How does Blockchain Support Data Privacy
Updated on 24th Jan, 23 79 Views

In this era where everything is digital and data is the supreme component, privacy has become an unavoidable concern. Users today have little to no say over how online websites and software make use of their data and personal information. Where this data can be used to provide personalized searches and customized recommendations of products and services, it can also lead to exploitation and security breaches. Blockchain provides a solution to that!

You must be wondering, “How does Blockchain Support Data Privacy?”

Well, follow along as we uncover the answer to that question.

Let’s have a look at what topics this blog will cover.

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Before we get into understanding how it supports data privacy, let us first see what Blockchain actually means.

What is Blockchain?

What is Blockchain?

Blockchain can be defined as a digital database system that records all transactions which occur on a peer-to-peer network. It is a technique to store data in a decentralized manner, which means that the system does not contain any single central authority that controls the data and transactions. The transactions take place directly between the end users(the sender and the recipient), without the interference of a third party.

Blockchain Technology was brought into existence by Satoshi Nakamoto in the year 2008 when he created Bitcoin, a digital cryptocurrency.

Blockchain enhances the collaboration rates among individuals and businesses within a peer network. It makes use of the five most important parameters required for collaboration in the world today. These parameters can be named as follows:

  • Economics
  • Currency
  • Value
  • Trust
  • Exchange

One of the key characteristics of Blockchain Technology is that, once data is added to a block, it is nearly impossible to change or modify it.

It allows people to trust each other and work in a peer-to-peer environment, without having centralized management.

We now know what Blockchain Technology is. So here comes the biggest concern: How does it support Data Privacy?

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How does Blockchain support Data Privacy?

Blockchain enables users to take back ownership of their data. It gives the control back to the user.

It is a decentralized system, which means no single organization can control your data. The layer of transparency and complete control inflate the user with feelings of trust and safety.

However, if blockchain transactions are transparent and everyone has access to a copy of the same, then what about the user’s privacy? How can one protect the data that is distributed?

Let us discuss some ways in which Blockchain technology strives to protect the privacy and security of the user and their data.

Decentralization and Consensus

The major factor that helps in maintaining the security of Blockchain is Decentralization. Where a traditional database stores data at a single place, Blockchain stores the data by copying it to several different places creating a distributed ledger. As a result, Blockchain requires taking up non-traditional approaches to ensure the privacy of data.

Every transaction on the platform is transparent and is stored not only on one computer but on a network of devices. Every device in the world participating in a blockchain has a copy of every transaction taking place on the blockchain. This implies that a blockchain is run and managed collectively by a network of people on the system.

Any new block being introduced in the chain by a node is first verified by the other nodes in the Blockchain network. The tampered blocks are rejected. If more than 51% of the nodes in the blockchain approve of the new block, only then it can be successfully added to the respective chain. This is known as the Consensus mechanism.

Blocks and Hashing

Blockchain, as its name suggests, is a chain or string of blocks. Each of these blocks contains three different components, namely,

  • The data or the information
  • The hash of the block
  • The hash of the previous block in the chain

The data in the block is in encrypted form and has its own unique identifier (sort of like a fingerprint). This identifier can be known as a Hash. Each block is responsible for storing the hash of the previous block in the chain. This helps in keeping the Blockchain system effective and extremely secure.

The first block in the chain, which does not point to any previous block, is known as the Genesis Block.

If something inside the block is changed, the hash of the block changes as well. That means the next block will now point to a different hash instead of the one before it (It no longer stores the valid hash of its previous block). This leads to all the succeeding blocks in the chain becoming invalid. Due to this feature, hashes can be used as a powerful tool to detect changes and tampering in the Blockchain data. Hence, ensuring that the information remains safe and tamper-free.

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However, this is not the strongest way of maintaining the security of the Blockchain. Due to the advancements in technology, it is extremely easy for someone to tamper with a block data and consequently recalculate the successive hashes in the block, within seconds. So how do you keep your data safe?

The answer to that is Blockchain’s amazing feature, known as Proof-of-Work!

Proof of Work

Proof of work is a Blockchain mechanism or technique that is used to reduce the speed of the creation of new blocks. As a result, if a person tampers with the data of one block, he/she will be required to recalculate the Proof-of-Work for each and all of the successive blocks in the chain. This makes it difficult for an individual to tamper with a block.

Proof of work and hashing mechanisms together work to mitigate fraud and thereby maintain the integrity as well as the security of the data in the Blockchain network.

Zero-Knowledge Proof

Zero Knowledge Proof is a great way to protect data privacy in a Blockchain system. In this technique, a person can prove to others that a given statement is true, without disclosing any additional information. During a transaction, the prover is required to prove to the verifier that a certain value (known by both the prover and verifier) is true and accurate, all the while excluding any extra information.

It is like proving to someone that you know what the secret is without actually revealing the secret to them.

Public Addresses

Every node(computer or other device) in the Blockchain network contains its own private key and a public address. When a node takes part in a transaction, it only shares the public address with the world, rather than the private key. This public address is a combination of random digits and letters. So, when the other people on the Blockchain network see this public address, all they are able to gauge is the transaction history and the public address. However, the financial and personal information, such as name, age, and location of the user remains anonymous. This system makes sure that the privacy of the user stays intact.

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Before we conclude the topic, let’s quickly see what the Future of Blockchain looks like.

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Future Scope of Blockchain Technology

Despite the distributed and transparent nature of the technology, Blockchain guarantees the security as well as privacy of the data. Considering its numerous benefits and notable features, a lot of financial institutions over the world have started investing in Blockchain. Blockchain also helps in mitigating the flow of black money. Apart from the financial industry, it finds its use cases in other fields as well, such as digital advertising, cybersecurity, and cloud storage. Therefore, we can say that Blockchain is a revolutionary technology that appears to have a bright future.

Conclusion

Blockchain is a hot topic in the world today. People are fascinated by its advantages and features. Every day new applications or use cases are designed to work on or with the blockchain networks. The main characteristic of blockchain being a decentralized system is what makes it the Hero and the talk of the town. It generates trust in users as there is no intruder or central authority in the picture when executing a transaction.

It effectively makes business operations more smooth, easy, and more efficient and will undoubtedly experience huge growth in the upcoming years.

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