As you know, blockchain consists of multiple ledgers organized in a series of encrypted blocks.
Each block is assigned a unique code called a hash.
The chain of blocks starts with the first block that gets assigned the hash value. With every transaction, a new block that follows records the rehashed value of the block before and receives its own unique hash value.
As a result, the blocks get linked to each other.
Blockchain is a technology that is mostly associated with cryptocurrencies where it’s used for storing the records of transactions. This is the area where blockchain has been widely used, tested, and developed.
However, with greater concern about hacking and data breaches, other industries such as healthcare have been interested in adopting the technology as well.
They’re interested in blockchain since it promises more secure management and sharing of sensitive files — such as health records.
But when it comes to personal data protection, how good of a job does blockchain do at keeping hackers away from private information?
Improved Personal Data Protection With Blockchain
Blockchain changed the way personal data is protected. The three key advantages of the blockchain include:
- Decentralization
- Immutability
- Encryption
Let’s break down what that means exactly and how these advantages improve the security of personal data within the encrypted blocks.
A Decentralized Network
Instead of relying on a single authority to confirm the transactions (such as a bank), blockchain has multiple users (nodes) that all have access to their complete transaction history.
A decentralized network gives users more autonomy but also makes it more secure against hacking.
In a centralized environment, there could be a single flaw in the central database that a hacker could exploit. Within the blockchain, even if a single node suffers a cyber attack and gets compromised, this doesn’t affect the entire system and all the data stored within it.
Immutability in Blockchain
After the information is recorded in the blockchain, it’s nearly impossible to change or delete it. Every transaction is cryptographically linked to the one before within the blockchain. This principle is known as immutability.
How does immutability improve data security?
It makes it incredibly difficult to manipulate the data recorded on the blockchain. Once a transaction is complete, you know it’s not likely it’ll be altered later on as part of the fraudulent activity.
Encryption With Private and Public Keys
Every block within the blockchain is encrypted with the hash signatures. Since the chain is connected and the hash of one block is connected to the one that follows, any changes are obvious.
Another level of encryption is the keys. Users get two keys — private and public. This is also known as asymmetric cryptography.
The public key is shared for transactions and the private is used for authentication. Even if someone does get someone’s public key, they can’t use it to crack the private key.
Private keys are additionally protected with cybersecurity methods such as multi-factor authentication.
Within the private blockchains, only the users with the private key can access protected personal data.
Limitations of Blockchain Technology
Many myths persist about crypto transactions and data security within the blockchain. The two common misconceptions are:
- A better personal data protection means complete anonymity — but there is a difference between private and public blockchain
- Blockchain technology is unhackable
Before we dive into the hacking of blockchain and anonymity on the private vs. public one, it’s important to keep in mind that even the advantages of the technology listed above can result in gaps in data security.
While immutability ensures that a third party can’t tamper with the data on the blockchain, it doesn’t guarantee that the recorded data is in fact trustworthy or clean.
Private Vs Public Blockchain
Private blockchains prioritize data privacy and public blockchains are more about transparency and security.
Within public blockchains (such as Ethereum or Bitcoin), all the information is available to others. Besides the user’s private identity and keys, everything is transparent.
For instance, authorities can follow the activity on the blockchain to track wallet transactions if they’re connected to a crypto wallet linked to illegal activity.
When a person makes a transfer to a wallet linked to illegal activity, they become a part of the investigation. Wallets are something that can be easily traced to a person because one has to give their personally identifiable information to make it in the first place.
Private blockchains, on the other hand, limit access. Data is not open and accessible to all, but instead available to select entities or individuals.
Hacking the Blockchain
Both phishing scams and sophisticated hacking can endanger the public blockchain that stores a history of crypto transactions. Cyber attacks on popular exchanges such as Coinbase and Binance can attest to this.
Blockchain technology can be compromised even if it’s secure (free of vulnerabilities). Hacking can happen if someone builds the application on top of blockchain technology. If that app is not free of weaknesses, it can endanger an otherwise secure blockchain.
Are Files in the Blockchain Well-Protected?
In many ways, a blockchain’s encrypted, transparent, and decentralized network does a better job at security storing users’ personal data — at least compared to a traditional centralized one.
It stores data within the decentralized and highly encrypted network. Every change in the transaction history is obvious. One fatal flaw within the network won’t take down the complete blockchain.
However, many mistake features such as encryption and decentralization with something that makes the technology infallible (hacker-proof) and one’s activity completely anonymous.
So far, the use of blockchain technology has been limited and predominantly used to store and obtain digital currencies.
It’s hard to tell exactly how blockchain technology might develop in the future.
But one thing is certain — rapid developments in the field of artificial intelligence paired with growing concerns about the protection of private data are a hint that blockchain might be paired with AI.