Industry Insights

Consensus for Business Blockchain

Hyperledger Fabric is a revolutionary blockchain-based approach to transaction processing within business network – through sharing a ledger – which improves efficiencies, reduces settlement times and increases trust within the network.  The four components of blockchain for business are shown in Figure 1; in this blog post I will focus on consensus.


Figure 1: Core Components of Blockchain for Business

Consensus is the process that the members of a blockchain business network use to agree that a transaction is valid.

The Journey

Let’s step back a bit to look at the bitcoin cryptocurrency – where blockchain technology was first applied “in anger”.  Bitcoin users are anonymous, and in general no trust exists between them. The bitcoin consensus process is known as “proof of work” which involves selected users (called “miners”) running a complex computer program (referred to as “cryptographic mining”) to prove that a set of bitcoin transactions are valid.  Whilst subject to some well documented vulnerabilities and security concerns, this method has been proven to work for anonymous, untrusted networks – albeit with a computational cost overhead.  The total amount of energy consumed in bitcoin cryptographic mining is reportedly equivalent to the electricity consumption of the country of Ireland!

In contrast, Hyperledger Fabric is aimed at business to business transactions across a “permissioned” network where all members are known and trusted.  Within this type of network, consensus can be achieved at a fraction of the computational cost.  Moreover, there is a wide range of methods to choose from.  Where the trust is high, a simple majority voting may suffice, or the network may choose to use a more sophisticated method.  One such method is known as Byzantine Fault Tolerance, and this is widely applied to computer failures in a fault tolerant computer system.  To deal with the vast variety of cross industry use cases, Hyperledger blockchain supports pluggable consensus.

Learning from Customer Projects

2016 was the year of the blockchain proof of concept.  IBM has worked over 70 first projects for customers in many industries and several countries.  Key learnings led the community to re-think consensus for the version 1.0 release of Hyperledger Fabric to be released in the coming months.  It was decided that Hyperledger Fabric v1 must allow us to:

  1. Specify who validates transactions, noting that not all members of the business network will need to validate all transactions.
  2. Support partitioned privacy, so network members only access and execute the smart contracts relevant to them.

Let’s look at practical examples of these consensus refinements, by referring to the vehicle leasing supply chain described in this short video and illustrated in Figure 2 below.

Vehicle Leasing Network

Figure 2: Vehicle Leasing Supply Chain

Hyperledger Fabric v1.0 introduces endorsement policies, which control who validates a transaction.  In the case of a creation of a new car transaction, only the regulator and specific manufacturer (e.g. BMW) need to be involved in the consensus process.  But on ownership change the regulator, specific lease company and leasee would need to be involved.

Hyperledger Fabric v1.0 also introduces channels for the business network members to communicate with the consensus service.  Communications are kept within a channel, so that a lease company – dealer volume discount executed in a smart contract will be private to the parties involved and not accessible by competitors within the business network.

Whilst these concepts are quite subtle, we are convinced that they are the next major step in making blockchain real by more closely reflecting how business happens today. This will maximise blockchain’s transformational value to business and government alike!

More on blockchain?

  1. Blockchain for Government
  2. Proving Provenance with Blockchain
  3. Blockchain and Cyber Security
  4. Tackling Tax Evasion in a Digital Economy
  5. Blockchain for Asset Registration
  6. Building a Blockchain Business Network

Add Comment

Leave a Reply

Your email address will not be published.Required fields are marked *

Saqr Ereiqat

John – great post ! To put it in Ramesh’s terms, 2015 was the year of BlockChain tourism and 2016 the year of proof of concepts; here’s to making 2017 the year of BlockChain production applications a reality – together.

More Industry Insights Stories

Navigating the global skills crisis – New IBV thought leadership study

Industry, technology and economic disruption has created a perfect storm that is having a significant impact on the types of skills required and the demand for and availability of those skills in global labor markets. This is one of the most significant issues impacting economic vitality: Without the adequate talent, public and private sector organizations […]

Continue reading

The Election is Over – Now What?

Now that the United States elections are in the rear view mirror and the process of “governing” comes into focus, hard decisions must be made. Getting elected is a long, complex process but organizing to govern can be equally, if not more, complex and challenging. IBM’s Center for the Business of Government recently published Getting […]

Continue reading

The Future of Public Transportation is Autonomous and Cognitive

Imagine a world where the use of public transportation is as easy as one click on your mobile phone. Many commuters already expect it today. This future of transportation is connected to citizen driven Mobility as a Service, where autonomous vehicles supported by cognitive technology will provide a strong foundation for these new mobility services. Autonomous […]

Continue reading