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Understanding Public and Private Blockchains

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)

ConsortiumNumber of MembersPremier Financial Services MembersLeader(s)Start DateFocus/Goal
R3CEV84DTCC, American Express, Bank of America Merrill Lynch, Wells Fargo, Citigroup, TD Bank, BBVA, Bank of New York Mellon, Northern Trust, HSBC, BarclaysR3, CEV2014General-purpose platform and technology to design and deliver advanced distributed ledger technologies to the financial services market.
Digital Asset Holdings15Deutsche Borse, J.P. Morgan, DTCC, ABN AMRO, Goldman Sachs, Santander, Citi, IBMDAH2014Capital markets – post-trade settlement. Building distributed, encrypted straight through processing tools to improve efficiency, security, compliance, and settlement speed.
Hyperledger Project 142J.P. Morgan, Barclays, Deutsche Bank, Wells Fargo, UBS, BBVA, Bank of New York MellonLinux Foundation, IBM, Cisco, Intel, SWIFT, DAH2015General 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.
Ethereum116J.P. Morgan, Santander, BNY Mellon, BBVA, Bank of New York MellonMicrosoft, Intel 2017Considering 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.
Ripple75UBS, Standard Chartered, Santander, CIBC, Sumitomo Mitsui Banking Corporation (SMBC), MUFG, MizuhoGoogle, IDG Capital Partners 2012Payments. 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).
Kinakuta35Ethereum FoundationMicrosoft,
2016Working 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.

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Maura Holland, Senior Program Manager, Financial Services, Perficient

Maura Holland joined Perficient in 2013 via the acquisition of ForwardThink Group. Her areas of focus include program management, change management, business process redesign, and strategic operations. Maura has more than 25 years of experience in wealth management, investment banking and consumer banking, serving in corporate and consulting roles. She has successfully delivered projects for diverse clients, such as Morgan Stanley, Citigroup, and the Depository Trust & Clearing Corporation (DTCC).

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