How can Blockchain's Decentralization redefine Data Privacy?

Date: 2019-04-19

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Blockchain as a revolutionary technology with its great attributes has a greater impact in keeping safe the user's data privacy.

Data privacy involves limiting access to users' personal information to parties that really need it and making sure that this data is handled properly. This access can be temporary (think about a bouncer verifying your ID and returning it to you before entering a club) or extended (bank keeps your personal information on file for prolonged periods of time).

Today, the internet is extremely centralized. Big corporations have a monopoly over a multitude of services being used on a mass scale. These corporations follow a cloud-based centralized model which basically implies storing all of the data that they collect and generate on centralized services that are owned and maintained by them for extended periods of time.

This setup is not designed to favour data privacy as the operating model of these companies is to gather as much data as possible on their customers in order to use that information to sell targeted ads and create new services that are designed to extract more information. Decentralized systems are on the other side of the spectrum.

With decentralized systems, data is stored only on nodes that need it and using blockchain, users have more visibility and control over what data is shared with third-parties. Instead of sharing PII that is stored on file for extended periods of time, service providers can leverage blockchain-based digital identity systems in order to assert users' identities without storing personal information for prolonged periods of time. Users can also audit better what discrete information is being shared with these service providers.

Blockchain definitely changes the mindset of users in a sense that they are exposed to additional mechanisms that allow them to limit their exposure by allowing them to recycle their identity easier across different service providers and this is definitely helping in the sense that users think more before handing out discrete information to service providers but the the reality of the matter is that as of today, most of the information gathered by service providers which are at the core of the digital privacy conversation are behavioural and gathered while the users interact with the services (user clicks on a link showing pictures of dogs, the action is recorded, a user is now considered a dog lover). This means that users will still see targeted ads and their behavioural data will still be shared with third-parties. But as long as users don't tie their blockchain identities to static identity attribute such as their name, email, phone number etc.. they should be fine.

Here are experts view on how the use of blockchain technology can protect user's data privacy.

The core issue with data privacy is that we are providing all of our data to companies and organisations and relying on them, and even trusting them, to honour our data and to protect it and keep it safe. We don’t really want people taking our data and selling it to 3rd parties and we certainly do not want to be added to spam groups due to our email addresses being sold off.

In fact, if you look at some of the most recent issues with data such as Facebook and Google issues with using our data and tracking so many things about us that they can intentionally advertise to us on things that are extraordinarily private just tells you the extent of a concern many people have.

Now as we look at decentralisation we look at systems that are not centrally controlling all of our data and information. And in fact, the way that decentralisation works is that we are literally controlling various information about ourselves on our PCs or phones. As we progressively rollout more decentralised applications and services, I think we will find that more and more data can be owned and controlled by us and shared as we like. We should be in a position to determine who can have access to our data and who cannot. Whilst blockchain and decentralisation is still a nascent technology, it will continue to evolve and grow. There will be many solutions that we will encounter that provide us with ways to increase our privacy, to manage our data, and to determine who can have access and when. We will be able to prevent the sale of our data to 3rd parties and perhaps even to determine how long the data we share about ourselves is made available to others. This is fundamental and critical to the well being of individuals.

I know of many companies that oppose this philosophy simply because the ability to mine data is what has made them so successful at targeting their customers so effectively. Honestly, there is a lot of sense in that too. A company wants to provide the best services they can because that’s how they retain customers. And the more they know about their customers the more they can tailor the types of information, products and services they can provide to us. But the issue at present is one of trust. The companies need to be trusted not to overuse or control or sell this data. And so I imagine we will first swing too widely to the extreme of data privacy at the detriment of companies until we then find a centre where people feel in control of their data and privacy and companies are unable to misuse this data. These are interesting times that are reshaping our lives. There is no magic bullet to solving all of this but there will certainly be a lot of changes over the next decade that will define a lot more about how we interact and share information.

Steve Good
The Coin Chat

As blockchain is moving from just another IT solution to an ecosystem builder, the technology now can be applied in potentially transformative ways, including:

To manage customer information and data privately and safely, while enabling smoother transactions and settlements in-network
To store payment and transaction history in a decentralized network, bringing added privacy and security to the marketplace arena
To support a large library of smart contracts that power decentralization of processes, such as dispute resolutions

This is, simply put, the enterprise-level evolution of blockchain technology—a practical, real-world application of it.

Considering Bitcoin as blockchain 1.0, and Ethereum as blockchain 2.0, blockchain 3.0 can realize—and improve upon—the promise of the Ethereum network, which, as it has gained popularity, has become too slow (TPS) and prohibitively expensive (gas fees). Certain challenges, such as political or institutional resistance to decentralization, do exist of course. But Michael believes that the extraordinary potential of blockchain today to transform industries for the better will keep the technology moving forward globally, notably via:

Decentralized applications. The days of electronic signatures for transactions are gone. Blockchain 3.0 will upend slow, laborious processing, improving the efficiency and error rate of future commercial transactions.
Smart business contracts. Blockchain 3.0 applications can immutably and transparently perform routine tasks, like completing a purchase, that may render third-party intermediaries (ex. credit card processors, title companies) obsolete.

Unlike IOTA’s DAG, we’re banking on DPoS as blockchain 3.0’s recipe for success. The only blockchain of real value is a public blockchain (compared to a private or “permission” one), so this model promises to enhance transparency and security (including legal compliance) while supporting developers to build and deploy DApps on the platform. Moreover, enforcement by trusted computers vs. unreliable humans will result in more efficient, cost-effective ways to do and manage a business. That’s the goal.

Mark Brinkerhoff
VP, Communications, 5miles.

Decentralization means one thing: data being under the purview of smaller groups or individuals instead of being controlled by massive companies in giant server farms. Do we really need another Marriott, Equifax, Anthem, Yahoo, or even Home Depot to prove to us that the latter's centralized way of doing things doesn't work? Just those five examples I gave represent data leaked on over four billion people around the world since 2013. Four billion!

Inherently, blockchain can give individual users and customers direct control over their own data, and allow them to store and secure it on their own devices instead of server farms, with solid encryption done client-side. This means there isn't even a data infrastructure like servers for malicious actors to gain access to and leak data from. And unlike the internet, a blockchain can be encrypted by default, making it that much harder a target. Blockchain fundamentally alters data privacy for the
better.

Brian

The Content Factory

With a public, decentralized blockchain, all transactions are recorded in the open, which presents a number of technical and regulatory challenges when it comes to data privacy. At the same time, decentralized blockchains also present a number of opportunities for redefining data privacy if implemented correctly. There is a number of existing cryptographic techniques that have the potential to ensure data privacy within a decentralized blockchain, such as zero-knowledge proofs, homomorphic and functional encryption.

Zero-knowledge proofs are designed to verify the authenticity and integrity of a data transfer without conveying any information about the transaction apart from the value of it. Homomorphic and functional encryption are examples of public-key encryption schemes that allow users to perform computations over encrypted data without needing to decrypt it first.

By integrating these techniques with decentralized blockchains, users can have greater control over their identity and assets. However, the data privacy narrative won’t truly be redefined until these platforms are able to take these techniques and deploy them in a decentralized blockchain platform at scale.

Kalyn Schieffer
Senior Account Executive, Marchcomms

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