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.

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