Is blockchain a risk to privacy?
Disclaimer: This article is intended for US audiences.
While blockchains offer anonymity, they can compromise privacy due to potential insider access, data transparency, and immutability, allowing personal information to be exposed and exploited.
As more governments embrace the technology, the balance between transparency and privacy becomes more complex, making it easier to access and monitor citizens’ digital assets and raising privacy concerns.
One of the main advantages of blockchains is the anonymity they offer their members. No one knows who you are as long as you follow the rules and participate. On the surface, this may seem like an ideal way to protect privacy.
However, a closer look at how blockchains work shows that they can pose significant threats to the privacy of both members and non-members.
PEPE Unchained: A Layer 2 Solution for Privacy and Security
Amid these concerns, new blockchain projects like PEPE Unchained are emerging with solutions designed to address privacy and security issues. PEPE Unchained is a Layer 2 blockchain built for speed, security, and low fees. The platform is powered by the $PEPU token, which drives the entire ecosystem.
PEPE Unchained leverages advanced cryptographic techniques and consensus mechanisms to enhance the security and privacy of its users. By building on top of existing blockchains, it offers faster transaction speeds and lower fees, making it more accessible while maintaining high levels of privacy protection.
The project aims to provide a more secure environment for digital transactions, which is crucial as blockchains expand beyond cryptocurrencies to include various tokenized assets and smart contracts.
Protected data
Most blockchains employ a variety of privacy protection tools, such as data encryption, consensus validation, cryptography, and the distributed architecture of the chain itself. This enables a wide range of applications, including secure messaging, storage immutability, ownership verification, and non-repudiation of software and assets.
All this has contributed to blockchain becoming a valuable addition to companies’ business models and an important driver of the digital economy.
All of these measures are intended to prevent outsiders from accessing the data in a blockchain, but what about the insiders?
Anyone who has a valid key for a particular chain can supposedly see all the data it contains – assuming there are no rules preventing this, which is not often the case. What happens when private information such as tax IDs, and health or financial data ends up on a blockchain?
And, worse still, what happens if this information is not put into the chain by the people it identifies and who have no access to it, but by a third party?
Data protection vs. transparency
An article by the international law firm AMLEGALS points out that while there are laws regulating the use of personal data, these often run counter to the transparency benefits of blockchain.
After all, transparency means being visible to everyone, including members of the chain who are anonymous and whose intentions are largely unknown. This can be particularly problematic with public blockchains, which are accessible to everyone and can act as veritable clearinghouses for all types of data.
And now that applications like smart contracts automate the sharing and copying of data, enforcing a rules-based privacy system becomes more difficult, especially when data crosses international borders.
Survey and analysis
Additionally, blockchain is emerging as an effective marketing tool, meaning it can be used to track not only personal data, but also purchases, page views, and even login credentials.
Some of this data can be life-threatening if it falls into the wrong hands, and even seemingly innocuous information can be compiled and analyzed to make statements about people that may or may not be true, such as whether they are financially burdened or have a serious illness.
And this data can be used to cross the line from simple marketing to exploitation or even coercion.
According to MIT professor Catherine Tucker of the Sloan School of Management, marketing strategies based on blockchain information can also pose risks to individuals due to the immutability inherent in the technology.
Records stored in the blockchain remain there forever, which can lead to false impressions about a person’s current living conditions.
The consequences can be minor, such as someone who was looking for shoes last year and not needing a new pair this year, or major, such as someone who committed a crime ten years ago and therefore has no credit today.
Government access
At the moment, blockchain has attracted the most interest from the private sector. But what happens when governments get involved and link blockchain to national identification programs, for example?
Brazil is doing this right now with a private blockchain developed by a company called Serpro.
The aim is supposedly to simplify access to government records and services and to combat crime and even corruption in the public sector.
At the same time, the country is developing its own central bank digital currencies (CBDC), which will likely exist on a different blockchain.
Exactly how much data will flow into one of these chains is unclear, but one thing is certain: it will make it much easier for authorities to see what Brazilians are doing and how they are using their digital assets.
Conclusion
This is perhaps the problem with blockchain and privacy. Both the government and the private sector already have access to vast amounts of data on virtually every citizen in the world.
Blockchain simply makes it easier to access this information. And in many ways, blockchains are more secure than traditional storage architectures. But they are also more open to those who have legitimate access. However, it is not always easy to determine who has joined a chain and for what purpose.
Ultimately, the trust created by the nature of blockchains is not universal. Trust only exists between those who have access to the chain, not between those who need to protect personal data.
ADVT.
This article is brought to you by Clickout Media.
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