Blockchain consensus as a service – Everything you need to know
avatar
by
on April 4th,2022

Blockchain consensus as a service solves one of the largest trade-offs that businesses face while developing enterprise applications. Which one? Let’s find out!

We all know that the validation of transactions on a blockchain network revolves around a consensus mechanism. Depending upon the specific application at hand, blockchain protocols adopt different consensus mechanisms. This process of validating transactions through decentralized consensus makes the data stored in the blockchain more credible. The trust built in the data comes down to how distributed and decentralized a network is and how many validator nodes it has.

Then again, enterprise-grade solutions are preferred to be built on industry-standard permissioned blockchains or distributed ledger frameworks. This preference roots from the pursuit of achieving higher levels of data privacy and security. However, the data from private permissioned blockchain networks or dApps rely on validator nodes operated by one or a few parties. In other words, they lack public trust owing to lower levels of distribution.

This is where Blockchain consensus as a service comes in. It helps enterprise applications steer clear of this privacy-distribution trade-off. With consensus-as-a-service, enterprise applications can ensure the privacy of sensitive data without giving up on decentralized consensus, fast ordering, and immutable recording of a public ledger. In the following sections, we will learn more about Blockchain consensus as a service, its advantages, and how it works.

Blockchain consensus as a service: What exactly is it?

Blockchain consensus as a service, fittingly, is a third-party blockchain consensus service offered to private or permissioned blockchain networks or applications. The service is essentially about validating the order of events or transactions for these networks and applications. This kind of service can be offered by a public distributed ledger technology (DLT) network.

The network providing Blockchain consensus as a service validates the transactions in a permissioned network through timestamps. This, in turn, creates auditable and transparent logs. Hence, private networks can benefit from consensus-as-a-service without losing the privacy of their persistent history of transactions.

In other words, Blockchain consensus as a service brings the best of two worlds and combines trust and privacy. Enterprise can take advantage of trusted timestamps, high transaction throughput, fast finality, and security from a public ledger, while also retaining the privacy of their sensitive data.

The need for Blockchain consensus as a service

Blockchain has emerged as a technological pillar for a plethora of applications from financial services and supply chains to IoT. The reason behind it is its ability to timestamp the order of events immutably and transparently.

However, private applications rely on small networks of known and permissioned nodes for consensus. This lacks public trust which is at the heart of web 3.0. Blockchain consensus as a service can fill in that gap and add an extra layer of trust.

Without Blockchain consensus as a service, applications rely on moderation, matching, and ordering performed by single entities. This results in three major disadvantages:

  • Increased risk of unintentional network outages or intentional manipulation
  • Risk of collusion by a small number of parties
  • Being subject to the cost model of centralized infrastructure providers

Enterprises can also use public ledgers like Bitcoin and Ethereum for decentralized consensus by selecting a block producer through proof of work. However, these bloated public ledgers are slow and expensive. Blockchain consensus as a service delivers decentralized as well as a fast consensus for enterprise applications.

Key Benefits of Blockchain consensus as a service

We’ve seen that blockchain consensus as a service allows enterprises to achieve data privacy without compromising on decentralized consensus. But how does it do that? It offers two key features to deal with this trade-off:

  • Decentralized consensus on the validity and order of events
  • Transparency of the history of events

It uses a model with a wider network of distributed nodes that come in agreement about the time and order of the event. Thus, Blockchain consensus as a service can independently verify whether and when an event occurred on a widely distributed network. The service models also offer an optimized performance by not persisting the history of transactions and offloading the storage requirements to other supporting resources.

Blockchain consensus as a service: How does it work?

The underlying blockchain protocol of a consensus model largely dictates the architecture of the model. Hence, different Blockchain consensus-as-a-service models vary in terms of service expenses, transaction processing ability, finality, and even mechanism.

Typically, a Blockchain consensus as a service consists of three key elements that are central to its application: a public network of distributed nodes, a consensus algorithm, and a mirror network of supporting resources. The transaction is sent first to the public network to be validated. The consensus algorithm validates the events or transactions and timestamps them. The role of the mirror network is to offload the storage requirements to nodes using the Mirror Network.

The public network provides the decentralization and credibility of a distributed network. The consensus algorithm in conjunction with the public network ensures seamless consensus. In addition, the mirror network retains data privacy by ensuring that the model doesn’t persist the history of transactions.

The Bottom Line

Businesses and organizations are increasingly realizing the wide-ranging applications that blockchain technology brings to the table and developing enterprise-grade applications. In the process of that, they often come across the privacy-decentralization trade-off. Hence, the demand for Blockchain consensus as a service will definitely grow as enterprises continue to use blockchain-powered applications or permissioned networks in their processes. 

It is paramount for data-sensitive applications, such as financial services, logistics, and supply chains, to ensure the privacy of their data. However, they often retain the privacy of that data at the expense of truly decentralized consensus. These applications can use Blockchain consensus as a service to audit records, match bids, transfer security tokens, or update the status of an order in transit.

In conclusion, a blockchain consensus service enables a secure, rapid, transparent, and decentralized consensus to any application, private ledger-based or not. Additionally, it also reduces the operating costs of private networks while building trust over both private ledgers and centralized servers.