A Case for Consortium Blockchains and What's Happening in this space by@chris-mugendi

A Case for Consortium Blockchains and What's Happening in this space

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Chris Mugendi

mostly crypto writing & research

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The coming together of 27 corporations to form Libra project signifies a growing trend that we might witness more going forward: companies coming together to form their own enterprise blockchain solutions.

A single corporation forming its own blockchain does not make much sense since there are easier ways of doing it with centralized databases. However, for collaboration within a specific industry, different tools are needed. For such endeavors, the key objectives for collaboration would be:

  1.  Having a better grip on the industry they are in  
  2. Allow participants to share data that would normally not share but within a permissioned system.       
  3. Give consumers more choice, efficiency within one platform
  4. With better visibility of industry operations, more value could be generated for the partners in the arrangement.
  5. From a regulatory standpoint, consortiums would have more bargaining power in terms of how policies are formulated and implemented. Of-late there has been a lot of pressure on reducing centralization and move towards decentralization. In order to minimize regulatory pressure as well as score some PR points in the public eye, consortium blockchains will make sense. As to how and if they will succeed, that still remains to be seen. Governments already seem to be leaning towards ‘blockchain not bitcoin’ and are therefore showing the intention of supporting projects that say they are blockchain projects.

Already we have seen corporations such as IBM, Walmart among others announce they will be introducing blockchain in one way or another.

The blockchain applications we are about to analyze are different from
cryptocurrencies such as bitcoin. Most of the enterprise applications below
employ some but not all aspects of blockchain but heavily reply on the broader concept of distributed ledger technology (DLT). Blockchain is a subset of DLT and DLT can be used in other ways.

With consortiums and permissioned blockchains, it is possible that there will be major developments in that sector as they try to integrate some aspect of distributed ledger technology or cryptography and introduce new ways for corporations to collaborate in some areas of mutual interest.

1.     Banking and payments


The obvious and most useful application of consortium blockchains is in the banking and finance industry. Libra is one of them, bringing together 27 other companies to form a global payments network.

Ripple has also been doing the same for a while now connecting global banks and payment providers to its Ripplenet Network.
The benefits are straightforward: faster, low cost and access. The rationale
behind Ripple is simple: payment and financial industry has not evolved to
match the internet era. It still takes days for cross-border payments to clear. Its ambitious plan is to on-board every major bank and payment system to use its network as a settlement layer and build a better alternative to current RTGS (real-time global settlement).

XRP, the currency is used to fuel the network and enable the execution of transactions. Currently, it says it has over 200 banks and payment partners working on the platform.

2.     Pharmaceuticals & food tracking

In terms of food traceability, IBM Food Trust is the leading example. IBM has created an ecosystem of producers, manufacturers, retailers, suppliers, and others working together in food supply chain process with the aim of increasing safety, transparency. There are currently 50 brands across the IBM Food Trust network.



Walmart is one of the leading participants. A player in the food ecosystem can apply to become a trusted provider in the Food Trust system through APIs for data upload and integration with your ERP system. Other
corporations that have joined are Albertsons companies (one of the largest food and drug retailers in the US) and Carrefour, the leading European grocery chain. Specifically, Carrefour says that consumers will be able to scan QR code with phone and get the products traceability information.

IBM FOOD Trust creates a digital ledger that tracks food from the farm to processing facilities, to distributors and grocery shelves. One of the rationales for this is to trace bacteria outbreaks quickly before they spread. The current tracing is paper-based and takes weeks. With blockchain, scanning product is easy and can trace back to the source with the
precision of seconds instead of weeks, according to Vice President of Food
at Walmart.
At the farm, the information is captured on a handheld system as well at the packing house. With a permissioned blockchain, different players come together as validators hence increasing transparency and efficiency. No one party can change the information without notifying the others. Traceability is also highly enhanced.

Main solutions in this area can be summed up as:

Ø  Ensure traceability and hence food safety in terms of detecting bacteria such as e.coli

Ø  Ensuring higher quality ingredients

Ø  To enable compliance with different food standards

Ø  Reducing food waste

Ø  Providing transparency to consumers by showing products are authentic. (this is becoming key competitive point as customers now want more transparency in sourcing).

Indeed as per this article by Reuters, Carrefour is reporting increased sales.
It has already launched tracking for 20 items such as chicken, eggs, oranges, pork, and cheese and will add 100 by end of 2019. “Consumers can scan QR barcode on pomelo grapefruit with their phone and find out the date of harvest, location of cultivation, the owner of the plot, when it was packed, how long it took to transport to Europe and tips on how to prepare it”.

Some of the challenges so far are:-        
-some farmers unwillingness to share so much information      
-tracking farm produce that comes from different farms

3. Shipping
Shipping is another area that corporates are bundling together to form blockchain consortiums. The most prevalent has been Tradelens. IBM has brought together nearly half of the world’s cargo container shipments
under one consortium in order to work together in improving the global shipping industry. It is built on Hyperledger Fabric.

Maersk, CMA CGM and Mediterranean Shipping Company, MSC are among the big players that have joined. The case for blockchain in the shipping industry emanates from the need to digitize the paper-based and manual
process and establish consensus rules for data management as it moves form one company to the next in the shipping chain.

Furthermore, it is hard to track containers and auditing takes weeks with many touchpoints that are disjointed.

Blockchain comes in to:     

  1. Enable all participants in the process to follow the flow of shipments as it changes hands from one entity or country to another in real-time.    
  2. Establish a governance model guiding the rules of engagement between different parties
  3. Permissioned data sharing with various players acting as nodes. This makes it more secure and reliable as no one party can change without notifying the others
  4. More visibility throughout the process making it easier to audit.

Other companies that want to join can tap into the consortium’s APIs

Here is a Demo of how Tradelens works.

In conclusion, it seems most of the blockchain use case for industries is optimizing for shared databases to improve visibility, tracking, auditing in certain aspects of business operations. In banking finance it is to improve interoperability between banks and payment companies, in shipping, it is for improving visibility and tracking, the same case for food and most of the other supply chain based operations.  With big players
such as IBM, Microsoft, Walmart experimenting with aspects of shared databases in one way or another, it is only a matter of time before industry-wide applications become mainstream.

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