Blockchain application series | Data privacy and blockchain | Article – HSBC VisionGo
Data security and privacy have always been major concerns for businesses and consumers. The breach of data protection brings huge losses to both the business profits as well as the reputation. Sometimes it is everything but the situation, the platform may work perfectly and receive few complaints or negative feedbacks until it suffers a major malfunction, or worse, a data leak. All centralized managed data platform risks mishandling clients’ information.
The users increasing concern and awareness of privacy issues is another trend that should not be ignored. Whatsapp is losing millions of customers to Telegram as they believe the messages pass on the platform may be accessed and handled inappropriately by third parties. One major cloud storage provider in China recently is facing fines from the local court for not complying with the data privacy laws. Even some most trustworthy service providers do not pay convincing efforts in making their central administrative role more transparent. It is actually a black box for sensitive users regarding how these central service providers handle their data.
Blockchain and data privacy
Blockchain has profound implications on data management at the enterprise level. The blockchain has been visioned as part of the new infrastructure in China’s national strategy. It merits more attention to how the technology sets itself apart from the existing solutions. The niche blockchain is that it is a secured and decentralized data structure protected by advanced encryption methods. Furthermore, the data recorded are fully traceable and inalterable. This enforces rules-based data governance on data operation procedures.
What blockchain may offer is an alternative data structure. Since there is no central management body in a blockchain, there is no place to point fingers or to accuse mishandling information. Since everything to a certain extent is shared and kept unaltered at every node connected to the blockchain, users are looking at the same piece of information, having the same right of access.
Accenture, a global consultancy has promoted blockchain technology in its series of insight articles. What it identifies potential areas for blockchain technology to outperform other alternatives are 1) data transparency, over 3 in 4 customers surveyed by the company will share more information to the company if they know how their information is handled; 2) data security, customers are willing to pay 41% more in exchange for data security; 3) data sharing and governance, customers are more loyal to the brand if the company is consistent in its data sharing and governance policy and make it aware by the customer.
Now let’s look more closely at the advantages of blockchain-based solutions and their implications.
Data Traceability and reliability
The reliability, completeness, and consistency of data can be ensured by blockchain technology. Blockchain is a unique data structure with an embedded mechanism to forbid data alteration. This naturally promotes the “Once Only Principle”. That guarantees one true copy of any information stored on the blockchain. The same structure also permits full traceability, the data can thus be relied upon as full data history is recorded in the blockchain. Any actions performed on the data are recorded and thus a data accountability policy can be established.
Blockchain implements an irreversible timeline of data, each block is time-stamped when added to the blockchain, each new information is chained onto the previous block and the blockchain is stored. Blockchain’s security is guarded by two designs:
1) cryptographic fingerprint unique to each block, called hash, altering the block will generate a new hash; what is recorded cannot be changed.
2) consensus protocol, all nodes in the blockchain have to agree to a shared history.
A blockchain is a trust machine. They’re useful when trusted institutions and intermediaries are problematic, or to overcome a trust gap between transacting organizations. The issue isn’t whether a centralized database could be employed in theory; it’s whether one would be in practice. In contexts like supply-chain management and trade finance, companies lack a unified view of information because they don’t fully trust their business partners. Blockchain enables “translucent collaboration”: sharing data without giving up control.
Blockchain enables parties to have transparency and integrity on the data. Every node has the same copy of the information and every update of the information will be recorded. The new information will not cover the older version thus full visibility is achieved to all historical data.
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