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Blockchain and Data Privacy

Blockchain has been defined as a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. It enables the secure transfer of assets without an intermediary. It also provides a record of transactions that is fully transparent and displayed in real-time for benefit of participants.

Blockchain Network is characterized as follows:

  1. Decentralized, Distribution Networks: There is no central authority to regulate and it is spread over a wide network.
  2. Immutable Ledger: Once any block is developed in the network it cannot be changed.
  3. Consensus-Based Mechanism: An agreement that data is correct, by network participants.
  4. Better Data Quality: It reduces error as the transaction is verified by all members.
  5. Increased Trust: Its immutable nature increases verifiability.

Basic terminologies are as follows: 

  1. Nodes: It could be a laptop or server, where each node over a blockchain network stores entire information over a network.
  2. Miners: A minor is a node in the network that works towards the authentication of a transaction.
  3. Public and Private Key: Every node over a network is comprised of the public having a private key paired together. The public key is visible while the private key is possessed by the node only.

Note: All minors are nodes while all nodes may or may not be minor.

Example: Adding a Block to the Network

Adding a block to the network

Data Privacy: It is sometimes referred to as information privacy, which deals with the proper handling of sensitive data including personal data. Data privacy has regulated the manner in which personal data is collected, processed, stored to ensure proper handling of data.

Data Privacy Importance: Data is the most important asset in a business. We live in an era where companies find value in collecting and sharing data.

  1. The business had to meet legal responsibilities about the collection, storage, and process of personal data.
  2. Companies who work in sensitive data should consider the legal parameters to ensure that data privacy is outlined in legislation.
  3. The identification of distinct stakeholders is important for fixing liability, obligation, and determination of rights. The stakeholders have been divided into:
    • Data Controller: When a business collects data directly from the user then that business is referred to as data controller.
    • Data Fiduciaries: The person who collects the data or identifies the purpose for which data is collected.
    • Data Principal: Decentralized nature of the network there is no authority to seek consent or to whom consent is to be addressed, so anonymization could be used to secure data on  a network
    • Data Processors: A natural or legal person, public authority, agency, or other body which processes personal data on behalf of the controller.

Applying regulation in a private blockchain is less complex as the participants are restricted and there is a central authority that can provide and regulate protocol itself. However, in the public blockchain, it comes very difficult for the person who is participating in public blockchain as there is no central authority.

Pruning: This is used in the situation where historical blocks of data beyond a certain timeline can be deleted, but in blockchain deletion of some data will require the change of a number of every node in the network which is difficult to achieve.

Forking: It basically starts its own parallel line of transaction where from which tampering or data has been deleted, then forking will starts its line of transaction absolutely new without having that one block in place.

Application of Data Privacy to Blockchain: If there is no personal data involved with the issue then there is no privacy issue and if yes, then one might be under the General Data Protection Regulation, and data privacy is forbidden unless you have the legal basis to proceed with the data. Most data is prohibited unless certain exceptions make it permissible.

Recent Trends in Data Privacy Laws

The following are some of the recent trends in data privacy laws:

  1. The growing threat of disinformation: During the pandemic stay at home and people look for the internet as a primary source of information, which provides a fertile ground for the spread of fake news.
  2. Employee monitoring exposes employers to legal risks: When work from home started the employer got uncomfortable as they have no idea and they were not able to monitor the work of the employee.
  3. End-to-End encryption legal battle will continue: The department of justice says by making a point that end-to-end encryption poses a significant challenge to public keys.
  4. Legal liability will lead to companies collecting less data: Most profitable businesses stores maximum data for understanding the target markets. Stronger data collection laws ensure the organization limits data collection.
  5. Privacy executives will report to the CEO: According to the Forbes report, 84% of the executives were targeted by cyberattacks in the past years. So, there is to be an increase in the awareness of the risk and potential liability.

Tensions Between Blockchain Technology and Data Privacy Requirements

Member of the laws when drafting recent data privacy laws and frameworks do not appear to have focused on blockchain technology and its unique features. Blockchain technology has peer-to-peer network architecture for centralized control-based data processing.

Data privacy issues and properly applying laws has increasingly contributed to the business for success:

Potential Mitigation Step

Several risk management strategies can be developed when considering blockchain technology:

Future of Blockchain Privacy Management

From the perspective of privacy compliance blockchain technology appear to be at least ambiguous. Processing data on a public blockchain may involve significant business risks.

Suggestion from technologist:

Taking one step further, self-governing blockchain-enabled identity and data management solution to maintain data and privacy policy.

Comparison of blockchain Privacy Systems

The two primary types of blockchain are:

1. Public blockchain: like Bitcoin, anyone can download the software and become a network participant. Example- Ethereum. It is a fully decentralized network system. The best part about it is they make sure all the participants have equal rights. To maintain transparency everyone can see the ledger.


Why use it?

2. Private Blockchain: 


Why use it?

Use Cases For Blockchain in Security

The following are some of the use cases of blockchain in security:

Challenges on Applying Blockchain Technology

The following are the challenges faced in applying blockchain technology:

Legality of Blockchain and Privacy

As the companies begin to implement blockchain they tried to implement some contracts related to the use of blockchain. The governance parties will decide with certain conditions that are fulfilled for a particular transaction that is to occur in blockchain or not.

Cases of Privacy Failure

Conclusion: Blockchain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded. The bitcoin and other cryptocurrencies are not managed by a single organization which means that it’s public and open-source. Bitcoin can be used for peer-to-peer electronic cash transfers, without a middle man.

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