In this podcast we are joined by Kevin Leuthardt who wrote an interesting article on this subject earlier this year where he analyses the use of governance from a business network layer, protocol layer and data layer for scaling blockchain consortia.

Kevin Leuthardt is the cofounder of KSquared which works with start-ups across industries and technologies. He is a tax lawyer and is involved in the European Blockchain Association within the Governance Working Group.

 

What is blockchain?

Kevin sees blockchain as a foundational technology. From a technical standpoint it’s a shared synchronised data ledger which is encrypted and comes with the potential of disintermediation, automation and providing a single source of truth. Automation comes through the use of smart contracts.

What Kevin finds the most exciting about blockchain is that it brings about the so called competition paradox where competitors can work together to unlock new opportunities.

 

The article - Successful scaling of blockchain consortia through governance

On the 16thof January, Kevin wrote an article entitled “Successful scaling of blockchain consortia through governance”.

Whilst working on a project around withholding tax refund on a DLT project, Kevin realised the importance governance had in the successful deployment of a blockchain consortium or an enterprise blockchain project.

 

What is governance?

Governance is a term which encompasses organisational, legal and economic reflections or considerations. Governance within a business network like enterprise blockchain is a set of rules, values and a set of incentives by which participants agree to operate within an ecosystem. If is a rulebook which is here to manage key situations or events:

* Such as what to do in certain key situations such as the need to tweak a protocol.

* How to avoid a hard fork?

* Who owns the IP?

The ultimate goal of governance, within the competition paradox, is to enable and facilitate transparency and continuity of the network.

 

How to assess the governance of a blockchain consortia?

If you think about what’s actually a blockchain consortia, it’s essentially a set of companies which agree to collaborate in order to advance the state of blockchain. Within an industry it’s about establishing industry standards, use cases or build real commercial applications as is the case with B3i.

In order to analyse the governance of a blockchain consortia it requires to run an assessment of the anatomy of the distributed ledger application. Michel Rauchs, at the Cambridge Centre for Alternative Finance at Cambridge University, has published a conceptual framework on distributed ledger technology systems. It splits the anatomy of blockchain applications into three layers:

* Protocol layer - everything about the blockchain stack

* Network layer – details of the business network such as who can access the network, who can submit transactions and who validates the transactions

* Data layer – what happens on chain and what happens off chain, where does the application take data from, what Oracles to sue and also aspects of cybersecurity