Multi-Party Systems in Blockchain Explained

In every industry, companies have to work together to share information, transact business, resolve disputes, and solve a whole host of problems. However, many of the processes used to accomplish these activities are products of another era. Outdated systems are the rule rather than the exception. 

For example, healthcare providers still rely on fax machines to share medical documents. Many international shipping and supply chain companies are still flying physical documents around the world to get signatures. Reps at car insurance companies still often need to call each other after every single crash. 

In example after example, the level of digitization that most of us have come to expect is simply not there. The reason for this is that it’s very difficult to build multi-party systems that can be used and trusted by multiple companies within the same industry ecosystem. 

For one, these companies are often competitors, so cooperation is already hard. Not only that, even if they did want to work together, their systems and databases are rarely compatible. Most importantly, how can a shared system be trusted when anyone can make edits (or deletions!) at any time?

Multi-Party Systems and Blockchain

This is where blockchain comes in. Blockchain provides an immutable, shared ledger, that can only be modified by group consensus. Trust isn’t an issue because smart contracts and consensus algorithms automate how data on the blockchain is added, deleted, or modified. Not only that, but blockchains are fully auditable. All transactions and data involved in the systems can be easily tracked, verified, stored, and secured. 

Most importantly of all, blockchain-as-a-service makes it possible to create digital twins of real world assets, using both coins (fungible tokens) and NFTs (non-fungible tokens). Think of things like car deeds, house titles, marriage certificates, death certificates, or even diplomas.

Tokenization makes it possible to create a digital representation of these things on the blockchain, moving them off paper and into the digital realm. Once there, it becomes much easier to instrument and automate processes around them, eliminating paperwork, lawyers, and notaries and greatly improving efficiency.

These unique characteristics of blockchain make it possible to create multi-party systems in which different companies can work together and collaborate to share data and information in a standardized way.  

Benefits of Blockchain-Based Multi-Party Systems

Multi-party systems based on blockchain technology solve many problems that are currently preventing companies from digitizing their back office processes, including:

• Creating a single source of truth that every party can trust
• Making it possible to standardize data across companies 
• Introducing token capabilities that make it possible to create digital twins of real world assets, transfer value, create tokenized incentives, or fractionalize ownership of assets
• Automating business processes in response to blockchain transactions
• Processing events from multiple sources in the correct order that is honored through the system
• Allowing companies to share private data with each other where they need to, without other parties being able to view the data. 

In other words, multi-party systems make it easy for different parties to collect, store, and safely transmit data throughout the system securely and efficiently. For companies who regularly have to share data with one another or who need an effective, standardized data infrastructure to work together effectively, multi-party systems are ideal. 

Examples of Multi-Party Systems Using Blockchain

There are many multi-party systems that are already being used to great effect throughout the world. Here are some examples of multi-party systems that are thriving currently: 

The Institutes RiskStream Collaborative - a large multi-party system operating in the risk management and insurance industry that runs on Canopy, a custom blockchain architecture. This multi-party system helps across a number of use cases in the Property and Casualty and Life and Annuities spaces. For example, it’s Mortality Monitor solution helps to provide a single source of truth for processing death benefits and claims, reducing the burden on beneficiaries by decreasing the number of claims they have to submit to individual insurance providers.

Synaptic Health Alliance - a coalition of US healthcare leaders (including Humana, Multiplan, UnitedHealth, Southwestern Health Resources, and more) leveraged Hyperledger FireFly to create a blockchain-based decentralized Provider Data Directory. This directory tackles the challenge of providing access to care via accurate provider data.

How to Build a Blockchain Business Network

Building a multi-party system with blockchain technology can be incredibly beneficial for companies that need single points of truth, increased security, increased efficiency, and reduced human error. The best way for organizations to build a multi-party system on blockchain is with Hyperledger FireFly, one of Hyperledger Foundation’s newest and fastest growing projects.

Hyperledger FireFly makes it easy for blockchain consortia to build:

1. A single source of truth coordination system across parties 
2. Per-member plumbing software to enable reliable, private integration to and from the coordination system
3. Cross-org plumbing software that provides robust cross-connectivity among members alongside the single source of truth coordination system for use when the coordination system is not suitable or not preferred as the data flow mechanism. Examples include sensitive data, low latency messaging, and large data flows
4. A control plane to manage all of these runtime and configuration details

All of these things are necessary to run a multi-party system on a blockchain that serves all members of the consortium. 

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However, many consortia that set out to build multi-party systems end up getting stuck on the plumbing layers, where they struggle to get into production with mounting expenses and time delays. Hyperledger FireFly simplifies these aspects of development, making it possible to get into production much quicker and more cheaply.

All of this is provided on a powerful, flexible platform with a full suite of APIs that make it easy for developers to build applications on public or private blockchains using their existing development skill-set.

Not only that, but FireFly is fully pluggable, allowing the underlying infrastructure components like the database, blob store, messaging technology, and the blockchain itself to be swapped out. All of this adds up to a platform that enables developers to build blockchain apps up to 100x faster by allowing them to focus on business logic instead of infrastructure.

Questions You May Have

How does blockchain technology ensure the security and privacy of data in a multi-party system?

‍Blockchain ensures data security and privacy through encryption and decentralized storage. Each transaction is verified by network nodes, making unauthorized data alteration nearly impossible. Privacy can be further enhanced by permissioned blockchain networks, where access to certain data is restricted to specific participants.

At Kaleido, we simplify the building and management of consortia by offering a platform that easily integrates privacy tools and permissioning features, ensuring that sensitive information remains secure and accessible only to authorized parties.

What are the main challenges in establishing a multi-party blockchain system?

Establishing a multi-party blockchain system faces challenges like aligning participant incentives, ensuring data privacy while maintaining transparency, and managing governance structures to facilitate consensus without central authority.

Our Consortium as a Service product makes it quick and easy to stand up blockchain business networks in a fraction of the time, at a fraction of the cost.

How does blockchain technology facilitate trust among competing parties in a consortium?

Blockchain facilitates trust among competing parties through its immutable ledger and consensus mechanisms, ensuring data integrity and transparency. This allows parties to verify transactions independently, reducing the need for a central trust authority.

Run Your Business Network on Kaleido

Ready to build your own multi-party system on blockchain?

Hyperledger FireFly is included in Kaleido’s free starter plan, so sign up for a free trial today or reach out to our team for a consultation!