What impact block chain technology has on the privacy in the age of the Internet

-- By RyoichInoue - 20 Nov 2020

Privacy concern in the age of the Internet

Many services or activities on the Internet are still based on client server model. Client server model is the model in which the services or activities are hosted on the server maintained the service provider. The users will access such server. The client server is centrally maintenance by the service provider. Under this model, the service provider, who is managing the client server which stores all data, will have almost unlimited access to such data. This would eventually lead to the ultimate surveillance. For example, Facebook has all data of you, which enables it to gain data as to your personal preference, activities, and network.

How blockchain technology solves the problem

Blockchain technology has the potential to solve this problem, by enabling “pseudonymous” activities and transactions on the Internet. Blockchain is based on the technologies that had been developed.

technologies underlying blockchain

public-private encryption

Public-private encryption is the technology which enables safe communication which reduces of risks that the secret communication will be intercepted. Before the advent of public-private encryption, the sender and recipient of the secret message had to come up with the shared password, and somehow communicate such password each other. Because of this, the passwords are often compromised, and the passwords are intercepted while being communicated.

Public-private encryption is the technique, under which the message is encrypted by combining public key and private key of the sender, which can only be de-crypted by the private key of the recipient. This enabled safe communication without sharing the common password.

Peer to peer networks

As described above, the traditional client server model relayed on the central control by the service provider. Under client server model, the flow of information was unilateral. Information only flowed from the client server to the user. Peer to peer networks enabled multi-way flow of information without the central control by directly connecting computers.

Advantages of blockchain technology

By utilizing public-private encryption technology, blockchain enabled communication and transaction without disclosing the true identity. The communication and transaction will be conducted by reference point, which is not connected with the real identity. In this sense, the blockchain enabled “pseudonymous” communication and transaction.

Also, by utilizing peer to peer networks, blockchain operates without central provider. Blockchain will be operated based on the protocol. The blockchain is decentralized database without any provider which manages the client server.

Because of these features of blockchain, this can prevent government or large corporations gaining access to your data, regaining peoples’ autonomy and freedom in the Internet sphere.

Advantages of blockchain technology

Bitcoin

Probably the most famous example of application of blockchain is Bitcoin, which was introduced in 2008 by 9-page paper by one or group of developers who called themselves as Satoshi Nakamoto. Unlike conventional payment institutions, Bitcoin operates without central clearing house. The double spending problem is solved by the mechanism, called “consensus”, by which the transaction is validated. Because the history of Bitcoin transactions is spread in thousands of computers connected through blockchain, it is highly temper resilient. Bitcoin account operates as “reference point” without disclosing the true identity, enabling pseudonymous, which prevents government or large corporation from gaining access to your transaction history.

Smart contract

The application of Bitcoin is not limited to the cryptocurrency. The temper resilient nature of blockchain is utilized to create more rigid digital contract called “Smart Contract”.

New challenge

Despite the positive aspect of blockchain, which enable us to regain freedom from the surveillance by the government and large corporations, it raises new challenges as well.

KYC and AML

Because blockchain has enabled the pseudonymous transactions and such transactions can be completely border free, the regulators in many jurisdictions are concerned that it would evade regulatory framework of know-your customer requirements and anti-money laundry regulations.

role of central banks

Also, for the case of the application of blockchain to payment system such as Bitcoin, the supply of the Bitcoin will be managed by the protocol. The central bank of each jurisdiction traditionally fulfilled this function, in order to effectively implement monetary policy. Central banks in many jurisdictions are raising concern that the blockchain-backed crypto currencies would undermine the role of central banks.

new types of privacy concern

Even though the blockchain seems to offer the resolution to the privacy concern which existed in the traditional Internet activities, it actually raises new type of privacy concern. Blockchain-backed transactions are “pseudonymous’ but it is not “anonymous”. The history of transactions in the blockchain backed system will be publicly available and can be accessed by anyone. Therefore, there is possibility that, even though account itself can be opened without disclosing the true identity, by somehow connecting the account with the actual identity, all of the transaction history might be accessible to anyone in the network.

I don't understand the idea behind the draft. A number of component ideas are accurately described, but the overall picture doesn't make sense to me.

A blockchain is a way of storing information, as you say. It replaces the database that underlay late-20th century enterprise software with a public or semi-public, authenticated ledger, which provides for distributed storage: anyone can have a copy of the ledger and can verify that the copy is authentic, as well as for arranging for safe authenticated updating or synchronizing of ledgers. This does for data that might otherwise be stored in a relational database what distributed version control has done for data that constitutes software source code under collaborative development.

This is orthogonal to the question of identity management. Blockchain ledgers can be used in contexts that preclude or permit anonymous generation of data, just as more familiar storage models can. Swiss banks and US state corporate records holders don't need blockchain to have anonymity in financial and corporate transactions. As you accurately point out, digital identity management supported by strong public-key encryption can provide for both high-reliability identity and moderately-resistant anonymity and pseudonymity, using the same math. Blockchain storage also depends on these primitives, operated in a slightly different configuration, but these are three parallel applications of basic cryptographic algorithms: they aren't causally sequenced.

Cryptocurrencies, the fourth distinct subject being conflated here, can exist without blockchain ledgers: US ethanol subsidy payment tokens (famously cornered by Goldman Sachs at the end of the last decade) are a straightforward example. Digital cash based on strong public-key encryption existed before blockchain ledger storage was proposed; I assigned the 1990 Scientific American paper by David Chaum that fully illustrates this point.

So the best route to improvement here is to unconfuse these mixed parts. If your point is that strong public-key encryption can be used to give identity control back to individuals, I agree of course: I tried, however badly, to teach the same idea over six weeks of the course. But what has that to do with blockchain storage? If your point is that the same technology can be used to modify the basic storage paradigm of late-20th century enterprise software, shifting from relational databases to public or semi-public authenticated ledgers implementing distributed version controlled data storage, that's technologically correct, but the implications are not those described. IBM's Chris Ferris gave a good talk on the technical relevance of blockchain at my 2016 SFLC conference at CLS which is a good place to start if you want to move the draft in the direction of explaining blockchain. But this in turn has little to do with privacy.

I know that the draft reflects what lots of people believe about blockchain: a sort of stew of reality and non-reality, and that much business in the world is done at the moment on the basis of "greater fool" strategies that depend on this misunderstanding. That Softbank has been the greatest fool of all doesn't make it irrelevant that digital collectibles like Bitcoin are presently the tulip bulbs of crowd madness. But you can learn not to think like the nonsense being thought around you. That might be helpful someday.

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