Australian law firm Gilbert + Tobin have published a new white paper, ‘Blockchain and Shared Ledgers: The New Age of the Consortium’, examining the differences between private shared ledgers and public blockchain to support consortia in a commercial setting. Authored by George Samman and Bernadette Jew, the paper also provides a view options for forming a consortium, including governance and operational framework.
The potential of blockchain to reduce transaction and record-keeping costs, streamline business operations and enable new business models is pointed out in this report; although, the main issue of confidentiality is particularly highlighted. Leveraging the trust provided by blockchain technology can enable the removal of intermediaries and reduce transaction, processing and reporting costs. However, the original blockchain model as designed for bitcoin, rather than other financial purposes which may require discretion.
Public blockchain is a distributed and transparent system which offers pseudo-anonymity but does not offer true anonymity or confidentiality. These challenges in providing privacy have led to new cryptographic solutions being developed, such as Confidential Transactions and Zero Knowledge Proofs. For confidential transactions, there is a need to leverage the benefits of blockchain technology to create a reliable record but without transparency. The white paper described a need for a middle ground hybrid model to allow all participants to maintain their own private records on the shared ledger; and allow participants to selectively share information. As might be expected, the increased privacy requires sacrifices in other areas, with scale and consistency having to be balanced. For these reasons, it was reasoned that commercial consortia are better suited to private shared ledgers.
The paper also stated that consortia operating on private shared ledgers are heavily dependent on a rigorous framework of governance, operating rules, smart contracts and contractual agreements – designed to work together consistently in the shared ledger environment and achieve its business goals.
In addition, the paper took a look at where consortia are emerging in the current scene and why particularly consortia were desirable, concluding that the emergence of consortia using shared ledger technologies will be a force to provide a major trust shift, which will empower new business models and relationships between corporations and consumers.