Blockchain Consortiums Importance
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Blockchain Consortium as Blockchain Ecosystem Evolution Element

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Distributed Ledger Technology (DLT) is not new, but still, it is not widespread. Due to Bitcoin (BTC), many of us have become familiar with this innovation, which has been changing the world dramatically. Our interest tends to focus primarily upon the price of BTC, but not the practical implementation and benefits DLT provides us with — and all the consequences stemming from that.

The blockchain industry is currently operating in a relatively self-sufficient manner, driven by two key groups: developers and investors (pseudo-investors, mostly). The ICO rush, which has paused to date, got the job done in terms of presenting to the world thousands of projects with plenty of products, services, and practical implementations of the tech. The great majority of these projects, however, have either disappeared or become slow-moving with a lack of development (the key reason for the pause on ICO market). There are lots of worthy examples to pay attention to, but it is like finding a needle in a haystack. This makes everyone feel discouraged. Welcome to the “trough of disillusionment” of the  “Gartner Hype Cycle”.

Technology Adoption Sources

There are two possible ways to bring DLT mass adoption into real life: by way of a private citizen (you and me), and via business. As mentioned above, a private citizen focuses primarily upon the speculative nature of the DLT-based asset Bitcoin and ICO mechanics (collecting easy money from one side and getting huge Xs on the other side). This is a false path we are locked into. We are manipulated by professional traders (including “whales”), governments, and any other third party which is driven by its own motivation, but does not act in favor of technology and its progress – our progress.

The “private citizen” layer has been getting older and more mature, since has lost tons of money. This is good in terms of pushing the situation to the next level of quality. In the case of BTC, we find a certain stability as soon as the “hamster” flow is over. In this way, the market is stabilized by a strong support level (order block) of USD 6,000.

In case of ICOs, a project must be more than just a concept and two founders (or just two photos of founders). There must also be:

  • a minimum viable product (MVP)
  • a strong team with proven track records
  • a deep but easy-to-understand white paper, including:
  • a go-to-market strategy and
  • a solid roadmap.

Even these do not contribute to technology promotion and mass adoption. We are almost turning into what we used to be, except for the fact that we have attracted the attention of the corporate sector.

Business is much more pragmatic and oriented to results. Thus, there is another attitude regarding both investment and technology utilization. It bears the distinction of having a consortium attitude, in which joint efforts make activity efficient, well-managed, and future-oriented with a direct connection between user/business and developer/technology. The latter becomes very important as soon as the developer stops shooting a cannon at sparrows, and begins providing solutions according to strict user requests based upon his or her pains and challenges.

Business brings experience into the developers’ arena. The consortium is one of the solutions called to make DLT a real part of our everyday life as soon as possible. Several types of Blockchain consortium can be identified, depending on the your target.blockchain consortium

Blockchain Investors’ Consortium

The blockchain investors’ consortium is targeted to attract a variety of projects while concentrating competence and financial resources inside. These projects are not similar in terms of focus upon a particular industry or technology. The blockchain investors’ consortium is similar to a venture fund, in which the  target is profit. This type of consortium becomes extremely important as soon as financial resources are not diluting a market with incompetence as its backbone. It is about cutting significant risk and increasing the efficiency of capital.

The Swiss-based consortium Crypto Valley Venture Capital is one of the most recent examples. Its goal is to collect up to USD $100 million, with the long-term goal of getting 1,000 blockchain companies off the ground internationally within five years.

Smart money is coming, and it can fill in a gap that has appeared already. This will be done in a professional way, which will certainly improve market performance. This, in turn, will contribute positively the image of the industry over the middle- and long-term perspective. Business and  investors will run lower risks when entering the industry, and the market will get additional participants and resources for development. The government will have fewer motives for restricting the industry, and this will positively affect the speed of growth and the adoption of technology.

Business/Industry-Focused Blockchain Consortium

The properties of DLT will bring improvement to a number of industries and businesses. DLT targets increased efficiency of resources, higher quality of business processes, and a higher level of security. The pool of issues within a certain industry or business is the same from one company to another. Thus, participants find it efficient to centralize, exploring a new technology while diluting expenses for the development process and infrastructure support.finance blockchain

The Financial Industry

So far, the vast majority of initiatives are concentrated within the financial sector. The R3 blockchain consortium is the most well-known example. It was launched back in 2015 by nine members: Barclays, BBVA, the Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, J.P. Morgan & Co., the Royal Bank of Scotland Plc, State Street Corporation, and UBS. In 2018, there are 200 members already using R3’s Corda platform.

The focus of a consortium can be fixed on an industry in general, or on a particular sub-level. For example, DLT-based trade finance applications, which are the core focus of blockchain consortiums like Voltron and Marco Polo (led with the participation of R3), Batavia, we.Trade, and HKTFP. The latter – Hong Kong Trade Finance Platform – is an interesting example because of its roots. It is the result of collaboration between banks and governments: the Hong Kong Monetary Authority and the Monetary Authority of Singapore. Both business and state authorities are doing their best to stay current on trends and provide solutions for the challenges the modern world brings day by day. Blockchain consortium becomes a concentration point where the interests of business and government meet, and a dialog is born. This cannot be overestimated.

In terms of DLT adoption and consortium quantity, it is great to find activity not only in a leading industry: the financial sector, which represents up to 60% of total consortiums, (according to a Deloitte analysis):number of consortia by sector Deloitte analysis

The Automotive Industry

MOBI is another great example of market participants’ joint efforts:

“MOBI is a nonprofit organization working with forward-thinking companies, governments, and NGOs to make mobility services more efficient, affordable, greener, safer, and less congested by promoting standards and accelerating the adoption of blockchain, distributed-ledger, and related technologies.” (MOBI:official site)

Here, we find a mix of automotive companies (accounting for over 70% of global vehicle production in terms of market share), the techno giant IBM, the consulting leader Accenture, and several newborn companies with ICO roots like the NuCypher team, VeChain, and Ocean Protocol. This consortium initiative brings us an example of collaboration in favor of a single industry as a result of multiple industry developments.

Agriculture

The agricultural industry has also entered the DLT arena. It plays a crucial role in the world economy – it feeds the world. Explosive population growth and the resulting demands bring hard challenges to industry participants. Growth is currently pretty stable:agriculture growth world bank data

The agricultural industry was one of the first to create a blockchain “sect.” The top four industry heavyweights in a new agricultural consortium, which was recently announced on October 25, 2018, include: Cargill (revenue = USD $114.695 billion in 2018, 155,000 employees, and 70 countries); Bunge (revenue = USD $42.679 billion in 2016, 32,000 employees, and 40 countries); Archer Daniels Midland (revenue = USD 62,35 billion in 2016, 31,000 employees and 170 countries); and Louis Dreyfus (revenue = USD $55.7 billion in 2015, 17,000 employees and 100 countries). Please pay attention to the numbers above. This is a real promotion. This is about real adoption. The brand-new agricultural Blockchain consortium helps set supply-chain standards while improving transparency and workflow to save time and money — huge money. A deep digitalization is about to take place in payment procedures, invoices, and contracts.

Technology-Focused Blockchain Consortium

It would be fair to state that previous consortium types have been more about tactics and current solutions, while technology-focused consortiums bring global development benchmarks and standards that function as a basis for the future. It’s all about strategy.

Hyperledger

Hyperledger, an umbrella project of open-source blockchains and related tools, was started in December 2015 by the Linux Foundation. It includes interoperable frameworks and tools which, developed according to strict standards , bring significant advantages to cross-industry products and services. 250+ organizations (including leading companies in finance, banking, logistics, and manufacturing: SAP, IBM, Intel, Fujitsu, Daimler, and a number of startups) are supporting and using its infrastructure.

Hyperledger’s infrastructure is supported by leading global specialists due to the open-source nature of the project. This is another example of collaboration and the consortium attitude: when developments for a single entity are used by multiple participants, while the development process is kept by a small number of top-layer specialists who are extremely not numerous (the industry is too young to provide enough pros at the moment). The demand for skilled blockchain engineers is booming – there has been a 400% increase since the end of 2017, according to a Hired report.

The second example is the Ethereum consortium: Enterprise Ethereum Alliance (EEA).

Enterprise Ethereum Alliance

“The Enterprise Ethereum Alliance (EEA) is the industry’s first global standards organization to deliver an open, standards-based architecture and specification to accelerate the adoption of Enterprise Ethereum. The EEA’s world-class Enterprise Ethereum Client Specification and forthcoming testing and certification programs will ensure interoperability, multiple vendors of choice, and lower costs for its members – the world’s largest enterprises and most innovative startups.” (Enterprise Ethereum Alliance: official site)

It should be mentioned that EEA owes its origin to a previous consortium – Hyperledger. There was an attempt to join the Hyperledger initiative with the Ethereum C++ client, but it faced licensing issues: there was a need for relicensing the code from the copyleft GPLv3 license (Ethereum side) to the more permissive Apache 2.0 license (Hyperledger side). There were long negotiations, which brought no results. This case showed us Games of Thrones and politics within the industry, which is a good sign – maturity is coming!

Ethereum is one of the most active players in the market. It is active by itself, and also provides technology to other industry leaders like JP Morgan (which is also part of EEA) to create rails for other market participants, both competitors and partners. JP Morgan’s Quorum is an enterprise-focused version of Ethereum (a fork of Geth, a leading Ethereum client, with some upgrades e.g. in terms of consensus mechanics) that targets the financial services market.

Quorum itself is an interesting example of Blockchain consortiums in terms of technology – it is, in essence, permissioned blockchain. This type of technology ecosystem has been a golden mean for corporate clients. It is not private (like Multichain), and it is not public (like Bitcoin).

IoT Consortiums

The Internet of Things is another technology that needs global cross-industry collaboration. The Industrial Internet Consortium was formed to accelerate the development, adoption, and widespread use of interconnected machines, devices, and intelligent analytics. It was created to set up Internet-of-Things industry standards today to avoid dead ends in the future. A number of companies have joined the initiative so as not to miss out on progress. Their goal is to avoid future expenses, time-consuming procedures, and to get in a door that’s closing fast.iot consortium

DLT is not just about Blockchain only. It’s also about the Directed Acyclic Graph, which is on an equal basis with Hashgraph, RaiBlocks/NANO, and PEAQ. It is used by the IOTA team to develop the Internet-of-Things solutions. This project is a cool example of creating an IoT consortium which is built on top of partnerships IOTA has been developing since its launch back in 2015. Bosh, VW, Fujitsu, Microsoft, Orange, Accenture – there are no competitors, only partners who believe in the importance of IOTA developments and provide support to achieve a joint result, find solutions, implement standards, and enter the new era well-armed.

Conclusion

The importance of blockchain consortiums for technology adoption is difficult to overestimate.

Blockchain consortiums are about resource efficiency in terms of finance, people, and competence. They are about developing standards to enter the future with widespread common rules and attitudes – to make it possible to interact both inside and outside of industries in the context of cross-industry solutions.

Consortium blockchain as a technical solution, based upon private or permissioned blockchain, is the only possible way to adopt and utilize DLT-based products and services for a number of industries (finance, primarily). Quorum, a non-public blockchain, provides technical support for the Interbank Informational Network of JP Morgan. The initiative brings together more than 70 leading banks worldwide. It is possible only because the network is controlled, and lives up to network participants’ expectations and strict requirements.

The non-public blockchain is the bridge between decentralized maximalism and a conservative business environment. This is an environment in need of a controlled ecosystem which will benefit from DLT. Here you can find a certain misalignment: controlled DLT. But this is the truth of life, and we must be flexible in terms of solution generation and our acceptance of the need for a temporary golden mean.

The private sector itself is not able to push adoption. Business is able to spread technology by bringing DLT-based products and services into daily life. To spread it with a network effect – think about a number of clients IBM, BMW, Microsoft, SAP etc. have in total – and create a perfect storm.

This will promote tech via social media and real-life tangible improvements. It will bring understanding from the private sector that DLT, blockchain is not only about Bitcoin and “to-the-moon”, “when lamba”. It will provide “therapeutic interventions” to the market and make it healthier in terms of project quality, thus improving the quality of investment products. Lower risk will bring additional resources to utilize. This, in turn,  will bring tech to a qualitatively new level, forcing governments to accept the new reality and change their attitude under the flow of upgrades we are witnessing today. Most important, however, is the fact that competition turns into collaboration — one of the core essences decentralization brings us.

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