Leveraging blockchain technology requires access to a blockchain platform. Public or permissionless blockchain platforms, however, have limitations for financial enterprise transactions, creating privacy concerns by enabling everybody on the blockchain to have visibility of all transactions.
Additionally, the sheer vastness of potential transactions requires a substantial amount of computational power, which can slow transaction processing times. To address these limitations, private and permissioned blockchain platforms were developed by financial technology companies. A private, single organization blockchain has limitations outside that organization, but can be used to enhance internal transaction processing.
Realizing these limitations, larger organizations have developed cooperative networks or consortiums that leverage a shared blockchain platform, but that is not public to any entity outside the consortium. These consortiums are comprised of organizations with similar or complementary services with the objective of optimizing processes with known entities. This provides many of the same benefits affiliated with a single organization private blockchain — efficiency and transaction privacy, for example — without consolidating power with only one company.
The first bank-backed consortium, R3CEV, was established in September 2015. There are now more than 100 types of consortia in the blockchain area.
Primary U.S.-centric Blockchain Consortia in Financial Services (August 2017)
| Consortium | Number of Members | Premier Financial Services Members | Leader(s) | Start Date | Focus/Goal |
|---|---|---|---|---|---|
| R3CEV | 84 | DTCC, American Express, Bank of America Merrill Lynch, Wells Fargo, Citigroup, TD Bank, BBVA, Bank of New York Mellon, Northern Trust, HSBC, Barclays | R3, CEV | 2014 | General-purpose platform and technology to design and deliver advanced distributed ledger technologies to the financial services market. |
| Digital Asset Holdings | 15 | Deutsche Borse, J.P. Morgan, DTCC, ABN AMRO, Goldman Sachs, Santander, Citi, IBM | DAH | 2014 | Capital markets – post-trade settlement. Building distributed, encrypted straight through processing tools to improve efficiency, security, compliance, and settlement speed. |
| Hyperledger Project | 142 | J.P. Morgan, Barclays, Deutsche Bank, Wells Fargo, UBS, BBVA, Bank of New York Mellon | Linux Foundation, IBM, Cisco, Intel, SWIFT, DAH | 2015 | General purpose blockchain. Open source collaborative effort based on IBM’s Fabric codebase, which was created to advance cross-industry blockchain technologies. It is a global collaboration that includes leaders in finance, banking, the internet of things (IoT), supply chain, manufacturing, and technology. The Linux Foundation hosts Hyperledger as a Collaborative Project under the foundation. |
| Ethereum | 116 | J.P. Morgan, Santander, BNY Mellon, BBVA, Bank of New York Mellon | Microsoft, Intel | 2017 | Considering a more distributed approach to self-management rather than the more traditional leadership structure adopted by competing blockchain consortia like R3CEV and Hyperledger. Offers smart contract features that contain a virtual machine, executing peer-to-peer contracts using a cryptocurrency known as Ether. |
| Ripple | 75 | UBS, Standard Chartered, Santander, CIBC, Sumitomo Mitsui Banking Corporation (SMBC), MUFG, Mizuho | Google, IDG Capital Partners | 2012 | Payments. 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). |
| Kinakuta | 35 | Ethereum Foundation | Microsoft, ConsenSys | 2016 | Working group dedicated to improving smart contracts security. |
Looking ahead as multiple versions of blockchain networks grow, standards for interoperability between blockchains will become increasingly important. Consortia that base their blockchain technology on public chains will adapt more easily to these standards.
If you are interested in learning more about blockchain, download our new guide titled “Getting Ahead with Blockchain in Financial Services.”
On-Demand Webinar
Many organizations are finding blockchain to be as confusing as it is promising. We cut through the hype and shared a practical way to get started, including how to determine where it fits within your organization. We covered the following in our on-demand webinar:
- Why adopt the technology?
- What makes a good use case?
- What are some specific industry applications?
- What are the best practices for getting started?
