Is Blockchain Technology Compatible With True User Privacy?
Blockchain technology is distributed ledger technology that records every transaction inside its network. Every transaction involving bitcoin is registered.
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Key takeaways
- Blockchain technology is distributed ledger technology that records every transaction inside its network.
- Although they are sensitive and may be protected by various legal and contractual measures, these are not the sorts of data that cause privacy concerns.
- As privacy becomes increasingly crucial, organizations must find a method to employ blockchain technology while protecting their consumers’ privacy.
Blockchain technology is distributed ledger technology that records every transaction inside its network. Every transaction involving bitcoin is registered and preserved in chronological sequence to aid users in keeping track of transactions and to prevent the need for a centralized record of transactions.
On the public ledger, these transactions are available to anybody. Anyone, in particular, may view transaction amounts, wallet addresses, wallet balances, and pending and completed transactions. It is similar to having a burner account on a social network where your personal information is hidden from others, and you work behind a pseudonymous name.
However, intelligent third parties can discover a user’s identity if they are not cautious. Because all your interactions are public, anybody can track your payments and establish a trail that follows your every move. This, in turn, can identify the wallets you have used, the protocols and apes you have dealt with, and the centralized exchanges you have used to pay out.
This can be a barrier to the widespread adoption of blockchain technology, particularly for business companies that want to keep their users’ data secret. This post will look at the link between user privacy and blockchain technology.
Is There A Compatibility Between Privacy and Blockchain Technology? #
In recent years, policymakers have been increasingly concerned about data privacy. I am sure you are all sick of the GDPR pop-up alerts that come on every website, blocking off a large portion of the screen and proclaiming, “We appreciate your privacy.” You must next decide whether to accept or reject the site’s tracking cookies, with some sites blocking your access if you reject them.
These cookie pop-ups are a result of the European Union’s (EU) General Data Protection Regulation (GDPR) framework, which was approved in 2016 and has been in effect since 2018. The goal of this regulation was to require websites to inform their users about the purpose of their cookies if the data would be shared, and with whom it will be shared. This rule was enacted to protect EU residents’ personal information while interacting with firms that do business with EU member states.
Europe is not the only area where new data protection rules have been enacted; California’s Consumer Privacy Act (CCPA), as well as related measures in other US states, went into force in 2020.
How Partisia Plans to Improve Web3 Privacy and Interoperability? #
The Partisia Blockchain Foundation, a non-profit organization, has announced the launch of its mainnet on May 31, 2022; the network’s privacy-focused, high-scalability layer-1 genesis block was generated, and it already has 89 validator nodes throughout the world. Partisia intends to use blockchain technology to promote economic development, wellness, and environmentally sustainable ecosystem use. Partisia Blockchain was used to construct a privacy-first Web search engine, a decentralized social network, and a medical counterfeit surveillance system.
The lack of anonymity and privacy in older public blockchain prevents institutional and widespread adoption. Partisia Blockchain intends to address the privacy issue by utilizing Mufti-Party Computation (MPC) technology, which it has pioneered as a founding member of the MPC Alliance since 2008. MPC allows several people to compute a function with no prior information. Partisia Blockchain uses blockchain technology to deliver private interactions and one-of-a-kind services.
MPC is used by Partisia Blockchain to enable global privacy-preserving computation and decentralized cross-chain bridges. Users can trade in $ETH while staking $MPC using Partisia Blockchain’s native interoperability solution. Bring Your Own Coin may serve as a privacy layer for other blockchain networks while accepting payment in the form of its own coin. Partnerships with Emurgo’s Cardano and Polygon were announced in May to achieve this goal.
So, What Does This Have To Do With Blockchain Technology? #
At the moment, only personally identifiable information is protected by data privacy legislation. Different legal regimes define this differently, but in general, it does not pertain to commercial business information, trade secret information, or intellectual property. Although they are sensitive and may be protected by various legal and contractual measures, these are not the sorts of data that cause privacy concerns.
Instead, the type of information that raises data privacy concerns includes information such as a person’s name, address, region of living, and so on. Blockchain technology may not pose data privacy concerns if the data does not contain or cannot be linked to personally identifiable information. This is particularly true for peer-to-peer wallet transfers, in which only the wallet, wallet balances, and transfer amounts are made public.
Simply defined, blockchain technology will not cause data privacy concerns if it just contains hashed information about transaction details and is not otherwise linked to a person. However, data privacy concerns would arise if personally identifiable information is made public or used to identify a specific person.
Despite its seeming promise of anonymity, blockchain technology has the potential to violate privacy depending on its application. A prevalent misperception is that cryptocurrencies automatically enable anonymous transactions. However, by definition, blockchain technology is pseudonymous.
As stated at the outset of this article, the blockchain does not completely anonymize a user because their transactions and wallet balances are public. Suppose a hostile actor obtains transactional information linked to a user. In that case, they may be able to dox (or reveal the identity of) that individual based on their transaction history (i.e., by tracing their transaction history on a block explorer). Although blockchain technology obscures a person’s identity, it does not entirely conceal it.
When it comes to transactional information, smart contracts function similarly. Smart contracts enable users to view all transactional details. By identifying appropriate information in the public domain, this information may be utilized to determine a user’s identity. NFT owners and crypt project founders, for example, have been doxxed by people correlating their purported wallets to the time of their social media posts.
When opposed to public blockchain, private blockchain, which are only available to a small number of users, can reduce the chance of being doxxed. Private blockchain limit the risk that a node operator would be able to access and locate private identifying information by using information from the public domain. Private blockchain applications, on the other hand, may still represent a danger. For example, an insurance company may use a private blockchain to maintain insurance records that include a client’s personal information.
A private blockchain might considerably enhance productivity by providing those with access (the insurer and the provider) with simple access to the chain of information in a client’s history. However, due to the sensitive nature of such data, a plethora of legal frameworks would be required, as well as adequate security to ensure privacy.
When considering whether to integrate blockchain technology into their systems, businesses must measure the advantages against the dangers. The blockchain’s decentralized character can give benefits such as enhanced confidence, although this is mostly due to the transparency provided by distributed ledger technology. We will need to strike a compromise between transparency and complete user data protection.
Conclusion #
Despite being almost ten years old, blockchain technology is still in its infancy, and there will be more growing pains for this new technology as it evolves. As privacy becomes increasingly crucial, organizations must find a method to employ blockchain technology while protecting their consumers’ privacy.
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