What is Blockchain Consensus as a Service?
As we already know, a blockchain consensus is required to validate transactions on every blockchain platform. Every blockchain network has a distinctive consensus mechanism, for instance, Proof-of-Work, Proof-of-Stake, Proof-of-History, etc. Consensus mechanisms act to validate the transactions via decentralized consensus protocols as provided by the network nodes. They build trust in the data that is stored on the blockchain platform.
Although, when we discuss blockchain technology as an enterprise-grade solution, it proves that organizations prefer to develop their applications via the industry-standard permissioned blockchains or the distributed ledger ecosystems for better privacy. But there is a drawback with application development done on the industry-standard permissioned blockchains that they lack the basic elements of public trust. This happens because they rely on the nodes accessed and used by one or more parties, resulting in a low distribution level.
Based on the above-discussed problem, there is an appropriate solution for the enterprise apps to safeguard the privacy of their confidential data along with an ideal decentralized consensus mechanism. Consensus-as-a-service addresses this concern. The blockchain consensus service is basically used by the applications that manage private and proprietary data but want to reap advantages like decentralized trust, immutable recording and fast ordering of a public ledger. This article is a quick guide to consensus-as-a-service and its mechanism.
What is consensus-as-a-service?
Consensus-as-a-service is a third party blockchain consensus service created for the private and permissioned blockchain networks for validating their order of events and transactions. A public distributed ledger technology (DLT) network can offer this kind of service. For a better understanding, let us take an example of a public distributed ledger like the Hedera network. Hedera has the capability to provide consensus in the form of service to the permissioned and private blockchain networks like Hyperledger Fabric and R3 Corda.
The network providing blockchain consensus as a service also validates the order of events on a permissioned blockchain platform via timestamping. This creates transparency and auditable logs. Private blockchains benefit from the consensus-as-a-service by not sharing the history of their network transactions.
In short, consensus-as-a-service is a provision of trust combined with privacy. It helps the permission networks or apps to safeguard and retain their privacy of the sensitive data along with giving them the benefits of fast finality, high transaction throughput and security from public ledgers. Consensus-as-a-service provides decentralized trust that supports businesses and consumer apps in eliminating the need to be dependent on costly intermediaries for trust facilitation among parties.
Why do we need consensus-as-a-service?
Blockchain technology is valuable because it can immutably timestamp the order of events in financial services, IoT, or supply chains and provide verifiable records governing it all, from financial transactions to significant asset attribution.
On the other hand, private apps lack public trust since they rely on the consensus given by smaller networks of known and permissioned nodes. A consensus service can provide a much-needed degree of confidentiality. Consensus service can benefit any application or permissioned network that needs executing logic based on the exact time and order of occurrences (e.g., for data auditing or reconciliation).
To establish decentralized consensus, permissioned networks or apps can alternatively use public ledgers such as Bitcoin and Ethereum, where they can choose a block producer using proof of work. However, these public ledgers are extremely slow and costly, taking minutes or even hours to establish the validity of a transaction. The speed with which consensus is delivered is important; hence a public DLT network providing consensus service should be capable of delivering both decentralized and quick consensus.
How does blockchain consensus work as a service?
A consensus model’s design is determined by the capabilities of the underlying blockchain technology. As a result, several consensus service models may differ in terms of transaction throughput, service cost, finality, and even process.
Let’s look at the popular Hedera Consensus Service to better grasp the mechanism of the blockchain consensus service concept. Hedera’s event ordering and timestamping service is available to any application or permissioned blockchain network. The Hedera Consensus Service validates events for various applications while offloading storage needs to computers through the Mirror Network utilizing the Hedera public network and hashgraph consensus method.
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Financial services, logistics and supply chain businesses that want to preserve the privacy of their data while benefitting from decentralized consensus can use the consensus service to audit records, match bids, transfer security tokens, or update the status of goods in transit.
A consensus service provides secure, fast, fair, and decentralized consensus to any application, private ledger-based or not. Also, it helps reduce the cost of operating private networks and improves the trust over both private ledgers and centralized servers.
