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How Can Blockchain Technology Help Improve User Security and Privacy?

Blockchain is one of the most in-hype technologies of our time.

Blockchain is a technology that promises data security and privacy protection as its core values. By enabling users to trade in a private and peer-to-peer manner, the blockchain enables an environment where no trusted third-parties are needed to verify or process a transaction.

But, the million-dollar question here is: whether blockchain is actually secure and private? And if so, how does it work?

In this article, we will try to analyze blockchain technology in terms of user security and privacy.

Blockchain and Privacy

Blockchain manages the privacy of its users, data, and transactions in the following three ways:

Peer-to-peer network

Blockchain was originally described as a decentralized network that allows peer-to-peer transactions of digital currencies (cryptocurrencies).

Peer-to-peer means the transactions in a blockchain network are direct between two parties (sender and receiver), and there are no intermediaries involved. So, how does it help with privacy?

Well, the traditional, centralized transactions, such as with banks, require users to trust third parties like banks with their personal data in order to execute transactions. To process any money through your bank account, you need to share your data with the bank, which puts your privacy at risk. Another problem is that all the user data is stored in a centralized system, which can be easily hacked or lost, posing a great security risk.

Blockchain is a decentralized network, which means the data or records are not stored with any centralized entity. In a blockchain, all the transactions and records are managed across a network of distributed nodes. 

Nodes are responsible for checking the validity of a transaction, so no third parties are required. Each new transaction in the network is verified and securely stored with all the nodes. Since there are no intermediaries needed and the network is decentralized, user privacy is maintained throughout the system.

Private/public keys

The blockchain system works on the cryptography mechanism to protect the user data from any breach. Each user in the system is given a unique combination of a public key and private key, which ensures that no one but the actual user can access his/her personal data and records in the blockchain network. How does it work?

Public keys are public, so they can be shared with other users. Public keys cannot be used to access a person’s account. These can only be used for making a transaction with the person. Consider the public address of your blockchain account, to which another user can send assets. In order to access your account, they will need your private key, which is only stored with the account owner. You can use your private key to access your account, funds as well as to transfer them to others.

Since the blockchain is a public network, all users can see each others’ transactions through their addresses, however, personal information such as the name of users is not revealed.

Zero-knowledge proofs

A zero-knowledge proof is a new method which was introduced in some of the latest blockchains to increase the privacy of users and accounts. This method works through zk-snarks.

In a traditional public blockchain, the addresses of the sender and receiver along with the amount being sent in a transaction are public information, however, zero-knowledge proofs are designed to maintain complete privacy and reveal nothing about the users or the transaction. They only confirm that the transaction is valid.

Based on the privacy criteria, blockchains are broadly categorized into two types:

Private Blockchain, as the name suggests, is private to those nodes who have been granted permission to participate and view/perform transactions.

Public blockchains, on the other hand, are available to everyone who wishes to access the network and access/see the transactions.

Blockchain and User/Data Security

Blockchain as a technology has great potential for improving data security. Where the world’s leading technology brands like Microsoft and Facebook are unable to ensure proper security of user data, blockchain provides a way for securely storing and managing data on its decentralized network. Let’s see how.

Encryption of data

Before storing any new data on the blockchain network, it is encrypted to ensure that the data cannot be modified or corrupted. Moreover, it also allows users to create and store only a cryptographic signature of data on the blockchain rather than storing the actual file while making sure that the data is untampered.

Blockchain’s decentralized network ensures that all copies of the data maintained by all the nodes in a blockchain network are the same, and no single copy can be modified without affecting all versions.

If someone tries to access or modify a file without permission, the signature associated will be rendered invalid, effectively telling you that the file has been modified or tampered in some way.

Decentralization

Another great benefit of blockchain is its decentralized nature, which ensures that the user transactions are not dependent on any centralized entity. The ledger, record of transactions, in a blockchain is not stored in any single place, but it’s distributed among hundreds of nodes who maintain the same copy at all times.

The lack of a centralized authority to verify each transaction makes blockchain relatively more secure and transparent. To verify and process transactions on its network, blockchain instead uses an advanced consensus system where transactions are validated by distributed nodes in an incorruptible manner. Many modern blockchains even employ a mix of these consensus algorithms to enhance security and privacy. For example, Titan blockchain uses a hybrid (PoW/PoS) system which is faster and more secure than traditional blockchains.

Since data in a blockchain network is stored across multiple computers, it remains secure and uncorrupted even if one computer/node is compromised.

Difficult to hack

Unlike centralized systems like banks, records in a blockchain network are not stored in a single, centralized place, which makes them nearly impossible to infiltrate. The blockchain ledger is distributed across multiple nodes located worldwide, so even if one or two of these nodes are compromised, the data still remains safe. In order to hack the network, a person will need to access and corrupt all the nodes in the network, since everyone has the same copy of the ledger.

Moreover, blockchain ledgers are regularly updated and maintained in sync to ensure that all nodes continue to have the exact same copy of the ledger. Since the data in a blockchain is distributed, it is quite difficult to access it with the hope to corrupt it.


Amit Gupta

Amit Gupta

Bio: Amit Gupta is the CEO and founder at SAG IPL, an India-based technology firm providing a range of service/software solutions in the web development, design, app development, and SEO industries.