Blockchain-based online privacy solutions have been in the minds of online users for the last couple of years. With a spate of scandals and leaks taking place, people are understandably upset about the way their data is being used and stored.
User data is a precious commodity in the digital age, and more people are becoming aware of that. Privacy-minded users feel deterred to use social media and other platforms due to the handling of data. However, with the blockchain, it is possible for privacy to be upheld.
Privacy is a fundamental element of the blockchain, owing to its roots in cryptography. Transactions are cryptographically verified by other nodes in the network and then added to the blockchain. But is blockchain the ultimate solution to privacy online?
Blockchain also has potential in enhancing cybersecurity, which will help ensure that data remains secure. This is because it changes the way data is stored, thanks to the digital ledger properties of the blockchain. Data theft, fraud, and manipulation are difficult to achieve due to the immutability and decentralization of the technology. In order to make any changes, the entire network would need to be taken down as each ‘node’ of the network stores a copy of the blockchain.
Then there is also the decentralized aspect of the blockchain. When data is stored in a centralized system, it is much easier for criminals to gain access to large amounts of information as it is stored all in one place. With a decentralized design, there is no single point of entry to the entire repository of data, which reduces the impact of breaches significantly.
There is also the ability to protect against the increasingly common DDoS attacks. These ‘distributed denial of service’ attacks are a means for hackers to knock websites offline by sending fake traffic to an extent that crashes the website. By decentralizing the DNS however, it is possible to reduce this vulnerability. Having this infrastructure distributed across a network of nodes means that potential hackers would, again, have to target all nodes to take it offline.
Of course, this hasn’t stopped hacks, scams, and leaks from occurring. A lot of privacy and security with the blockchain relies on the end user, as they are generally the weakest link. If someone accidentally leaks their private key instead of the address then all security will be lost. In the same way, if the user reveals transaction information, then the element of privacy is lost.
Anonymity While Browsing Online
Privacy vs anonymity in crypto is an ongoing debate. While they do have their differences, looking back to how crypto is used in adult entertainment to enable purchases to be made privately and anonymously is clearly a major benefit. However, this goes beyond being shy about online purchases. Especially at a time where online shopping is growing, remaining anonymous can help prevent private information being gathered.
Cryptocurrencies are seen as a secure payment method online. It upholds the privacy of the buyer. The likes of Monero were created for this very purpose. So-called privacy coins such as these utilize fungibility, privacy, and decentralization to ensure anonymity. Fungibility means that all coins are interchangeable and thus indistinguishable from one another. Decentralization means that there is no central authority that has access to all data. Privacy means that transactions are not traceable or observable by others. Thus, these privacy crypto coins are ideal for the purpose of upholding privacy online.
There are legal challenges that can prevent true anonymity with cryptocurrency and the blockchain. Due to fears of money laundering and terrorism funding, verification procedures such as AML (anti-money laundering) and KYC (Know Your Customer) have been put into place on many exchanges. While these requirements may differ from country to country, major exchanges will likely see it as a major risk management consideration. These explicitly involve users revealing their personal identity information. Of course, there is an obvious need for preventing illegal activities through cryptocurrencies and it looks unlikely that these will go away.
Enforcing GDPR Compliance with the Blockchain
GDPR has proven to be an important consideration when it comes to privacy and the handling of data online. It standardized the data protection laws across the EU and ultimately provides more power to individuals over their personal data. One such way this is achieved is through penalties and fines. It is therefore in the interest of companies to comply with the regulations. It is easily amongst the most strict privacy regulations in place, making it a good point of comparison.
Blockchain technology is generally regarded as being privacy-minded and so may be an ideal solution to many of the problems posed by the more traditional data storage systems. Private blockchains and smart contracts, for example, are able to provide stringently-enforced permission-based access to data, where only verified individuals are allowed access. This enables anonymity on the blockchain.
However, there are aspects of the technology that put it at odds with the regulation. Most prominently is the right to erasure. The blockchain is immutable, decentralized and permanent, meaning it would be near impossible for information, such as the personal information of data subjects, to be removed. This is a major roadblock that will need to be overcome for blockchain to become a viable solution for the GDPR.
Some argue that the two entities are incompatible, but others claim that they share many principals in privacy and security. While it is not impossible for blockchain tech and the GDPR to coincide, there are steps that need to be taken in order to ensure full compliance. These may strip away some of the core elements and strengths, however. Hopefully, this legislation won’t stifle or deter the development of blockchain projects.
Blockchain and Privacy Go Hand in Hand
Blockchain has many innate strengths that make it ideal when it comes to privacy. It is decentralized and changes the way that data is processed and stored. For the purposes of abiding by the GDPR, it also offers many useful data protection capabilities, though there are other aspects that make it inapplicable.
However, the blockchain isn’t the be-all and end-all when it comes to online privacy and data protection. There are still many steps that users should take to uphold privacy. It is only as strong as the weakest link. Ultimately, blockchain technology is just a tool to be used and built upon.
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