Enhanced Data Privacy in Blockchain Network

In the digital era, data privacy is a major concern. To ensure the cyber security of individuals, technical experts and the concerned governments incessantly explore new technologies. Some entities exchange such private and sensitive information with several agencies. Blockchain data privacy is preferred over the centralised system to limit access to sensitive data.

Blockchain is automated, and it limits manpower and resources. Blockchains eliminate intermediaries and are cost-effective. Blockchains are cryptographically programmed and time-stamped. Using private key and public key blockchain is transparent and tamperproof. So, blockchain technology controls the privacy of personally identifiable information (PII).

The Functioning of a Centralised System

In centralised systems, data is stored in the central server. So, the hackers or frauds directly enter the server and manipulate, steal or forge the information. Failure in the server leads to single-point failure of data.

Such issues in the centralised system cause privacy breaches. A central authority handles the server, and it minimises the security. All personal information, including biometrical data and location data to phone numbers, is at stake. So, the experts identify decentralised networking as an effective alternative to centralised networks.

Exploring the Basics of Blockchain

Blockchain is a decentralised technology wherein several blocks are chained together to form the blockchain.

The transaction records are digitally signed and stored in the blocks. Each member node stores the transaction data, and it is unalterable. In blockchain, alphanumeric addresses are used for interactions instead of real names.

The distributed ledger system keeps the transaction data in multiple nodes. Thus, single-point failure is impossible in the decentralised system. If a manipulator or fraud enters the network, there are multiple nodes that store the time-stamped data. Since it is impossible to hack every node in the network. So, public blockchains are safe for storing transaction data. In a private blockchain, the data is kept private, and only relevant information is shared with the individual’s consent. So, no intruders can access the data, and even in a private blockchain, limited nodes store the same data. So the participants in the group might be from an organised sector, who have basic trust in the group.

Understanding the Features of Blockchain

Blockchain technology’s decentralised, anonymous feature is transparent, secure, and immutable. The privacy protection nature of the technology is enhanced through personal information control. The data is stored as confidential in the distributed ledger system.

Blockchain is preferred over centralised systems to store and record transaction data. Digital ledgers record and maintain the database. The copies of the transaction are shared in multiple nodes or systems, making it immutable.

Identifying the Basics of Data Privacy in Blockchain

Blockchains never compromise privacy and security. The public key and private key formulate asymmetric cryptography. A digital signature or private key authenticates the transactions. To access the data, the majority of nodes should give consensus.

It should be unanimous, time-stamped, digitally signed and programmable. Blockchain data privacy is ensured by concealing the real identity of the individual by replacing it with pseudonyms. It disallows identity theft, forgery, and the production of duplicate transactions. Forging signature is also controlled through time-stamped blocks using a private key. It eliminates intermediaries to verify the transactions.

Empowering Blockchain Privacy Control

Blockchain data privacy is established through enhanced security features. The consensus mechanism ensures security features and transparency through regular auditing. Public blockchains are open and transparent. Private blockchains are partially transparent through the authorised participation of nodes.

Data is controlled through permissioned access, smart contracts, and the immutable nature of blockchain. The anonymous nature conceals the identity, retaining confidentiality. A single entity does not control the peer-to-peer network. So, data security and privacy are ensured through self-executing agreements in blockchain networks called smart contracts.

Use Case of Blockchain Technology in Data Privacy:

Let us consider how data privacy is enhanced in blockchain technology through a sample case. When a bank wants to verify a customer’s identity, under the ‘Know Your Customer’ (KYC) policy, the centralised and decentralised verification process is detailed here for better understanding.

Under the centralised system, data privacy is at stake. The bank will get all information of the customer’s details as a copy.

The bank or the server shares the details of the individual, Ruman Shah, in our example, with a third party for verification. The data is thus passed to one or more third parties. So, the bank and the third parties will get all the information (both relevant and irrelevant) about Ruman Shah. This is against the privacy of Ruman Shah, the customer.

Considering such privacy breaches, the bank and Ruman Shah utilise blockchain verification of identity and documentation. With the consent of Ruman Shah, the bank accessed the relevant data of the customer through the blockchain verification method. Blockchain makes it easier and quicker to verify information without compromising privacy.

So, blockchain networking only provides the necessary data for verification with the consent of the individual. Blockchain networks automatically verify the required data by concealing the individual’s sensitive information.

Limitations of Blockchain

Scalability is one of the significant drawbacks of blockchain technology. Privacy of transactions is limited in public blockchains. The anonymous nature of users poses a major threat. No legal procedures can be initiated against the users for violation due to the anonymous nature. The possibility of 51% attack is another threat which might affect privacy in the long run.

Private Key is the password of the individual. However, this automated key is non-retrievable. This feature guarantees data privacy in the blockchain. However, if the private key is lost or if the private key reaches a third party, it cannot be changed or retrieved.

To Conclude

Privacy, data security and confidentiality are the three main concerns of the digital era. Blockchains are also vulnerable; however, this decentralised distributed ledger technology is more secure than centralised systems. Blockchain is one of the best tamperproof systems that protects individuals’ privacy.