Yes, it was public blockchains which showed the world the tremendous potential of the distributed ledger technology. But private blockchains were the ones which became the beacon of hope for industries and changed the way enterprises think about trust in business. The industry experts believe it is going to be private blockchains which are going to be the driving narrative of the year 2019.
As a result, private blockchains caught the fancy of industry leaders and JP Morgan- the Wall Street mega-bank co-developed Quorum blockchain along with Ethereum startup Ethlab. A private, permissioned blockchain, Quorum is an Ethereum-forked variant blockchain which uses cryptography to prevent nodes outside the network from seeing sensitive data. If we talk in general, Quorum aims to create a blockchain and smart contract platform for financial institutions, big enterprises and manufacturers.
JP Morgan believes that Quorum blockchain in the longer run could solely become the basis on which all future banking will be performed and decentralized. An open source project, Quorum is designed to enable quick trade execution across all asset classes, right of asset ownership, exchange of payments, as well as the movement of collateral. Moreover, with Quorum JP Morgan is looking forward to changing the current reconciliations-based model of the finance industry across the world with instantaneous settlements cycles and the central counterparties with real-time reporting.
Why Quorum Blockchain is forked from Ethereum?
Blockchain as a decentralized technology has raised important concerns which has led banks and other financial institutions to be hesitant about adopting it. Immutability and quick traceability- advantages that Ethereum blockchain offers are great but traditional bank would not want to expose their data and entire record of the transactions to the public. In addition, as ethereum smart contracts are also publicly exposed, this also raises concerns for organization like banks.
With blockchain technologies like Quorum and R3’s Corda
entering the banking and financial industry, we believe the traditional banking is soon going to be reshaped and concepts like Open Banking are not far to be adopted across the world.
Quorum is designed to solve these issues with four major distinctions: network and peer permissions management, increased transaction and contract privacy, voting based consensus mechanism, and higher performance.
Quorum- A Permissioned Blockchain
Quorum is a permissioned blockchain, translating that the network using the platform will not be available to all. Quorum is designed to be permissioned, meaning that networks using Quorum won’t be open to all, as they are in most cases with Ethereum. Because of this, permissioned blockchains operate with extremely different expectations of trust between approved nodes than permissionless ones, even if the architecture is roughly the same.
Namely, Quorum’s permissioned chain is a consortium blockchain
; it is meant to be implemented between participants that are pre-approved by a designated authority. Although consortium blockchains are somewhat redundant (blockchains contain protocols to establish trust, so using them among an already trusted group is unnecessary), their initial use is understandable as these institutions seek to test their ability. A consortium blockchain runs with the same features and protocols of a normal blockchain but maintains the failsafe of only relying on permitted nodes. As a result, organizations can glean the feasibility of blockchain tech without the possibility of catastrophic failure or breach.
In the long-run, should blockchain consensus protocols continue to perform securely, permissioned systems can eventually disappear as their redundancy becomes apparent: blockchains gain stability from a larger base of users, so explicitly trusting the nodes ignores the strength of the blockchain and limits the number of users included.
The permissioned nature of Quorum’s blockchain is rather fundamentally intertwined with some of its privacy protocols, and especially with the consensus mechanism. It seems unlikely to be phased out in future iterations.
Confidentiality of records has always been a concern of financial institutions that Ethereum and regular blockchains failed to tackle. The pseudonymous nature of transactions is easily undermined when it comes to applications for massive firms. Beyond its permissioned nature, Quorum seeks to further improve on this point by introducing ‘public’ and ‘private’ on-chain transactions. The public transactions act like normal Ethereum transactions. The private transactions are verified, but the details are not exposed.
Quorum manages much of its secure message transfers through a system called Constellation. Constellation is a general-purpose mechanism that is not necessarily blockchain-specific. It involves encrypting specific messages in communication with an enclave, a store of previous transactions, authenticity, and authentications. Much of the cryptographically-heavy work is done within the enclave and the communication relay between it. Constellation, and the architecture it supports, is one of the reasons for Quorum’s superior speed.
In addition to privacy in transaction, there is also privacy for smart contracts, something many banks are particularly wary of exposing for security reasons. Such smart contracts could contain investment strategies, transaction data, or sensitive internal information. The privacy protocols for smart contracts are actually relatively straightforward.
In addition to the promise of private transactions and smart contracts, Quorum has been working with the Zcash team to integrate the zero-knowledge security layer (ZSL) into the Quroum protocol. Although the work is not yet production ready, the two have released a proof-of-concept technical design document.
Quorum’s consensus protocol is called QuorumChain and is initiated within the genesis block. QuorumChain is a relatively straightforward, simple majority voting protocol. A certain set of nodes are relegated voting rights and all with voting rights and confer voting rights to others. A smart contract is used within the genesis block to assign voting rights and tracks the status of all voting nodes within the network as it updates. Voting is triggered by a voting smart contract that pings voting nodes for them to commit to a transaction as the correct block at a certain height in the chain. All Quorum transactions include: a Global Transaction Hash, which is the hash of all transactions in a block; the Public State root hash; and the block maker’s signature.
Interestingly, the Quorum documentation contains a lot of references towards Raft, a popular consensus protocol for distributed systems, but nowhere does it seem to actually use it within the Quorum network. It is unclear whether the Quorum developers were trying to get inspiration for QuorumChain or merely draw analogies between the two. QuorumChain bears little resemblance to Raft and Raft is not employed anywhere within Quorum’s implementation.
Quorum is fast. The development team claims that the system can exceed hundreds of transactions per second, a massive improvement over standard Ethereum and Bitcoin rates, and ideal for usage in financial cases. Speed itself is one of the major roadblocks to blockchain adoption, a problem Quorum neatly sidestepped with its implementation.
The main reason for the massive speed increase comes from the simplistic consensus mechanism. A straightforward voting procedure called by a smart contract to a relatively small number of nodes is significantly fast than proof of work or proof of stake, especially amongst massive networks of nodes.
Even though Quorum operates on a restrictive structure based around its permissioned nature and its consensus mechanism is by no means trustless, it has clear applications in a financial consortium. A collection of banks trying to improve their transaction infrastructure could see value to switching to this system. In addition, the network benefits from being a light-weight shift, allowing for future incorporation of code from the Go Ethereum base.
Overall to us, Quorum seems like a great method to pave the way for other financial implementations of blockchain. What do you think?
We’ll soon be doing a qualitative comparison between Quorum with IBM’s Hyperledger Fabric
and R3’s Corda , the pros and cons of each and which one is going to be