A Federated Blockchain is a type of blockchain network that operates with a consortium of organizations or entities, typically consisting of a predefined group of trusted participants. It can be considered as a hybrid model that combines elements of both public and private blockchains. In a federated blockchain, multiple organizations come together to collectively maintain and validate the blockchain, making it suitable for specific use cases where trust and collaboration among participants are essential.
Here are key characteristics and features of a federated blockchain:
Permissioned Access: Participants in a federated blockchain network are known and trusted entities. Access to the network and its functions is permissioned, meaning that only authorized entities can participate in block validation and transaction processing.
Consensus Mechanism: Federated blockchains often use a consensus mechanism that is different from proof-of-work (PoW) or proof-of-stake (PoS), which are common in public blockchains. Common consensus mechanisms for federated blockchains include Practical Byzantine Fault Tolerance (PBFT) or other forms of federated consensus.
Shared Governance: Governance in a federated blockchain is typically shared among the participating organizations. These organizations agree on rules, protocols, and network upgrades, which can be more flexible than in public blockchains where governance is decentralized and driven by token holders.
Privacy and Confidentiality: Federated blockchains are well-suited for use cases where data privacy and confidentiality are paramount. Transactions and data may be encrypted or kept confidential among the participating entities, depending on the use case.
Efficiency and Scalability: Since federated blockchains do not require energy-intensive mining or extensive validation by unknown participants, they can achieve higher transaction throughput and scalability compared to some public blockchains.
Use Cases: Federated blockchains are often used in industries such as finance, supply chain, healthcare, and logistics, where multiple organizations need to collaborate on a shared ledger without fully trusting a central authority. These blockchains enable trustless interactions among known participants.
Interoperability: Interoperability between federated blockchains and other blockchain networks or legacy systems is a consideration. Solutions may involve the use of cross-chain technologies to facilitate data exchange and interoperability.
Examples: Some examples of federated blockchains include the R3 Corda platform, Hyperledger Fabric, and Quorum (developed by JPMorgan Chase). These platforms are designed for enterprise and consortium use cases.
Federated blockchains offer a balance between the openness and transparency of public blockchains and the control and privacy of private blockchains. They are particularly well-suited for scenarios where multiple organizations want to collaborate and share data on a common ledger while maintaining a level of trust among participants.