CONSORTIUM

BLOCKCHAIN
Prepared By:
Palak Desai
Assistant Professor
SCET, Surat
 Introduction:
• A consortium blockchain is a group of multiple financial institutions where each financial
institution has its private blockchain. In this blockchain, a pre-selected set of nodes are allowed to
control the consensus process.
• Consortium blockchains are managed and run by a number of organizations or entities. As a
permissioned blockchain, users must be asked to join and have authorization before they can
access the network.
• The upkeep of the blockchain network and transaction verification are divided among the
participating groups in a consortium blockchain. Instead of being under the control of a singular
central authority, the member organizations manage the nodes that verify transactions and keep
the blockchain.

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 • In sectors where multiple organizations must work together on a single platform while keeping
control over their data and transactions, this kind of blockchain is frequently used.

• In general, consortium blockchains provide a balance between decentralization and control,

making them appropriate for use cases where a number of well-known and trustworthy parties
must collaborate on a common platform.

• A consortium blockchain is a combination of multiple private blockchains belonging to different

organizations, where each of them forms a node on the chain as a stakeholder in the alliance —
and can only leave or join the network with the authorization of the stakeholders. While each
organization manages their own node or blockchain, the data within can be accessed, shared and
distributed by organizations within the consortium. In doing so, cross-organization and cross-
technology solutions can be developed to improve their existing workflows, accountability and
transparency, thereby addressing the issues and challenges encountered by individual
blockchains.

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 Characteristics of Consortium Blockchain
The consortium blockchain aids in data transfer, but it is not involved in crypto creation or
administration because those tasks are handled by a public blockchain.

Following are a few of its main characteristics.

1. Data Privacy
2. Rapid-Fire Transaction
3. Regulations and Rules
4. No Crime was Committed
5. Zero Probability of 51% Act

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 1. Data Privacy
Data privacy is supported by fewer nodes in addition to a lighter network burden. Here, unlike
private blockchains, only a select few individuals have access to the datasets. The safety and
uniqueness of the data in the blocks are exploited by this system. The network’s information
cannot be changed without the permission of some nodes.

2. Rapid-Fire Transaction
Blockchain consortiums have few users. Because of this, there is less competition for transaction
verification among nodes from various groups. Controlled user groups can also speed up the
consensus-building process. All of these elements help make deals happen more quickly.

3. Regulations and Rules

Regulations are much more essential to keep the consortium’s creative juices flowing because it
was specifically created for multiple companies and groups. Nodes must abide by the network’s
regulations in this situation. By doing so, a team atmosphere is created and efficiency is
increased quickly.

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 4. No Crime was Committed
Because most anonymous users are infamous for clogging up a network’s processes, the risk of
criminal or illegal activity is completely eliminated when a federated blockchain is connected
with a small number of well-known members. This chain’s familiarity with one another fosters a
system of checks and balances that reduces the likelihood of unlawful activity, making this
platform a secure choice for businesses.

5. Zero Probability of 51% Act

Attacks from 51% of users could be disastrous for the blockchain network. A private blockchain
is more vulnerable to this problem because multiple groups’ members can work together to
override or even perform reverse transactions.

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 Working of Consortium Blockchain:
In a consortium blockchain, nodes from various businesses or groups govern the network in a much more
private manner. They work together to exchange and modify information in order to preserve workflow,
scalability, and accountability.

• A consortium is a form of blockchain that shares some characteristics with both private and public blockchains, such
as scalability and privacy. However, it still manages to stand out by reducing the network burden where a limited
number of nodes participate; another example is its voting base system with a small number of well-known
participants. Together, these factors enable the network to be both flexible and safe.

• A consortium blockchain is only accessible to selected members, as opposed to a public blockchain, which is open to
everyone.

• In a consortium blockchain, a number of carefully chosen participants run nodes and verify transactions on behalf of
the network.

• Typically, these members are reliable institutions or groups like banks, governments, or corporations.

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 • Depending on the specific implementation, the consensus mechanism in a consortium blockchain
can change, but it usually includes some kind of voting or consensus among the members. Using a
proof-of-stake (PoS) consensus method, for instance, members who have a stake in the network
are in charge of approving transactions.

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 Benefits of Consortium Blockchain:
- Greater Efficiency
- Enhanced Security
- Shared Costs
- Better Data Privacy
- Scalability
- Customizable Governance
- Interoperability
- Reduced Regulatory Burden
- Collaborative Innovation

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 Limitations:
- Limited Decentralization
- Potential for Conflict of Interest
- Limited Transparency
- Risk of Network Fragmentation
- Governance Challenges

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 Overview of Ripple:
• Ripple is a blockchain-based technology that uses a decentralized digital ledger to record
transactions. The Ripple blockchain operates as a distributed network, with multiple servers and
nodes verifying and validating real-time transactions.
• This eliminates the need for a central authority or middleman to facilitate transactions, allowing
for fast, secure, and low-cost transfers of value across borders.
• The native cryptocurrency of the Ripple network is called XRP, and it can be used to make cross-
border payments between different currencies or as a bridge currency.
• The Ripple blockchain also supports smart contracts and decentralized applications, providing a
platform for financial institutions and payment providers to offer their customers a wide range of
financial services.

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 • Ripple works by using a decentralized, blockchain-based payment platform called the RippleNet
network. This network connects financial institutions and payment providers around the world,
allowing for fast, secure, and low-cost transfers of value across borders.
- The process of making a cross-border payment using Ripple involves the following steps:

- The sender initiates a payment by sending a request to the payment provider.

- The payment provider converts the sender’s currency into XRP, the native cryptocurrency of the
Ripple network, and sends the payment to the recipient’s payment provider.
- The recipient’s payment provider converts the XRP back into their local currency and deposits it into
the recipient’s account.

• Throughout this process, the XRP acts as a bridge currency, allowing for fast and efficient transfers of
value across borders without the need for intermediaries or pre-funding. The decentralized and
blockchain-based nature of the RippleNet network ensures that all transactions are secure,
transparent, and tamper-proof.
• In addition to cross-border payments, Ripple also supports smart contracts and decentralized
applications, allowing financial institutions and payment providers to offer a wide range of financial
services to their customers. This includes remittances, e-commerce, and more.

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 Working of Ripple
• Below are the steps followed for transactions on Ripple Blockchain:
• The XRP crypto uses a consensus protocol to confirm transactions.
• Validators compare the proposed transactions to the most recent versions of the XRP ledger to
determine whether they are valid.
• The majority of the validators must accept the transaction to be verified.

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 Pros of Ripple:
- XRP transactions are inexpensive and quick.
- Financial institutions already use the payment network of Ripple.
- Small company owners and individuals can utilize XRP to make safe money transactions.
- It may be used as a bridge currency for transactions between different currencies

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 Cons of Ripple:
- Centralization:
Despite being a blockchain-based solution, Ripple is considered to be highly centralized, with a small
number of nodes controlling the majority of the network. This has led to concerns about the security and
decentralization of the RippleNet network.
- Regulatory uncertainty:
The status of XRP as a security has been a matter of debate and regulatory uncertainty, which has led to
concerns about the future of the token and the Ripple network. In some countries, XRP has been banned
or restricted, which has limited its use and adoption.
- Competition:
Ripple faces stiff competition from other blockchain-based solutions and traditional financial institutions,
which may impact its growth and adoption in the long term.
- Scalability:
RippleNet can currently handle a limited number of transactions per second, which may limit its use for
large-scale transactions and applications.

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 Characteristics of Ripple
Ripple offers the capacity to be traded to any cash or significant resource with an insignificant brought
together commission.
• It is a solid stage that offers expanded perceivability (To become aware of something directly through
any of the sense), in this manner wiping out installment disappointment.
• This stage gives moment installments, so cash shows up when clients need it.
• Ripple helps in benefiting from functional and cost efficiencies to develop your business further.
• It gives advanced security to prepare for the fake coins.

Wave has its own passage known as Ripple Gateways that are fundamentally for monetary foundations
and to interconnect these entryways; the stage utilizes “chains of trusts”. These chains of trust are
fundamentally connects between two doors that trust one another however there can be circuitous
connections of trust between entryways as well.

Rather than mining, Ripple works by agreement for its exchange confirmation where barely ay hub and
affirm exchanges, the foundation of ripple is decentralized.

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 Difference between Bitcoin and XRP(Ripple)
Bitcoin Ripple

Start 2009 2012

Algorithm Proof of Work Consensus

Exchange(per second) 3-4 >1500

Maximum Supply 21 Million 100 Billion

Smallest Unit Satoshi Drop

Mined Yes No

Purpose Good purchase and mining Intended for banks and money
settlement framework

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 Hyperledger:
• Hyperledger is an open-source project under the Linux Foundation where people can come
and work on the platform to develop blockchain-related use cases. According to Brian
behlendorf, executive director of Hyperledger.

• Hyperledger provides the platform to create personalized blockchain services according to

the need of business work. Unlike other platforms for developing blockchain-based software,
Hyperledger has the advantage of creating a secured and personalized blockchain network.
- It is created to support the development of blockchain-based distributed ledgers.
- It includes a variety of enterprise-ready permissioned blockchain platforms.
- It is a global collaboration for developing high-performance and reliable blockchain and
distributed ledger-based technology frameworks.

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 Need for a hyperledger project:

• To enhance the efficiency, performance, and transactions of various business processes.

• It provides the necessary infrastructure and standards for developing various blockchain-
based systems and applications for industrial use.
• It gets rid of the complex nature of contractual agreements, as the legal issues are taken
care of.
• Hyperledger offers the physical separation of sensitive data.
• It decreases the need for verification and enhances trust, thus optimizing network
performance and scalability.

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 How Does Hyperledger Work?
• Hyperledger works in a way that a requirement for the contract can be initiated through an
application.
• The membership service involved in the network validates the contract.
• The concerned two-peer has to produce a result and then sent it to the consensus cloud.
• The generated result from both the peer has to be the same in order to validate the contract.
• Once it is validated, then the transaction will happen between the affiliated peers and their
ledger will be updated.
• When a business requires confidentiality and a private network for its transaction to happen
without doing that in a single network, a hyperledger paves the way.
• This can be summarized as the peers who are directly affiliated with the deal are connected and
only their ledgers will get updated about the deal. The third parties who help to carry out the
transaction will only get to know the exact and required amount of information with the help of
regulations levied on the network.

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 Advantages:
• Flexibility: Hyperledger provides a high degree of flexibility and modularity, allowing developers
to customize and configure the platform to meet their specific needs.

• Security: Hyperledger has a strong focus on security, with features such as access control, identity
management, and encryption. This makes it well-suited for enterprise applications that require a
high level of security.

• Scalability: Hyperledger is designed to handle large-scale enterprise applications, with the ability
to support thousands of transactions per second.

• Privacy: Hyperledger allows for the creation of private, permissioned blockchain networks, which
means that only authorized participants have access to the data on the network.

• Interoperability: Hyperledger provides a common platform for building blockchain applications,

which makes it easier to integrate with other systems and applications.

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 Disadvantages:
• Complexity: Hyperledger can be complex to set up and maintain, particularly for organizations
that are new to blockchain technology. This can require significant technical expertise and
resources.

• Limited decentralization: Hyperledger is a permissioned blockchain platform, which means that

only authorized parties can participate in the network. While this can provide increased security
and privacy, it also means that the network is less decentralized than public blockchain platforms.

• Limited community: While Hyperledger has a growing community of developers and contributors,
it is still smaller than some other blockchain platforms. This could make it more difficult to find
support and resources.

• Limited smart contract functionality: Hyperledger offers limited smart contract functionality
compared to some other blockchain platforms. While this may be sufficient for some use cases, it
could be a disadvantage for organizations that require more advanced smart contract capabilities.

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 Overview of Corda
• R3 Corda is a distributed ledger technology (DLT) platform specifically designed for financial
services. It is an open-source project launched in 2016 by a consortium of over 200 banks,
financial institutions, and technology companies.

• R3 Corda is built on privacy, security, and interoperability principles. It allows for the secure and
efficient exchange of data and value between parties. The platform is also modular, so it can be
easily customized to meet the specific needs of each user.

• Many major financial institutions have used R3 Corda to streamline their operations and reduce
costs. Some of the world's largest banks, such as HSBC, ING, and J.P. Morgan, have all built
applications on top of R3 Corda.

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 Why DLT?
• Information consistency is one of the center highlights of distributed ledgers and is vital to issue
that corda is endeavoring to tackle.
• Utilizing a Distributed Ledger will eliminate the additional time and exertion that organizations
need to place in to keep information from all gathering reliable.
• At the point when a business or monetary establishment, a bank for this model, moves cash from
a customer’s record to the collector’s record in another bank, both should watch that what was
sent was substantial, that the assets from the customer have been sent, lastly that they were
gotten accurately.
• Guaranteeing that the assets have diminished in one record and expanded in the other requires
different checks from the two sides of the exchange, as they should be 100% certain that cash
hasn’t mystically vanished or been made out of nowhere.
• Moreover, some of the these checks are done physically, reauiring significantly additional time
and exertion to guarantee consistency.

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 • A distributed ledger could totally eliminate the requirement for this compromise,
regardless of whether it is finished by the interfacing parties themselves or an outsider.
This is because of the idea of Distributed Ledgers where all hubs (the gathering) should
be in a similar state.
• All the more explicitly to Corda, an exchange is possibly dedicated when all elaborate
gathering have acknowledged that the information sources and yields of proposed
exchange are right. Assuming anybody dissents, it doesn’t happen. Something else, the
exchange is submitted and the assets ( or whatever the sources of info and yields were)
are moved between the gathering as recently concurred.

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 Transactions Limited to Only involved Parties :

• One of the fundamental attractions of blockchain is being trustless, implying that I don’t
have to trust you actually to in any case, believe that everyone of the exchanges on the
chain are legitimate.
• This is conceivable because of all exchanges being public whenever they are remembered
for a square and will stay that way forever. For an agitator to adjust an exchange after it
has been remembered for a square on any remaining hubs in the organization to be
changed before the following square is added to the chain.
• The disadvantage that accompanies this is that each gathering utilizing that blockchain
should keep a neighborhood duplicate of the actual chain so when another square is
added to the chain, all gathering get the update and kept in a similar state.

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 • Execution and versatility are extraordinarily affected by making a framework trustless.
• For instance, Ethereum at present requires each hub to handle all exchanges and store
the condition of records and agreement code. This lessens the conceivable throughput of
all hubs on the organization to that of solitary hub. Assuming this model remaining parts,
equivalent to the quantity of clients builds the normal time that a client trusts that their
exchange will be mined can just go up.
• Because of this issue, potential approaches to work on the presentation of the
organization are being investigated, the Ethereum Raiden Network and Bitcoin Lightning
Network are both expecting to limitlessly increment both the exhibition and adaptability
of their separate frameworks.

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 References
1. https://www.geeksforgeeks.org/blockchain/

2. https://ethereum.org/

3. https://medium.com/

4. https://docs.cosmos.network/

5. Blockchain Technology By Chandramouli Subramanian, Asha George, Abhilash K A and Meena

Karthikeyan , Universities Press Publication.

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