How is Blockchain changing Digital Privacy?
The revolutionary technology is providing new ways to protecting digital identity.
Over the last five years, Blockchain technology has taken the digital and financial world by storm. However, while Blockchain is most commonly associated with cryptocurrencies such as Bitcoin, the power and potential of the technology goes far beyond virtual assets.
We’ve already written about how Blockchain is poised to change a whole range of different aspects of modern, digital economies.
In this article, we’re going to explore how Blockchain technology is affecting the way information on our digital identities is being stored and distributed online, and how it is poised to revolutionize the way we conceptualize the idea of digital privacy and security.
But first, let’s have a brief reminder of what blockchain technology actually is.
A blockchain is essentially a shared database that is composed of individual pieces – or ‘blocks’ – of encrypted information.
In order for a piece of information to be registered on this distributed ledger, it needs to first be verified by participants of the ledger. This is accomplished through randomized steps that see pieces of each encrypted block being verified by automated algorithms from the computers of participants. Different blockchains have different levels of access to participants:
- some are private,
- some are public,
- while some offer hybrid models.
Once a piece of information is placed on the blockchain, it is almost impossible to alter or change. The entire history of transactions and movements on a blockchain are visible to all of its participants.
What this means is that unlike centralized databases, where all of the information is stored on single servers or data points that are controlled by a limited or select group of people – blockchains are distributed and decentralized. All of the information stored on the blockchain:
- is accessible to everyone who participates on it;
- it is distributed throughout the network of devices that are part of it.
It is precisely this decentralized, encrypted nature of blockchain that gives it its power – there is no need for a centralized authority to verify the integrity of a blockchain’s contents, and the data that it contains is encrypted.
This has obviously created challenges for regulatory authorities seeking to prevent money laundering and criminals using the anonymity latent in blockchains for nefarious purposes.
But it has also created some interesting, previously unthinkable ways for storing and distributing data securely.
Blockchain and Data Privacy
Now, you might be thinking, what has a technology that was built for realizing anonymous transactions of virtual currencies got to do with Digital Privacy?
Well, the answer is relatively simple: information.
For example, Bitcoin exists and is traded on its own blockchain. It is essentially impossible to hack this blockchain to create fabricated values of Bitcoin, as it would involve having to hack pretty much every computer or ‘node’ that is a participant on the blockchain, and alter the data found on it.
There is now a growing industry of companies – known in industry jargon:
- as FinTech (for Financial Technology)
- or RegTech (for Regulatory Technology),
that are looking for new ways to use blockchain to verify customer data for Know Your Customer (KYC) processes.
This is the logic: every year, the amount of large-scale data breaches continues to grow in worrying numbers. Every day, we are passing incredible amounts of information to different companies – from our credit card data to our addresses, age, telephone numbers, emails, passport numbers – the list goes on.
Where does all of this data end up? Well, most of it gets stored in large databases that make for very juicy targets for hackers who want to use that data to either extort people, or to fabricate identities that can then be used for criminal activity.
But blockchain technology is offering a way out of that. New blockchain-based Application Programming Interfaces (APIs) have been developed that allow for someone to have a blockchain based identity that demonstrates that their credentials have been verified and adhere to various levels of requirements, without actually having to hold their information online.
This means that through using blockchain powered software, users can now just upload their information once, have it stored securely on a blockchain, verified by the third party, and then go on to use that verification to gain access to products such as bank accounts that would normally require them to submit large amounts of their data.
This has the potential to both significantly speed up KYC processes for privacy sensitive processes such as opening a bank account or a incorporating a company, as well as securing that information so that it is much harder – if not impossible – to access by hackers.
While blockchain technology was once considered only relevant to how cryptocurrencies can be stored and exchanged, it is now becoming clear that it can offer new and highly innovative solutions to a whole host of other digital areas and issues.
Blockchain technology really does represent an enormous technological leap from what we had previously – it can easily be considered one of the most important technological innovations since the Internet.
At Bocasay, we always keep our finger on the pulse of new technologies, and how they will affect – and empower – businesses going into the future. Get in touch at any time to discuss how we can work together on your company’s technological journey.