Stretching well beyond the technology that enterprise blockchain networks bring, choosing a governance model that is right for you and your organization is critical to business success. Many organizations spend the great bulk of their time fleshing out the correct governance models for their consortiums, ensuring that the correct parties have the access they both need and desire. Here is a framework for how to consider your governance options for a permissioned blockchain network.
What is a permissioned blockchain network?
A permissioned enterprise blockchain network has an access control layer built into the blockchain nodes such that the participants of the network have the ability to restrict access regarding who can validate blocks on transactions.
In short, this means that with a permissioned blockchain, one has the mechanism to better control who joins a network and what powers they have.
Being able to restrict who has the authority to join a network or indeed change the ledger is critical for many different kinds of business operations. This kind of infrastructure ensures that information is traded only with those organizations that have been highly vetted by a chosen central authority.
Who is in your permissioned blockchain?
This role on the low end of the permission spectrum, might be useful for those who need to analyze data being added to a ledger without modifying it. An example might be a network member that needs to gather data on how the flow of information is changing over time, or would like to demo a network to other potential members without giving them the authority to modify data.
At the mid-range is a writer with the ability to both read and write to the ledger but does not have the ability to grant access to new members or change access controls to existing members.
The operator is the “super-user” for a consortium, with the ability to add new members to the network and grant them access. There are some instances where each and every member in a network is an operator. This happens when a blockchain is set up in what I call the United Nations Model, where each member has equal voting rights — meaning if all operators do not agree with having a new member join, the new member cannot join. I’ll explain more on the various models below.
What consortium model should you choose?
Permission requirements are unique to the needs of each enterprise blockchain, and choosing the wrong model could be devastating to the productivity of your consortium. It is for this reason, that I present the proposed etiquette framework below to think through what kind of membership you should grant to your members, or what kind of membership you should be seeking from a potential consortium to join.
United Nations Model
All members are operators and are valued equally. This is most effective when there is a small, stable network of members that each perceives as being equally powerful and valued. The drawbacks to this approach is that processes like new member admission might get stalled as one votes by committee. Some ways to avoid this problem is ensuring that each member is carefully screened and chosen based on their ability to quickly and effectively communicate about network operations, and managing the size of the network.
Benevolent Dictator Model
Only one or a few operators manage access control and all other members are writers or readers. Although the benefits with this approach is quick decision-making in the network, the drawback is that it must be very clear as to “why” the operator(s) were chosen to represent the whole — do they communicate well about how new members are identified and added to the consortium via their published governance? All members are required to review and either accept or decline governance models as they are published by operators. When a member decides that the model is not to their liking — for example they wish more power — they can create their own blockchain network.
For both of these models, consider including the Watchdog Hybrid Model shown below as a key way to mitigate risk of transactions that violate regulations.
Centralized Database Model
So, you don’t need to share information amongst partners? Then it doesn’t sound like what you need is a blockchain. A Centralized Database would be faster but do beware of bottlenecks and corruption control.
What other questions should you consider?
As an organization looking to join a consortium in an enterprise blockchain, there are many questions to consider. Here are a few:
Who is the operator for the consortium and how do they choose who joins — do you need the ability to determine who else joins?
Will you need write access or only read access — will new member ever need to be limited in their access?
If you join a United Nations Model, who else is on the network and what are their plans to scale — will the size be so untenable that decision-making will be too difficult?
Dive into a blockchain consortium with your eyes wide open. Take the time to really think through the flow of power that maximizes your organization’s role. And as always, consider ways to mitigate your risks. This will help you make the right choice on what kind of blockchain network to build and join.
Why do I need a bank account to hold, manage or spend money? I really shouldn’t have to pay fees and service charges, especially since my money — everyone’s money — is the gas in the bank’s lending engine. But if I don’t have a bank account, how do I pay my bills? I often […]
The subject of blockchain and the technology behind it is still a hot topic. In the course of an evening, 9 out of 10 parties refer to blockchain at least once — in a non-scientific study conducted by this author. The word “blockchain” is going more mainstream but the fundamental understanding still remains confusing for […]
What’s stopping blockchain from becoming a more pervasive technology in financial services? If you think it has something to do with the technology behind blockchain, you’re partially wrong — it’s the nature of the solution that is causing the barrier. For a blockchain-based solution to work successfully, it requires multiple entities to come together in […]