industry. Exploring and identifying regulatory and legal themes, and identifying impacts and associated benefits for the industry at large, are ways in which the group hopes to use distributed ledger tech on the post-trade space.
Members of the PTDL Group include CME Group, HSBC, The London Stock Exchange, and Euroclear. Ernst and Young serves as a consultancy to PTDL Group members while Norton Rose Fulbright provides legal and regulatory guidance.
Kinakuta is a working group organized by Microsoft, which aims to improve security using smart contracts. The goal is for the group to make it easier for the industry to share information and tips about smart contracts, for the end result of providing smart advice on contracts. The Ethereum Foundation, the bank-backed R3CEV consortium, and the startup BlockApps are among a list of 35 developers and companies that are reported to have been drafted for the group. The group is exploring the ability to potentially write smart contracts that would use language to make them secure from the start.
5. R3 Consortium—Cross-sector
The R3 Consortium is comprised of 70 of the world’s largest financial institutions and is designed to research and develop distributed ledger technology for use in the financial industry. The joint efforts of the consortium have developed an open-source distributed ledger platform called Corda. Corda is designed to help the financial world as it handles more complex transactions and restricts access to transaction data.
The company raised $107M USD in May of last year, which made it one of the largest funding rounds for a startup working with distributed ledger technology. In an interview with Business Insider in June 2017, company founder and CEO David Rutter said that the company is attempting to build an “operating system for finance,” likening the platform to Apple’s App Store.
The consortium began on September 15, 2015, and, while four of its main members (Goldman Sachs, Santander, Morgan Stanley, and JP Morgan Chase) pulled out in the spring of 2017, the who’s who among the remaining members can’t be taken lightly. Credit Suisse, Citi, Deutsche Bank, Wells Fargo, Scotiabank, and MetLife are all on that list, and on December 6, 2017, Amazon Web Services (AWS) announced a partnership with R3 to allow Corda to become one of the first ever distributed ledger technology solutions on the AWS. Corda allows users to deploy DApps (decentralized apps) onto the AWS in order to create new apps directly.
If blockchain technology is going to be integral to the way business is conducted and goods and services are received, it seems only prudent that businesses and organizations research the possibility of joining a consortium to access the potential of the blockchain to its fullest extent.
Written by Paul Keenan.