How to support the growing number of Blockchain business networks

Governance, and day to day operational management of distributed ledger (i.e. Blockchain) applications involves more than just building software. 

Increasingly, these applications are being established as business networks. A private business network is a group of independent parties that transact business (such as insurance) together via a secure and private network using distributed applications, underpinned by Blockchain. By using a business network, this creates a membership framework with shared membership information collected and then utilized to achieve agreement about trading insurance assets such as risks, claims and technical accounts. 

Across different geographies, there are multiple insurance projects and initiatives that are focused on building blockchain based distributed solutions for many insurance business networks. Participants of these business networks want to be able to transfer assets or share facts seamlessly amongst each other. A member of a reinsurance business network should be able to transact or share information with a member of an aviation business network, without having to have a separate node infrastructure installed in each of the networks it participates in. This universal node system is now possible by building applications which can be deployed on business networks in Corda.

A universal node system

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The compatibility zone (CZ) in Corda is a physical network that can contain and support multiple business networks within it.  The CZ defines a minimal set of high-level technical standards, which every participant has to comply with such as notary, network map and doorman services. The doorman service at CZ will issue certificates as part of onboarding any new entity onto the compatibility zone.

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Business networks can inter-operate with one another as long as they are within the same compatibility zone. e.g. broker A-node in the reinsurance business network can transfer assets and share information seamlessly with broker X-node in the ILS business network. Via a single node, carrier-A can be a part of both the aviation business and reinsurance business networks.

Each business network is free to establish its own membership service or can use the standard reference implementation, such as the example application built by R3. Corda Applications (Cordapps) are built to be intelligent and work with business networks to ensure that only authorised nodes in the business network are able to send and receive business transactions.

R3 prescribes that each business network it builds has a Business Network Governor (BNG) and Business Network Operator (BNO). The BNG is responsible for defining the strategic management and governance policies of the business network, and is accountable for the implementation and enforcement of those policies e.g. the legal and regulatory framework, membership services, upgrade pathway and software licensing etc.

BNO is a Corda node in the business network responsible for day to day management of the business network. It approves or rejects membership requests, maintains and distributes members’ meta-data such as their unique identity profile which is provided by business data agencies such as Dun and Bradstreet or Lloyd’s. Based on the on-boarding rules defined in the network, BNO’s can optionally do a know your customer exercise for each member.

Corda’s business network has a powerful and flexible support model which allows for the possibility that one business network can build upon the work of another.

Effective governance frameworks are needed alongside technology solutions

As Corda supports technology solutions that deal with cross-business network transactions, whilst maintaining the confidentiality of their ledgers, it is paramount that effective governance, compliance and regulatory standards are in place. Participants in each business network must be engaged to develop the governance structures that will facilitate the growth of each business network. These will define and influence engineering choices when implementing decentralised solutions on business networks in Corda. And, nowhere will it be more important to get this right than in the insurance industry, where it is becoming apparent that the market has to create inter-operable business networks if it is to harness the power that blockchain technology can bring.

Shaun Gull