Despite the technical difficulties involved in introducing blockchains, it is becoming increasingly clear that security concerns are hampering blockchain development, especially in the light of new compliance rules such as the GDPR. These problems stem from blockchain itself being used in a range of industries, including finance, banking, insurance and financial services. Blockchain is an invariable public register and allows for the adoption of a record keeping regime without relying on a central authority.
It is called blockchain because the information is stored in blocks and it looks exactly like looking at a family tree. Once the information is finalised in a single block and added to the register, the registers flip a page and start a new block.
There are two different types of blockchains, one is public (Bitcoin) and the other is private (Ethereum). The public chain is open and accessible to all, but it is the public blockchain that raises security concerns for businesses. Access to the private blockchain is usually by invitation only and is only available to a limited number of people.
Blockchain enthusiasts and evangelists are optimistic that the technology will lead to decentralisation. The decentralised nature of blockchains means that they are open to all nodes (computers) that decide to participate. That’s a major difference from traditional digital currencies such as Bitcoin and Ethereum. Although no traditional technology can replace blockchain, it is transparent and cannot be controlled or manipulated by a central authority with its own blockchain.
The question is whether competitors can gain insight into their business plans through transparent and visible technology. The short answer is yes.
First, the only information visible on the blockchain that the company itself entered there is information that is not in the blockchain. Second, when attacking the idea that blockchain could make a company vulnerable to competition, it points to blockchain-protected property as an argument against it.
Blockchains are very versatile and customisable and can be used for a variety of purposes. An important point is that the company that chooses the blockchain itself decides exactly what information it should contain. This means that a blockchain that is open to the public contains only information that they should have access to. There is no need for companies to make decisions about whether or not public information should remain private.
While the blockchain that most people are familiar with is freely available to everyone, there are several cryptocurrency projects that offer individuals and businesses the opportunity to create their own private blockchains. This blockchain offers some of the same benefits as a public blockchain, but it can only be used by those who are entitled to use it. Private blockchain systems can use sensitive information such as sensitive financial information or sensitive business information.
There are also new cryptocurrencies that offer much more privacy than the Bitcoin register. While transactions on these blockchains are registered in a public register and visible to everyone, the parties involved in the transaction are anonymous and can use pseudonyms and wallet addresses. There are some features of blockchain that protect your business, even if you use the public blockchain, but competitive research in this blockchain movement would be speculative at best. The basic details of a transaction and the amount are left open, so that the party concerned is private and anonymous.
The technology is still in its infancy, but once it is accepted and applied to established companies, privacy concerns will disappear. While the addresses on the blockchain are pseudonymous and unauthorised blockchains are fully public, only the published addresses can be linked to an identity. Of course, addresses need to be shared to receive payments, so you need to monitor how many coins are sent to which address, and it is unclear exactly when the transfer will take place. The company at the receiving address must know who received what and the address will be shared with those who receive the payment.
If you set up a shared register for your business, you could use encryption of private keys to enable blockchain data where it is protected from prying eyes. If the blockchain is public, your competitors may be able to see the transaction volumes and amount of data you publish, even if they cannot read the data actually provided. Further analysis could reveal much about the company’s business.
The more companies think about this, the more they will have to think about security and data protection in the future.
The emerging consensus seems to be that while existing rules prevent data from being transferred to a public blockchain for compliance reasons, private hybrid blockchains that are subject to traditional data security systems are being scrutinised for their controversies. A hybrid blockchain puts the cryptographic hashtag of a private blockchain on a public blockchain, adding tamper-proof features of the public blockchain to the private blockchain data without revealing private data. As blockchain security researchers have discovered, both private and hybrid blockchains combine blockchain’s strengths with the security standards imposed on traditional financial transactions. For example, data in a blockchain of a banking syndicate could be encrypted, but data in the blockchain of the banking syndicate could not be encrypted for security reasons.
Private and hybrid blockchains are also controversial because they bring trusted authorities and middlemen back into play.
Private companies create private blockchains and make them available to customers for a fee, but they must create them themselves and prevent private providers from suddenly going bankrupt, charging excessive fees or deliberately denying a customer service. Existing regulations require private banking syndicates to operate private blockchain on behalf of their customers. But emerging blockchain standards could make private and hybrid blockchain interoperable, so if a private blockchain operator tries to charge exorbitant fees, subscribers could simply shift them to another operator.
Another option is to transfer sensitive information encrypted on private servers to the blockchain. However, if companies are not satisfied with the medium-sized approach, they are likely to stick with public blockchains in the near future. More likely, companies are publishing certain data on a public blockchain that verifies the encrypted data.
Not all blockchains need to be exclusively public or fully transparent, but this approach preserves the privacy of the data and the security of their owners and users. This approach would allow companies to publish encrypted data on a public blockchain with a private key and pass the decryption key to a specific entity that needs access to it. The data is only visible to third parties when the private keys decrypt it to make it readable.
Currently, blockchain use cases are relatively rudimentary for companies, but there are a number of on-chain protocols related to permits and access controls that would allow companies to disclose the right amount of sensitive data through a blockchain consortium group. Permission from blockchains, which cover a wide range of business relationships through governance protocols, can be used in business consortia to implement blockchain governance, access control, data protection and data security. According to Gartner, the blockchain space is one of the most promising areas of research and development in the field of corporate security.
Today we are trying to find and address appropriate blockchain parameters and protocols. How many tables are there and what questions do you need to ask to make a business work?
Transparency and security are two very rational concerns, and it is perfectly normal that people and companies are fed up with certain aspects of blockchain technology. The introduction of new technologies is associated with growing pains such as fear of the unknown. By exploring blockchain technologies, taking small steps toward adoption, and learning every step of the way, businesses can ease their concerns while preparing for a very bright future.