Stichting Consortium Blockchain Nederland: Towards a Dutch public blockchain facility; March 2018
Blockchains are expected to be beneficial to Dutch business and government. This whitepaper argues that there is an opportunity for a Dutch public blockchain facility, possibly organised through a Dutch stichting (foundation). Readers are invited to review and comment on this whitepaper, and to participate in an initiative to turn the vision into a reality.
Market interest for blockchain applications: dependency on shared administrative processes and reducing bureaucracy
Dutch business sectors struggle with bureaucracy. Billions of euros and uncountable hours are wasted in the exchange and manual verification of documents on paper or PDF, and scandals pop up due to gaps occuring in paper trails. In many cases, a hypothetical central organisation could reduce the bureaucracy by efficiently handling networks of business transactions. However, too great a dependency on such a central organisation involves significant risks such as the employees of the central organisation accidentally or maliciously corrupting exchanged information, or the central organisation itself turning into a monopoly and abusing its power.
The unique selling point of a blockchain is that no single individual or organisation can take down a blockchain or corrupt its contents via technical intervention. Even though a blockchain-based solution is significantly more expensive to run than an equivalent single-server system, it mitigates the above-mentioned risks and it may create the trust to convince Dutch business sectors to take a further step in the reduction of bureaucracy.
However, deciding that a blockchain may be a component in a bureaucracy-reduction project is only a first step. Whereas the bulk of the work will be in sector-specific coordination, exploration, experimentation, piloting and implementation, one important question is: “which blockchain are we going to use?”.
 E.g. finance, logistics, energy, government, food, health, …
Which blockchain are we going to use?
Choosing a blockchain is not obvious. Each of the following options has advantages and disadvantages.
1) Cryptocurrency blockchain
2) Private blockchain
3) Public consortium blockchain
Table 1 illustrates these three main options.
Table 1: Different types of blockchains.
Cryptocurrency blockchains like Public Bitcoin and Public Ethereum have the benefit that they are up and running, and they have a proven past performance. They are public, i.e. visible and accessible to anyone. They are unpermissioned, so nobody can prevent one from participating. This is why start-ups typically use a cryptocurrency blockchain for their to-be-trusted core applications. However, cryptocurrencies are volatile and their blockchains are frequently forking, which is how these blockchains are governed. Start-ups have already gone down because escalating transactions fees and transaction confirmation times made their business proposition unfeasible. Regular forking implies that a Dutch sector would continuously need to coordinate and resolve which fork to use.
The authors believe that given the issues with cryptocurrency blockchains, Dutch business sectors should not let their core business processes rely on them.
Private blockchains, e.g. based on Hyperledger Fabric or Ethereum Enterprise technology, have the benefit that partners do not need to rely on others for blockchain access. Instead, the consortium partners that have agreed on an application-specific bureaucracy-reduction solution are the participants in their own joint private blockchain. Several Dutch sectors are already developing their own private blockchain solutions, in many cases supported by an American tech giant. Private blockchains also have disadvantages. As we are learning from Techruption Consortium Blockchain (see below), it is complex and costly to run a blockchain network together. Outsourced blockchain operations run the risks of technology and vendor lock-ins. Also, the appearance of a plethora of application-specific micro blockchains impedes trans-sectoral innovation, like combining blockchain solutions on finance and logistics, or energy and identity.
The authors believe that private blockchains are an important low-threshold stepping stone into the blockchain domain. Given the identified issues, we foresee that research is needed into inter-blockchain technologies, including atomic cross-blockchain transactions, inter-blockchain interoperability, smart-contract migration between blockchains, backward and forward compatibility in blockchains, and life-cycle management of blockchain ecosystems. Nevertheless, private blockchains may not be the only solution.
A public (permissioned) consortium blockchain facility, which may also be based on Hyperledger Fabric or Ethereum Enterprise technologies, is run by a consortium of participants for whom trust is their core business and who have the expertise to run such a facility as efficiently and reliably as possible, e.g. Dutch banks and telecom operators. A public consortium blockchain may have lower operational cost, and hence lower transaction fees, than (networks of) private blockchains. They may resolve several of the above-mentioned issues with private blockchains. And they allow Dutch sectors to focus on their core business, which running blockchains is not. Whereas there are already some public consortium blockchains in existence (e.g. Sovrin for identity solutions, and Interplanetary Database for data storage), the concept is still far from being a proven solution.
Vision: An accessible Dutch managed consortium blockchain facility
TNO suspects that there is an opportunity for a Dutch public (permissioned) consortium blockchain facility. We feel that the Dutch scale is a “Goldilocks zone”. Being Dutch, the consortium blockchain has a clear jurisdiction. The scale is large enough to achieve economies of scale and enable trans-sectoral innovation. The scale is small enough to prevent inter-cultural governance complexities and trans-jurisdictional issues. Also, Netherlands has the Dutch Blockchain Coalition, as well as various blockchain field labs, which may prove fertile ground for this opportunity.
The remainder of this whitepaper presents a more detailed version of the vision modelled after Stichting Internet Domeinnaamregistratie Nederland (SIDN), and a proposal on how to get there from the current experiences in the Techruption Consortium blockchain, followed by a call to action. The proposed project performs the research, development, beta pilot and coordination leading up to the foundation of “Stichting Consortium Blockchain Nederland” (SCBN). The call to action invites you to respond to this whitepaper and to join the associated initiative.
Minimalistic coordination - modelling SCBN after SIDN
A public consortium blockchain constitutes somewhat of a paradox. The unique selling point of a blockchain is the absence of a single controlling party, whereas the consortium decides who can run a blockchain node and who can deploy and interact with smart contracts on their blockchain. A solution to this paradox may be to reduce the role of the central consortium organisation to its bare minimum. A highly successful example of this is the Stichting Internet Domeinregistratie Nederland (SIDN) which is the responsible registry for “.nl” domain names. We propose to model our hypothetical “Stichting Consortium Blockchain Nederland” (“SCBN”) after SIDN, see Figure 3.
SIDN is a Dutch foundation that has over 2000 participants. Any company that satisfies the requirements can become participant in SIDN and become a registrar of .nl domain names. Typical registrars are internet service providers and web hosters. Registrants, customers of these registrars, are persons and organisations that want to register a .nl domain name. Usually, a registrar provides value-added services to their customers as well, like webhosting, domain-name services and other. The role of SIDN is limited to log the .nl registrations and a step in the DNS resolving of those .nl domain names, as well as some legal and societal responsibilities. Registrants may switch between registrars, if another registrar offers a better service or price. This provides a market to drive low prices and high quality. The huge number of registered .nl domain names, as well as its high international reputation is testament to the effectiveness of the SIDN approach.
SCBN would become a similar Dutch foundation. Any company that satisfies the requirements can become participant in SCBN and become blockchain service provider. Typical blockchain service providers are companies for whom trust is their core business and who have the expertise to run such a facility as efficiently and reliably as possible. One can think of Dutch banks and telecom operators, but likely other sectors and professions as well. Perhaps, notaries want to provide access to “Blockchain-as-a-Service” to their customers. Or an electricity network provider wants to have a stake in SCBN as some of its services rely on an SCBN blockchain. Customers of the platform providers are application providers that use the blockchain to deploy smart contracts that are used for their typically sector-specific applications. The role of SCBN is limited to coordination between the blockchain service providers, e.g. about technology choices and updates, as well as some legal and societal responsibilities. It is the blockchain service providers ultimately decide about any changes. After all, SCBN is their “stichting”. Application providers may switch between blockchain service providers, if another blockchain service provider offers a better service or price. This should provide a market to drive low prices and high quality.
Ramping up the learning curve
The vision detailed above is based on a somewhat stable view on the future blockchain landscape. This however is not the current situation. Based on experiences in setting up and running a joint blockchain infrastructure (see below), we observe that both blockchain infrastructure and blockchain based applications are both in general in the very early stages of maturity. This is a “Catch 22” as application development requires stable infrastructure and in order to achieve stable infrastructure and infrastructure management practice a heterogeneous mix of applications is desirable. That is particularly challenging given that a blockchain infrastructure is a system composed of many components from different vendors (fabric, OS, dB,…). And each of these is still subject to change (versions, protocols, hash-algorithms,…).
Consequently, a reasonably stable and by application providers acceptable infrastructure for application development and testing needs to be developed. However, soon after the application providers will require a stable infrastructure that “hosts” the accepted applications. These phases will require close interaction of the collaborating infrastructure providers and the application providers. (See  for a more detailed discussion.)
This is currently a vision and an ambition. It does not exist yet, and work needs to be done to make it happen. However, we do not start from scratch. Some exploratory practical work has been done.
Current state: Learning experiences from Techruption Consortium Blockchain
Techruption Consortium Blockchain is an experiment of the Techruption consortium , which is hosted by Brightlands Smart Services Campus. Participants in the experiment are TNO, KPN, Rabobank, APG, Kamer van Koophandel, CZ and Zuyderland, later joined by Budgetphone and BSSC, and with support from Accenture, ToBlockchain, Hunter Legal and several other organisations and individuals.
Some of the participants in the experiment bring in experience with blockchain technology and consortium blockchains. Other participants are involved in sector-specific blockchain use cases and start-ups. The experiment is being executed as action design research to develop the work on the three main issues: business models, governance structure and technology choice. A business model was developed with business roles and phases. A governance outline was established with roles, responsibilities and a decision structure, as well as legal analysis. An initial consortium blockchain was rolled out, based on the Ethereum-based Quorum technology under the supervision of Accenture.
 The experiment is still ongoing at the time of writing this whitepaper
The business model developed during the experiment forms the basis of this whitepaper. Two main business roles are distinguished: blockchain service provider and application provider. The blockchain service providers together form the consortium that runs one or more blockchains, where each blockchain service provider runs one or more blockchain nodes. Application providers use the blockchain to deploy smart contracts that are used for their typically sector-specific applications. Of course, blockchain service providers could also act as application provider. Three phases are distinguished: an experimental learning phase during which everything is allowed to go wrong, a professional phase with professionally run blockchains for vital blockchain applications, and a beta phase running up to that. This beta phase may already be relevant on its own, providing blockchain application developers to a stable testing and acceptance infrastructure, as well as shared learning and access to technical expertise.
What we have learned, is that it is not obvious how to run a consortium blockchain together. Whereas it was easy to technically initiate a five-partners blockchain in just a few hours, keeping it alive and well governed turned out to be complex. Because of technical issues, many nodes have gone down at times or lost connectivity. Even though the blockchain carried only a single smart contract (launched by BSSC CEO Peter Verkoulen, containing the words “… it is a small step for a man …”) it grew to over 20 GB in just a couple of weeks, leading us to launch a new blockchain with different parameters and properties.
Also the governance is turning out to be complex. The governance of the consortium blockchain includes decisions on the technical set-up; monitoring and management responsibilities; the decision process itself (and how to change it); memberships and roles (including on- and offboarding); application support etc. The governance process is centred around a blueprint document  which carries the consensus view of the participants. The document is developed further in bi-weekly phone conferences in a contribution-driven process, based on voluntary contributions by the participants, documenting the insights from the workshops. Available resources and distraction from other activities is limiting the speed of progress, and we are looking into alternative/additional approaches.
While the experimental phase is still in progress at the time of writing this whitepaper, people are already thinking about the next phases.
Proposal: Foundation project - research, development, beta pilot and coordination
This whitepaper proposes to start a joint Dutch project with partners who see an opportunity in the proposed vision.
Many things still need to be done, before SCBN can be founded. Prospective blockchain service providers need to be persuaded to join. The role and function of SCBN needs to be documented. A governance structure needs to be established. Cost modelling is needed in order to establish initial annual and usage fees. A template agreement needs to be made for signing up blockchain service provider, including technical and legal conditions on their participation. Application providers need to be drafted as friendly users of the blockchain service. A beta pilot needs to be set up and executed with those application providers. Legal matters will need to be arranged. SCBN needs to be staffed. Most likely, the ongoing Techruption Consortium Blockchain experiment will throw up even more issues that require work in the development phase. And all of these activities need to be coordinated with the partners.
The context in which this foundational project will be developed is open as of yet. It could be the Techruption field lab, which has already established itself as an effective accelerator in the blockchain domain. It could be in the context of Dutch Blockchain Coalition, which has a well-matching scope. It would be useful to involve SIDN at some stage, possibly for an active role in the project and the resulting operational phase.
Call to action: please review and comment, and join the initiative
We invite you to review this whitepaper and provide comments and suggestions. Please indicate if you or your organisation is interested in joining this initiative. Please also think of the level of commitment that you and your organisation can provide in terms of resourcing and financial support. Our contact information is provided with this whitepaper.
The authors wish to thank the participants in the Techruption Consortium Blockchain experiment for their active participation and many insights that form the basis of this whitepaper.
Oskar van Deventer, Frank Berkers and Pieter Verhagen
 Oskar van Deventer
“Techruption Consortium Blockchain"
Blockchain Summit Amsterdam 17-10-2017
 Laurens van Piggelen (APG), André Zandee (APG), Tom Vreuls (APG), Douwe van de Ruit (KPN), Mischa Vos (Rabobank), Frank Berkers (TNO), Oskar van Deventer (TNO, editor)
“Techruption Consortium Blockchain – blueprint for a Dutch consortium blockchain”
Please review and comment, and join the initiative
Get in touch with Oskar van Deventer