Blockchain and Privacy: the New Frontier

It's hard to enter a technical conference these days without at least one party bringing up the advancements of blockchain. With support from big-name players including IBM, J.P. Morgan Chase and Microsoft, and the foundation behind the advancement of cryptocurrencies such as Bitcoin, researchers now argue blockchain may be the ultimate disruptive technology. Certainly if advances in development continue, the technology is set to become a major game changer, shaking up the finance industry and potentially many others.

If blockchain is to succeed however, privacy professionals need to start getting involved with the technology's development. It is crucial that we to understand what we're dealing with, the technology's strengths and weaknesses, that we may be able to properly advise both when blockchain technology should/shouldn't be adapted, and get involved in the development of possible solutions so that the technology can be adapted without unintended potential harm. For blockchain to go forward and be used in projects that collect personally identifiable information, the community needs to understand the implications against personal privacy, and challenges their product will need to address to properly respect personal information rights.

What is Blockchain?

Understanding blockchain is critical before considering implementing the technology into an existing or new practice. While blockchain offers a bevy of opportunities, it is fundamentally different than other data storage technologies seen in traditional computing. blockchain is not a type of software, a program or a scalable database: it is a new way of verifying, saving, sharing and storing information.

One way to look at blockchain is to think of a governance model far more familiar: autarchies vs democracies. Both are ways societies come to lead the population, distribute power and information, and (ideally) keep things running smoothly. Up until now, traditional data models have operated under the autarchy model: while information is stored, accessed and shared through various ports, in order for updates to sync and changes to be authenticated, all data has had to move through a primary database as the overseer. Even cloud systems and shared documents, which seemingly allow access and editing capability through multiple devices and accounts, eventually sync into one single program that overseas the execution of code, performs checks, balances and assigns attributes against information coming and going.

Now consider blockchain: instead of that single database rule who authenticates updates before passing them forward, when information is added or modified it moves to a group of digital overseers, called nodes. The nodes together verify the information, run checks including checks against other 'blocks' of connected information and, upon consensus, distribute the updated information to all others on the network. The nodes complete their task by giving information an official seal: a time stamp that indicates changes from the last update and that yes, the update is approved, and a connector (the hash) that links their approved updates to prior approved updates, developing the 'chain'. As there is more than one node, the information has much stricter requirements for verification. If an evil advisor (such as an outside hacker) wishes to overthrow the system, they've got to get past or control not a single leader, but a group of experts: if something is off, the changes won't go through and the outside party's plans for takeover are thwarted.

While blockchain was originally devised as a theory only, thanks to increases in computing power and ability, practical examples and uses are coming into effect. The most popular example of blockchain technology is with money: 'bitcoins', or digital currency are gaining interest and becoming more popular as they offer advantages over traditional money management systems, with some experts expecting them to completely uproot the financial industry. Bitcoins however, are but one popular example: other potential applications for blockchain are considerable.

Consider, as a colleague once described, the possibilities with food supplies, such as beef. Those in the meat processing industry know it is rife with problems, contamination of original product and logistic fraud among them. Blockchain offers solutions: what if, should contaminated meat be discovered, production managers could trace the source of infected beef down to the very cow, with the ability to test the rest of the herd and determine which other products were safe? What if, upon discovery of a contaminated cow, producers could do the reverse and determine exactly what products the contaminated animal had been used in, down to the shelved item or product sold? Another example would be reduction of product fraud: suppose someone raised cattle in India, then, when shipped to a buyer in Italy switched the bill of sale to claim the beef had originated in Argentina. Argentinian cattle fetches a higher price than Indian, and it would be exceedingly difficult for the importer to recognize scamming, particularly from the product alone, resulting in higher payment for a lower grade product. With blockchain however, if that cow had an accompanying digital marker that could not be modified, it would be possible to trace origins down to the cow, and have more trust in purchasing product. 

 

Privacy and Blockchain

So where does privacy fit into blockchain development? As described above, the technology offers potential breakthroughs in how it can be used, but it is important to understand that because it operates differently than traditional computing models, it has different strengths and weakness in how it handles information. Unfortunately, this means things do get complicated when adding personally identifiable information and privacy legislations into the mix.

 

Blockchain Strengths for Privacy

On one hand, blockchain unquestionably offers security benefits that are a boon to keeping data private. While it is mistaken to believe all data within a blockchain is encrypted, encryption of data can be defaulted easier within blockchain, including the ability of blocks of data to be hashed. While traditional cypher models need to decrypt the data into plaintext at some point in the process to perform operations, this is not so with blockchain hashes: data can be processed without use of a key. Getting access to encrypted information on a blockchain becomes even more complex when you factor in that the data itself is by default split up: even if one block is decrypted, in order to read a full record the hacker will need to decrypt all other blocks connecting the chain, which use different algorithms in their security. Picture a fantasy film or game where the protagonist must go through multiple challenges to acquire different pieces of a torn scroll: you cannot read the data without all pieces, and gaining access to all the pieces is no easy feat. blockchain isn't impervious to attacks, but it is certainly much stronger against the cyber onslaughts that have recently devastated industry leaders.

Blockchain data also benefits from much stronger verification controls than traditional models, which limits the ability of unauthorized parties to alter data. Under the Canadian PIPEDA, for example, one of the privacy standards is maintaining accuracy of records. In order for updates or changes to be accepted, data entered into a blockchain goes through a rigorous screening process. As a result, there is a higher quality of data contained that is complete, consistent and accurate. The potential for using blockchain to authenticate identity is particularly high: instead of relying on passwords or providing gatekeepers with identifiable information that can be stolen, identity is proven by assigning a code that is significantly difficult to copy or fabricate.

 

Blockchain Privacy Weaknesses

While blockchain is stronger at providing encryption safeguards and verification, it is weak in areas considered critical for privacy: most notably access control and the destruction of data. First, blockchain lacks the flexibility of other systems when it comes to allowing or removing access to information. For a blockchain app, access is all or nothing: either access is via public blockchain, and can be seen by anyone in the community creating a project, or a private blockchain where permissions are given to a select group of individuals. The private blockchain might appear ideal, save that permissions cannot be added and subtracted, or limited in the information they may have access to. As a prime example of conflict, most privacy laws require an organization to grant access of information to individual users. Under current models of blockchain this is not possible: if a user is granted access to their information, they are granted access to all information within the blockchain; not only a small segment for only a small portion of time. Other incompatibilities include Article 20 of the GDPR, which requires the portability of data, and Article 25, where new technology cannot be implemented without privacy controls built-in; effectively preventing existing blockchain technologies from being usable on the European market unless they do not collect personally identifiable information or meet user access and controller requirements from the get-go.

The other big problem with blockchain and privacy is that there is no way to destroy information, or for users who interact with the data to remain anonymous: once data enters the chain, it's there forever. The inability to destroy information again, flies right in the face of privacy legislations, including state laws in the U.S., which require businesses to erase certain levels of personally identifiable data after the intended use. Proper destruction data, particularly when the data is no longer needed for it's original purpose, provides a safeguard against its unauthorized use for different objectives in the future. 

Blockchain's privacy problem is a known concern. In the case of cryptocurrency, banks are already working to overcome one major challenge: at present all transactions are recorded on a public ledger. The owner who spends the bitcoin might be anonymous at the time of transaction, but their purchases certainly aren't: all it could take is a little lining up between bitcoin and online wallet, or an analysis of spending history, to ID the purchaser.  Likewise, consider the above example of a blockchain that tracks meat, right down to when the final cut was sold. Suppose at the end of the processing, a transaction was recorded per animal on who made the purchase. Now suppose the person who purchased the meat was heavily involved with a community highly against animal consumption, and, after the purchase history was accessed by members of the community, resulted in discipline. This might seem a bit much, until you discover studies have proven that when individuals operate outside expected dietary norms, it can be uncomfortable.

Finally, it is important to recognize that while blockchain is stronger than traditional models, there is an error in assuming all blockchains are safe: while harder to get at than traditional models, blockchains can be attacked, most notably through a heavy-handed DDoS, such as one that uses unprotected Internet of Things devices as a launching pad. Blockchain after all, while more secure, is created by humans, and is as prone to bugs and loopholes as any other platform, which hackers can find and exploit, and if adapted into more organizations will increasingly be used by humans without advanced technology backgrounds, which hackers love to exploit. A more famous ‘hack’ of blockchain involves bitcoin alternative Ethereum, another blockchain-based cryptocurrency, where attackers used a vulnerability in an Ethereum project code to steal 3.6 million units of cryptocurrency, worth $64 million dollars. The attack was handled, but not in a way that would work with real-world data or transactions: try, just try to explain the necessity of a parallel universe to a law firm.

For privacy professionals and blockchain enthusiasts, we need to start looking if there are ways blockchain can evolve and be adapted to fit current privacy frameworks. Likewise, we shouldn't be afraid to turn the problem around on its head:  are there ways blockchain could increase privacy, individual ownership of personal data, and the right to be left alone? Although at present using blockchain to store sensitive, personally identifiable information is not feasible, future solutions must be ironed out. There’s no ‘if’ for blockchain: to many large players are involved, and the technology has too many advantages to be ignored, and thanks to recent high-profile hacks many will be looking towards the technology if it can offer greater defence for safeguarding sensitive information assets. It's up to both the privacy and blockchain community then, to come together to discover solutions that work. 

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