Data is the new oil. But will it catch fire?
With an enormous amount of data recorded in transactions occurring 24×7 for 365 days a year, the privacy of personal and business data is in question. Fortunately, another film over the oil is the new player. Blockchain, a cutting-edge technology, offers a cost-effective data privacy solution through decentralization, transparency, and consensus.
How Does Decentralisation Protect Data?
Blockchain, in its most basic sense, is distributed ledger. It is a database that is not controlled by a central authority. Rather, it records data in the form of blocks and a timestamp is added to it. These blocks are added to the pre-existing chain, making the data immutable.
The linking makes it difficult to tamper with the data. If one block is changed, the other blocks linked to it will not approve of the change. Removing the necessity of a third party makes blockchain a trustworthy transaction platform for business and government operations rather than conventional means. It’s why every industry from banking to healthcare to online casino games uses this tech today.
Such immutable ledgers or blockchain records digital information. But you cannot edit it. Its core competence is the use of consensus.
- No centralized body has complete authority over the data
- Blockchain involves a peer-to-peer network of computers, where there is no governing entity.
- Thus, when a new block is appended to the chain, it is validated by the majority of the nodes distributed across a wide network.
- This is a Proof of Work consensus algorithm, namely Nakamoto Consensus for Bitcoin’s consensus protocol that verifies the authenticity
- Blockchain employs Zero Knowledge Proof, a cryptographic method to prove to the other party that the transaction is valid without revealing personal data.
- The distributed network keeps the record safe and protected.
If the hacker has access to a copy of the blockchain network, only a single copy of the data would be in malicious hands. The privacy of the entire network would not be compromised.
Transparency Build Trust
The decentralisation gives blockchain technology the edge for preventing any bad actor from tampering with any data. If any node is tampered with, the other nodes would cross-reference and the mal-node would be pointed out. This establishes the transparency of the blockchain, hence making the data trustworthy.
The transparency gives anyone with a personal node or blockchain explorers the right to view all transactions. However, the data being cryptographically encrypted is kept private with no individual having complete access to it.
Encryption- A Secure Lock
The data is encrypted using a mathematical function that converts the data into a sequence of numbers and letters, known as hash. Encryption of the data helps blockchain maintain data privacy. The personal and financial records of any person are not revealed while preserving the transparency of all transactions. Each node has a unique combination of public-private pair. The public key has universal visibility but the private key is specific to the node. To decrypt the data, the private-public pair is necessary.
- Each node has a public and private key
- The public key, derived from the hash function, is the address and is shared among the network. It does not give away any personal data
- The address is used for the exchange of digital assets on the blockchain
- However, the private key is assigned unique to each owner and serves as the cryptographic signature
- To tamper with the data, hackers would not only have to alter a particular block, but all those linked with it
- This might alter the private key or digital signature of another node
- This throws up a red flag and makes the entire peer network aware.
The 51% Attack
Hackers would require control over 51% of the blockchain to tamper with the records. However, this would incur an enormous amount of money and resources.
The top three mining pools, namely FoundryUSA, Antpool and Binance Pool, together make up around 56% of the total network hash rate. Equipment to host infrastructure equivalent to the combined pool would cost more than $10 billion, excluding maintenance and operational charges. The enormity of the charges renders blockchain data safe and private.
Timing and Cost- The Protective Layer of Blockchain
Apart from the cost associated, hackers would have to be precise with the timing. The altered blockchain network needs to be incorporated before the valid blockchain creation occurs, which is an impossible feat to achieve in large networks with high hash rates.
Although the risks are exposed in small network blockchains with lower hash rates, participants of larger networks are immune to 51% attacks with complete privacy of their data being maintained.
In today’s data-driven world, privacy and security are in a cauldron of questions. Blockchain, although a relatively infant technology, might be the answer to it. Decentralized identities and Proof of Work Consensus can go a long way in setting the path for the ethical use of data.