Get the App
Broearn Events > Details

How does blockchain support data privacy?

Updated 2023-07-21 15:01:22

Whenever the transactions are processed in cryptocurrency, there will be transactions and details about time, amount, and balance. Those details about transactions also known as ledgers are encrypted in blockchains and provided to both parties. Furthermore, blockchains are securely linked sequentially. For the alterations of one blockchain, it is also required to alter the linking blockchains. That will produce a huge problem for hackers as quite a certain amount of work and time are necessary.


Without any medium or mid-Man, transactions are quite faster, cheaper, and more efficient for users. Moreover, blockchains have to ensure that all data and information in blocks are secure and protected in many ways for the best user experience. Let’s explore in detail how blockchain support data privacy in the new internet era.


5 Ways Blockchain Supports Data Privacy

1) Storing data in Distributed Ledger Technology

Blockchain store data in distributed ledger technology


Distributed Ledger Technology (DLT) serves one of the most important roles in blockchain technology. Distributed Ledger Technology is the technological system and protocols that let simultaneous access, validation, and record updating in the networked database. Additionally, it can permit the users to view the formations and alterations of data and provide data access only to necessary users.


DLT lets information be stored securely and accurately with the application of cryptography. The data is accessible using keys and cryptographic signatures. As soon as the information is stored, it will develop into an immutable and absolute database; the regulation of the network is inscribed into the coding of the database programming and govern the ledger. Due to the ledgers being decentralized, private, and encrypted, they are invulnerable to cybercrime or hacking. In order to commit a cybercrime to the ledgers, all the copies and data located throughout the network will be required to get attacked simultaneously for a successful attempt. Moreover, the peer-to-peer sharing and updating of records data make the entire procedure much faster, more effective, and cheaper.


All the devices on a distributed ledger network have a copy of the ledger. These devices are known as nodes - a network can possess any number of nodes. All the nodes have a record whenever there are changes to the ledger, such as relocating data from one block to another. Due to the fact that every node possesses a copy of the ledger, each one publishes its version with the newest transactions. When the network reaches a consensus about the legitimacy of the latest ledger, finalizations and encryptions are done to the transactions and applied as a basis data for further transactions. This is the procedure of how the development of the blockchain network really is and each block has encrypted information about the proceeding block, which will create certain impossibilities in alteration.


2) Protection by Encryption and Cryptography

Blockchain protects data privacy by encryption and cryptography


Various cryptography concepts develop and assist the blockchain network in many ways. In the blockchain, cryptography is applied for the protection of user data privacy, transaction information, and ensuring data consistency. Cryptography is a procedure that will ensure information from any third party throughout the communication process. It consists of two Greek terms, Kryptos means “hidden” and Graphein means “to write”.


One of the important applications of cryptography is cryptographic hashing. Hashing allows immutability in the blockchain. Encryption does not include the application of keys in cryptographic hashing. When the transaction is confirmed, the hashing algorithm puts the hash to the block, and a new unique hash is added to the block from the original transaction. Hashing remains to combine or make new hashes; however, the original information is still traceable and accessible. The single combined hash is described as the root hash. Hash Function supports linking the block and preserving the integrity of the data inside the block, and any alterations in the data of the blockchain can break the blockchain.


There are several terminologies relating to cryptography:


Encryption: Changing general text to a random sequence of bits.


Key: A certain amount of information is required to attain the information of the cryptographic algorithm.


Decryption: The opposite procedure of encryption, converting a random sequence of bits into general text.


Cipher: A mathematical function, i.e., a cryptographic algorithm that changes general text into ciphertext (a random sequence of bits).


There are two parts of cryptography: Symmetric-key cryptography and Asymmetric-key cryptography.


Symmetric Key encryption

Emphasizes an identical key for encryption and decryption. The symmetric key encryption method is also appropriate for secure website connections or data encryption. Also stated to be secret key cryptography. Both the sender and receiver can exchange and keep the key securely in symmetric key encryption. Moreover, it can be applied for bulk encryption, needing less processing power and faster transfer.


Asymmetric Key encryption

Applies different keys for encryption and decryption. This method applies public key and private key procedures. These public key procedures assist totally unfamiliar parties share information such as email ID. Private key assists to decrypt the messages and supports in verifying the digital signature. The mathematical interaction among the keys is that the private key cannot be obtained from the public key, but the public key can be obtained from the private key. Additionally, asymmetric key encryption needs a long period of procedure to execute.


3) Application of Smart Contracts

Blockchain has various applications on smart contracts to help protect data privacy


Smart Contracts are general programs placed on a blockchain that will operate automatically when predetermined conditions are met. They are applied for the automatic execution of an agreement. Therefore, all the participants can be certain of the outcome immediately without any third-party or mid-man involvement and time loss. They can also automate a workflow, triggering the next action when conditions are met.


The operation of smart contracts is carried out by following simple “if/when, then” regulations that are put into code on a blockchain. A network of computers performs the actions when predetermined conditions have been verified. These kinds of actions can be releasing funds to suitable parties, making registrations of vehicles, delivering notifications, and issuing a ticket. Updating is done to the blockchain as soon as the transaction is finished. Once completed the actions, the transactions are trackable and irreversible which helps enhance data privacy. However, alterations cannot be done in the transaction and only parties who have access can check the results.


4) Pseudonymization or Privacy Layer Method