While blockchain data privacy features can be leveraged to protect consumers such as enabling self-sovereign identity, blockchain technology poses massive security issues to users who are unaware of the technology’s risks. If designed and executed well, however, blockchain can create a complex and completely private network of computers around the world. Blockchain currently faces problems with consumer privacy and safety that have to be worked out before it can become the computational norm. Some of these issues include:
Public Ledgers and Blockchain Data Privacy
While the public ledger was a core aspect of Bitcoin’s success (anyone could verify transaction records thought the self-perpetuating blockchain) the feature posed and continues to pose problems for Bitcoin (BTC) and all coins that use this method. While the ability for any user to look at every transaction on the blockchain was good for verification, it quickly became a tool for tracking people and their spending habits. Police and criminals can use the blockchain to find people through use of their digital assets. This is where consumer data can get breached. Learn more about blockchain security.
Consumer data isn’t only accessed and used by outside individuals, however. A fully centralized blockchain would award the owner/creator full control over the users’ data. Blockchains like Cardano (ADA) are fully decentralized, meaning the community controls the project and no one individual or group controls the blockchain. On the other hand, a nationally centralized blockchain would be a dystopian nightmare for any citizens living under it. The first country to implement something like this will most likely be China. Considering the Chinese Communist Party has already implemented a highly monitored and Chinese-exclusive internet and now its own national digital currency, it wouldn’t be unlikely. If Chinese citizens were to be forced to use the blockchain, it would threaten the self-sovereign identity that other blockchains could offer.
However, blockchain and technology built on top of it have revolutionized what privacy means in the field of economics. Bitcoin proved its concept when the coin was used as a P2P (peer-to-peer) cash-sending system like PayPal or Venmo as well as online marketplaces. Sellers of illicit goods on dark web marketplaces like The Silk Road quickly took up BTC for its decentralization and privacy from authority figures. Monero (XMR) takes the technology even further with its use of stealth addresses. By creating encrypted, one-time addresses used to denote interactions between users on the ledger instead of their real wallet addresses, complete consumer privacy can be achieved. This level of security reaches between the user and the network, other users, and any outside onlookers.
One typical area of concern with blockchain data privacy is around digital currency wallets and users’ lack of awareness of data privacy risks such as when renaming the wallet to something personal such as a password which can be visible to everyone on the public blockchain.
Finally, knowledge and control over personal data is the most important blockchain feature for implementing complete consumer privacy and security. As big tech companies continue to monopolize the personal data of internet users, alternatives are invented to protect user data. Where blockchain technology provides absolute security to a networks transactions by writing on immutable data, the Tor project serves as a complimentary web browser that gives total privacy. It does this by sending users through multiple virtual networks before finally landing on the website. However, it is significantly slower than most other web browsers because of this redirecting as well as its indexing. If Tor worked with blockchain tech, users could comfortably leave mainstream browsers that sell their data and censor their search results. Tor could also connect to blockchain-powered ecosystems like digital supply chains to create a safe and knowledgeable shopping experience on the web. This combination of security and privacy would make the perfect space for consumers to safely interact–free from any centralization, users can achieve full privacy and security in their transactions.