Navigating the Maze of Blockchain Consortia

April 20, 2017     By : Aman Trivedi

We have always asserted that blockchain is an ecosystem-level technology that stands to bring about cost-related and operational efficiencies in interconnected systems, an exchange, for instance, perfectly fits the bill. We have come across three general approaches that enterprises consider towards realizing the potential of blockchain:

1. Partnering with a startup
2. Building an in-house team
3. Joining a consortium in order to realize blockchain.

A recent survey report released by LTP, in partnership with Infosys Finacle, shows that 30% of participants representing banks and financial institutions have taken the consortia route.

According to William Mougayar’s (author of The Business Blockchain) December 2016 analysis, there are 25 global consortiums driving blockchain initiatives across industries. They have amassed a membership base of 550 in total while the average count of members stands at 25 per consortium.

The Consortia

Navigating the Maze of Blockchain Consortia Navigating the Maze of Blockchain Consortia Navigating the Maze of Blockchain Consortia Navigating the Maze of Blockchain Consortia

 

R3CEV is a distributed database technology company which leads a consortium of more than 80 of the world’s biggest financial institutions in R&D of blockchain database usage in the financial system.

Ripple is a real-time gross settlement system (RTGS), currency exchange and remittance network by the company of the same name. The Ripple Transaction Protocol (RTXP) or Ripple protocol is built upon a distributed open-source Internet protocol, consensus ledger and native currency called XRP (ripples). It supports tokens representing fiat currency, cryptocurrency, commodity or any other unit of value such as frequent flier miles or mobile minutes.

Hyperledger is an umbrella project of open-source blockchains and related tools, which was started in December 2015 by the Linux Foundation to support blockchain-based distributed ledgers. It is focused on global business transactions, including major technological, financial, and supply chain companies. The project aims to introduce a variety of blockchains with their own consensus and storage models, and services for identity, access control, and contracts.

Digital Asset Holdings is a software company that develops and builds distributed ledger technology solutions for the financial services industry. Its software maps business logic and legal processes to cryptographic signature flows, as well as commits transactions to private or public distributed ledgers or traditional databases depending on the requirements of the use case. The company offers its software for various market segments, such as loans, securities, derivatives, and foreign exchange. It serves various customers, including banks, dealers, exchanges, central securities depositories, custodians, central clearing counterparties, and other critical infrastructure providers worldwide.

How are these platforms similar or different?

Parameter Hyperledger R3 CEV Ripple Digital Asset Holdings
Membership Scheme Tiered membership – Premier, General & Associate members Flat membership Regional membership clusters. Ex: RC Cloud in Japan Sells software to banks, dealers, exchanges, custodians and clearing house clients.
Fees $250k/year for premier, $5-50k/year for general, $0 for associate members Flat advisory fee Customized Customized
Area of Focus General purpose blockchain General financial transactions & agreements Payments Capital markets – Post-trade settlement
Core Offering 3 Frameworks:

IBM-Fabric, Soramitsu-Iroha and Intel-Sawtooth Lake

Corda, a distributed ledger for recording and managing financial agreements Integration for corporate disbursements and retail remittances. Digital asset platform which uses distributed ledger technology for mutualization of financial market data and processes across distinct market participants.
Investment Opportunities Open-source collaborative effort, projects are funded by membership fees. Yes, equity in spin-off company that would control Corda. Backed by Santander Innoventures, Standard Chartered Bank, Accenture, Digital Currency Group among others. Backed by JP Morgan, Goldman Sachs, ABN AMRO, BNP Paribas, IBM and Deutsche Borse, among others.

Google Trends Analysis

Consortiums tend to largely be clandestine ventures with little visibility on what’s going on on the inside. In order to gauge the public interest, we ran a quick trend analysis for the search words linking to the respective consortia. We map the worldwide search popularity of respective terms over past three years. The Y-axis represents the relative popularity of the search term with respect to the most popular search item worldwide at that point of time.

Navigating the Maze of Blockchain Consortia

Please note that search term “digital asset” need not necessarily point to the consortium. However, we use this because it’s the nearest visible search term for “digital asset holdings.”

This data should be perceived as a rough indicator of general interest in these consortia among the general public, the superset which also includes financial services professionals and decision-makers. That being said, the recent spike in Ripple is attributed to the elevated public interest generated from the extraordinary value appreciation XRP, the ledger’s local currency, underwent.

The aforementioned ‘pump and dump’ of XRP tokens gives a consumer angle to the consortia approach; Ripple’s might be the first and only case where an enterprise technology provider has seen exposure from a very small, discrete category of retail investors. The reasons may go beyond the technical or fundamental domain of analysis to plain and simple FUD – fear, uncertainty & doubt but it surely has provided some boost to the company’s marketing initiatives.

Going forward, we might encounter the scenario where the success of the consortia approach is closely intertwined with its outlook in the general public, who themselves may not take part in operating these complex financial systems.

Disclaimer: Please note that we have restricted our analysis to only the four aforementioned industry consortia.

Stay Fresh on FinTech. Get our Daily Insights.

Aman Trivedi

Aman Trivedi

Aman reads and writes about distributed ledger technologies and digital identity at Let's Talk Payments. He has been active in the financial technology consulting space for over two years, looking out for novel business models, markets, products and services.
Aman Trivedi