The way to solve the blockchain privacy problem
In 2020, the scale of global blockchain spending will reach 4 billion U.S. dollars, nearly doubling compared to 19 years. Blockchain has the ability to use smart contracts to verify data and provide transparency between network participants through immutable shared data, which has aroused the attention of people talking about the technological revolution. However, this benefit is a double-edged sword because the corporate world is skeptical about sharing sensitive data on ledgers where information cannot be deleted. The good news is that currently Fortune 500 companies have announced uni-party and multi-party blockchain trials, such as Starbucks and MetLife. Data privacy issues have not stopped them, and the corporate blockchain world has taken these steps to change their minds.
Store references to data on the blockchain
The easiest way to avoid this data privacy issue is to not put the data on the chain. A popular method is to share an anonymous ID on the blockchain and use that ID to obtain data from another system. For example, MediLedger is a supply chain pilot in the strictly regulated pharmaceutical industry. It uses blockchain to track the transactions of medicines, and then uses another private peer-to-peer application to transmit detailed information about medicines. What is passed on the chain is the anonymous identifier of the drug. This can keep transactions light, allow companies to regulate data access, and use proven methods to protect sensitive data. MediLedger actually goes a step further and uses zero-knowledge proofs to anonymize transaction details (which I will cover later).
Use blockchain to verify instead of sharing
The real power of the blockchain lies in its ability to verify data. In addition to putting the actual information on the chain, the solution can combine the unique elements of the data and share its hash value on the blockchain. Hashing is an encryption method that generates random unique values from input. In this case, the generated hash itself will not display any information, but it can verify the existing document by checking whether the same hash is generated when input into the function. The choice of data input can also be to create a hash without sampling any key information so that regulations can be complied with. Companies have reliable data exchange methods, but verification time is long and costly. By using the blockchain as a validator instead of data storage.
Use zero-knowledge proof to make transactions anonymous
On the basis of the first two trends, the blockchain pilots took additional steps to protect data security and replaced the hash transaction details with zero-knowledge proof (ZKP). ZKP allows transactions to be verified without disclosing transaction details. Now, the two companies can communicate on public networks and are completely anonymous. This is because what is placed on the chain is a proof that is encrypted and verified by the recipient, not the data that enters the transaction. This shift in data verification methods solves data privacy issues and provides support for industry associations.