Over the past few years, the concept of blockchain has gained significant attention from organizations worldwide due to its potential to streamline processes, increase transparency, and reduce costs. Many companies are eager to adopt this technology despite the prevailing narrative that enterprise blockchain has failed us.
However, the fundamental technology of Blockchain is not at fault for any shortcomings or failures. Instead, the fault lies with the way organizations implement or govern it. One of the main problems with the governance of enterprise blockchain is that it is often controlled by a select few entities. For example, the TradeLends consortium, a group of banks and financial institutions developing a blockchain platform for supply chain management, could face a conflict of interest if the network administrator and participating organizations are not defined correctly.
If the entity controlling the orderer (consensus) has more visibility into the network’s state and executed transactions, they may have greater influence over the network’s configuration and operational policies.
Consider the scenario where two channels, C1 & C2, are in use. While Org2 & Org3 can communicate within both channels, Org1 is restricted to only channel 1 (C1). However, if Org1 is also the network admin, they can technically view the ledger in C2 without the consent of Org2 & Org3, since they have access to the Orderer (O).
Additionally, if the Orderer maintained a Chaincode, they could also propose and query transactions. Therefore, while building a network, it is important to prioritize design patterns that implement strict policies such as Zero Proof Knowledge.
The TradeLens consortium’s goal is to enhance the efficiency and transparency of the global supply chain by digitizing trade finance processes, including the creation and exchange of documents such as invoices and shipping manifests. However, the consortium is governed by a small group of powerful banks, raising concerns about their influence over the consortium’s direction and the level of transparency on the platform. Furthermore, certain information is only accessible to member organizations and is not publicly available.
We. Trade Consortium
The We. Trade consortium is another example of governance failure in enterprise blockchain. The consortium was established by banks and financial institutions to create a blockchain platform for cross-border trade finance. However, the consortium’s governance was heavily criticized, with a few large banks dominating and exerting disproportionate influence over its direction. This resulted in smaller organizations feeling excluded from the decision-making process, ultimately leading to the consortium’s failure.
Apart from governance and profit motives, there are technical and financial obstacles that prevent many organizations from joining enterprise blockchain consortia. Some organizations may lack the technical expertise or resources to participate, while others may not have the financial means to cover the costs of membership. This creates a situation where only the largest and most well-funded organizations can participate, exacerbating issues with governance and profit motives.
Possible Solutions
To address the governance issues in enterprise blockchain, adopting a more decentralized governance model is a potential solution. In this model, all member organizations have an equal voice in the decision-making process. This can be accomplished through the implementation of a decentralized autonomous organization (DAO) or other decentralized governance structures.
- Decentralized Autonomous Organization (DAO)
A decentralized autonomous organization (DAO) is a digital organization governed by a set of rules programmed in smart contracts on a blockchain. In the context of enterprise blockchain, a DAO could be implemented to govern the consortium in a more transparent and decentralized way.
In a DAO model, every member organization would have an equal voice in the decision-making process through a voting system. This could be achieved by allowing members to cast their votes on important decisions based on their participation in the consortium.
The DAO model provides several advantages, such as promoting more inclusive and efficient governance for the consortium. It creates a more level playing field, giving smaller organizations equal decision-making power regardless of their financial status. Additionally, the DAO model can streamline the decision-making process and promote faster implementation, leading to increased benefits for all members. Overall, implementing the DAO model has the potential to revolutionize the governance of blockchain consortia by promoting transparency, inclusivity, and efficiency.
2. A Non-profit Consortium
A shift towards the collective good instead of individual profits is another solution to address governance issues in enterprise blockchain. One way to achieve this is through the establishment of non-profit consortia or the adoption of a revenue-sharing model where all member organizations receive a fair return on their investment.
Non-profit consortia are formed by a group of organizations with a shared goal, such as the development of a blockchain platform or the implementation of a new technology. Unlike for-profit consortia, non-profit consortia prioritize the collective good over individual profits.
One benefit of non-profit consortia is that they foster a more inclusive and collaborative environment where all members have an equal say in decision-making and can contribute to the consortium’s direction and growth. They also tend to be more transparent and accountable, subject to stringent reporting and governance requirements.
However, non-profit consortia may face challenges in attracting funding and resources since they do not generate profits that can be reinvested in the consortium. This may hinder their ability to scale and achieve their goals.
Non-profit consortia can be a powerful tool in addressing governance issues in enterprise blockchain. By prioritizing the collective good and promoting transparency and accountability, non-profit consortia can create a more collaborative and inclusive environment for all member organizations.
3. BaaS (Blockchain as a Service) Model
One feasible approach is to manage the consortium through a Blockchain as a Service (BaaS) model, where member organizations pay a monthly fee for utilizing the platform and its services. Under this model, the hosting and maintenance company would offer the infrastructure and technical support, while the member organizations would have an equal say in the decision-making process and the direction of the consortium.
The BaaS model provides a significant advantage to member organizations by allowing them to access the consortium’s resources without having to make a significant upfront investment. This would be particularly beneficial for smaller organizations that might not have the financial resources to cover the expenses of joining a traditional consortium.
Another advantage of the BaaS model is that it allows for a more decentralized governance structure, where all member organizations would have an equal say in the decision-making process. This could be achieved through the use of a decentralized autonomous organization (DAO) or other decentralized governance structures.
However, there are also some challenges associated with the BaaS model. One of the challenges is attracting member organizations, as some may be hesitant to pay a monthly fee for accessing the consortium’s resources. Additionally, the BaaS model may be less flexible than other models since member organizations may be limited in their ability to customize the consortium’s platform to meet their specific needs.
Overall, the BaaS model has the potential to offer a more decentralized and flexible governance structure for blockchain consortia. By allowing member organizations to pay a monthly fee for access to the consortium’s resources, the BaaS model could help to resolve many of the governance issues that have historically plagued blockchain.
Conclusion
It is crucial to address the governance and design patterns of blockchain in order to fully realize the potential of this technology. Without proper governance and design, organizations may be hesitant to join a consortium, which could limit the benefits of blockchain technology. Adopting more decentralized governance models and prioritizing the collective good can create a more inclusive and sustainable future for enterprise blockchain.
For more detailed information, consider reaching out to Gyan Consulting.
