Role of Blockchain in Data Privacy

Introduction

Did you know that as the world continues to embrace digital technologies, we are more at risk of data breaches and exploitation?

\ According to Statista, over 422 million records worldwide were exposed to data breaches during the third quarter of 2024, and the most common causes of these breaches were compromised systems, careless users, and malicious employees.

\ The indisputable truth is that as the world continues to go digital, more data is vastly generated and used across sectors to make informed decisions, power innovation, create digital products, and generate insights. However, the potential of misusing and mishandling sensitive data grows as more of these technologies are embraced.

\ For instance, if you were to open a social media account like Twitter, you would need to provide personal information like your name, age, school, and other information about you. As you begin to engage with this platform, the algorithm tracks your interests, views, and preferences to provide a personalized and enjoyable experience.

\ This poses a threat to our privacy, as personal and sensitive information is likely to be mishandled or misused, which can lead to potential threats like identity theft, financial fraud, cyberstalking, and more.

\ A technology like blockchain that offers robust security techniques to ensure data privacy can be embraced to tackle this pressing challenge.

\ In this article, we will examine the role blockchain plays in ensuring data privacy.

\

What is Data Privacy?

Data privacy involves the proper handling of personal data such as name, date of birth, bank details, health records, and other related information. It helps safeguard data from undue access and keeps it confidential. Providing adequate security for data is a necessity for every organization and company that collects, stores, and processes customer data.

\

What could go wrong if data gets exposed?

\ The threats associated with exposing data to unauthorized parties can be grievous, depending on the type of data exposed. If sensitive data like health records or credit cards is exposed to unauthorized parties, it could lead to data breaches. This means unauthorized parties can exploit the exposed data for selfish gains.

\

:::info For instance, in 2013, Yahoo, a web-based company, faced a data breach that affected all three billion user accounts. Personal and sensitive information like names, email addresses, phone numbers, birth dates, passwords, and security questions were compromised.

:::

\ This breach caused huge havoc for the company, as they were faced with huge financial losses, subjected to numerous lawsuits, and created a bad reputation for the company's image.

\ Another consequence of exposing data is that it can lead to identity theft. Attackers can use stolen data, such as personal information, to commit fraudulent activities.

\ It can also lead to intellectual property threats where secrets, strategies, and innovations are leaked, giving competitors an edge or leading to huge financial losses.

\ The implications of inadequate data protection are grievous; thus, there's a need to embrace technology like blockchain to ensure data privacy.

\

Overview of Blockchain Technology

Blockchain is a digital database that stores transactions and data in a decentralized, secure, and transparent way.

\ Each block in the network contains transaction data linked with the previous block to create a chain via cryptographic techniques. The chronological order in which the blocks are linked helps to ensure that the data stored are immutable and can never be altered or changed. This is usually useful in keeping the integrity of data in case of legal contracts or financial transactions.

\ Unlike the traditional database, where data are stored in a central location, the blockchain stores data across multiple nodes in the network. Each node holds the same copy of data, and no single entity is responsible for controlling the network. Instead, it uses a consensus mechanism where nodes in the network agree on the state of the blockchain without the need for an external intermediary.

\ This feature eliminates the possibility of a single point of failure, which means attackers do not have a central target they can attack to gain access to the network.

\

Security Features of Blockchain

The blockchain possesses several inherent security features which can be used to ensure data privacy. Some of the features include:

\

• Cryptography: Blockchain uses cryptographic techniques to protect data from unauthorized access. This is achieved by assigning a unique cryptographic hash to each block stored in the blockchain. Any slight modification made to the data in the block will alter the hash, which signifies a threat.

\

• Encryption: Blockchain uses cryptographic techniques to encrypt sensitive data. This involves turning plain text into cipher text, meaning the data is unreadable. Only authorized users can read the encrypted data by using an encryption key. This feature ensures that sensitive information is free from unauthorized access.

\

• Consensus mechanism: This mechanism ensures that only validated transactions and data are stored in the blockchain. It involves assigning participants in the network to agree on the validity of the submitted transactions before they are added to the network. This feature provides an extra layer of security to prevent the processing of illegitimate transactions.

\

• Immutability: Data stored on the blockchain are immutable and tamper-resistant. This feature ensures that the integrity and authenticity of data stored in the network are maintained, and it leaves no room for alterations or falsifications. Once data are stored on the network, it's nearly impossible to change them.

\

• Transparency: Data on the blockchain is visible to everyone in the network, enabling all participants to track its activities. This feature prevents the possibility of performing shady or fraudulent activities. It also helps to build trust and retain the authenticity of the data, as any alterations will be visible to all participants.

\

Use cases of Blockchain

Several industries leverage the security and data privacy that blockchain technology offers. Some of the industries include:

\

• Health industry: Health industries leverage the security features of blockchain technology to secure patients’ health records. Through encryption, sensitive health information is protected from unauthorized access, and the immutability nature of the information also helps to securely share it across different health providers without losing its authenticity.

\

:::info One notable real-life application of blockchain in the health sector is the BurstIQ platform. This platform leverages blockchain technology to manage sensitive health records securely. It also empowers patients to have greater control over their data, maintain the integrity of the data, and ensure that only authorized health providers can access the data.

:::

\

• Financial sector: Blockchain technology is used to protect sensitive data in the financial sector. Its decentralized nature defeats a single point of access for attackers, and through digital fingerprints, customers can use a unique ID to prevent any overlap during Know Your Customer (KYC) checks, where users have to provide proof of identity to verify their identity.

\

• Government sector: Blockchain provides a secure approach to storing and protecting data in the government sector. Its transparency increases accountability and trust, as stakeholders can see all information in real time. This is useful in cases like voting, public spending, and public implementation.

\

:::info One notable use case of blockchain technology in the government sector is its application in the voting system. Each vote in the system is encrypted, recorded, and stored safely. This helps to ensure a free and fair voting system.

:::

\

• Social media: The application of blockchain technology in social media promotes data privacy. Unlike centralized social media, where data is stored in a central server, decentralized social media uses a distributed ledger to store data. This means no central authority controls the data, and users have total control over their information.

\ Additionally, without proper authorization, users cannot access information stored in the decentralized space which makes it nearly impossible for data breaches or identity theft.

\

Examples of blockchain-based social media are: Steemit, Verasity, Sapien, etc

\

Risks associated with blockchain technology

Blockchain provides promising solutions to tackle data privacy issues. However, it has some associated risks, which include:

\

• Auditing challenge: Although blockchain's decentralized nature prevents unauthorized access, it also poses a challenge to how transactions are audited since each transaction is verified by multiple nodes in the network. This process can complicate the auditing process and lead to time-intensive audits.

\

• Data Exposure: Blockchain's excessive degree of transparency raises concerns about the privacy of sensitive data since it is visible on the blockchain. A company's proprietary information, such as financial history or pricing, that is available on the blockchain can provide insights into the company's operations for competitors to have an edge. Malicious actors can also observe transaction patterns to predict behavior, exploit weaknesses, or track transactions to gain strategic advantages.

\

• Immutability challenge: Although immutability helps to maintain data authenticity, it also poses a risk if sensitive data are mistakenly or maliciously recorded.

\

:::info The inability to alter or delete data is against data privacy requirements, such as the right to be forgotten, under the General Data Protection Regulation (GDPR).

:::

\

Wrap up

Blockchain technology offers a significant solution to the pressing data privacy issues through its several security features, such as decentralization, immutability, encryption, and cryptographic techniques. However, it's not a one-size-fits-all approach to ensuring data privacy. Companies and individuals are advised to do their due diligence on how they want to protect their data.

\

References

1. Understanding the impact of the largest data breaches
2. Blockchain in Government and the Public Sector

\ \ \