Blockchain Privacy Explained
Since the dawn of the internet, the privacy of the individual user has been been in a consistent and steep decline. Blockchain technology reinstates this basic human right. In this segment we will examine what aspects of blockchain play a role in rebuilding privacy and why it is so important.
On a daily basis a regular internet user agrees to countless cookies that monitor their online activity and concede some of their most intimate information to social media platforms, all with the constant awareness that everything that is done online is being closely observed. This information is used to build eerily detailed profiles on each user, either as a means of monitoring or marketing products and services more efficiently. The problem with this state of affairs is that organisations use personal information without a users’ full understanding and therefore without an informed and honest agreement to do so.
This is one of the main ways in which blockchain sets itself apart from the traditional models of technology that are common today. Blockchain does not require any identity for the network layer itself. This means no name, email, address or any other information is needed to download and start utilizing the technology. In the case of Lisk, a user simply needs to install the Lisk Hub, carefully noting down their passphrase, and they are instantly ready to send and receive LSK tokens on a blockchain.
This lack of a hard requirement of personal information means that there is no central server storing users’ information, making blockchain technology considerably more secure than a central server which can be breached, putting its users’ sensitive data at risk.
This aspect of the technology is not only beneficial for the individual user but also to the entities and corporations that have traditionally stored personal data too. This is due to the fact that such companies are starting to appreciate that large storages of data can be regarded as a toxic asset, in that the risks outweigh the rewards. Such data provide companies with opportunities to market products more effectively, but if hacked, a phenomenon that is happening with increasing regularity, the financial implications can be huge, if not crippling.
The identity of each user is concealed behind cryptography. This makes it arguably impossible to determine the identity of an owner of an account. As such, there is little denial that privacy is one of the main qualities of blockchain technology and one of the foremost reasons such a significant amount of people find the technology so appealing. However, it must be noted that not all cryptocurrencies and blockchains are entirely private. As all transactions are recorded, including the sender, receiver and the amount transferred there have been arguments raised that this information could be easily accessed, especially if the user’s public address is known.
The legislation safeguarding personal data in the European Union is the General Data Protection Regulation (GDPR), which states an individual has the right to demand that all data stored and associated with them is removed. On the one hand private keys are not innately linked to an identity, however on the other hand there is still a notion of users leaving behind a ‘digital footprint’. One approach to this issue is that in blockchain technology by simply forgetting their private key, a user ensures that their information is no longer accessible. However, this still does not entirely comply with the letter of the law, which opens the interesting notion of how legislation will adapt to the nature of blockchain or try to shape the technology.
The levels of privacy varies between private cryptocurrencies and there are platforms that offer higher levels of secrecy. However, it must be appreciated that despite all of this emphasis on privacy, blockchains integrity is rooted in its transparency, which can be a confusing notion at first.
Blockchain Transparency Explained
One of the most appealing aspects of blockchain technology is the degree of privacy that it can provide. However, this leads to some confusion about how privacy and transparency can effectively coexist. In this segment we will explore how blockchain balances the two concepts to the benefit of users.