What you don’t know about Transactional Privacy but you should!

By Akshay on ALTCOIN MAGAZINE

An individual in a free country would assume that their freedom will not be restricted by corporations. How could a private entity go against the law of the nation? Right? That individual could not be more wrong.

Corporations have always found ways to go around the law to get what they want. Almost all big companies have been found to utilize the “loopholes” in the system. Here is a short video of Apple utilizing a loophole to gain massive tax benefits.

How’s this linked to something called the Transactional Privacy? Well, we’re here to discuss just that!

What is Transactional Privacy?

Privacy is a myth.

I am sure most of you are familiar with this phrase. A lot of well-known journalists and activists all around the world have gone to extreme lengths to prove that our privacy is practically non-existent. From government-sponsored snooping to corporations collecting all sorts of personal and private information, it seems like there isn’t any hope.

Transactional Privacy refers to the ability of a person to own the transactional information of the purchases or sales they made. This implies that no organizations would know about this transaction between the two parties. On the chance that they did know, the law would ensure they do not have the right to use it in any manner.

Transactional Privacy would ban organizations from collecting users’ transactional data and utilizing it for their own profits. However, this is not the case!

Most organizations store all the transactional data and link it with individuals. For example, supermarkets create loyalty programs that help them link individuals to transactions. Banks are aware of every single penny that comes in and goes out of the account. We then have credit card companies who store similar information, and finally, there are big retailers like Walmart, Amazon, and more, who have direct access to their users' transactional data. The Internet has made it easy for everyone to collect any kind of data they need.

Ideally, if transactional privacy were to exist, then people would get to chose how their data must be used and where it could be used. Unfortunately, the reality is far from this!

Issues surrounding Transactional Privacy

Most of the people are focusing on the ease of doing commerce in the days of the internet. A single button gets you essentials delivered to your doorstep within 2 hours, a single swipe could potentially get you your soulmate, 15 minutes on websites and you are ready to sell your product to the world, or a few clicks that get you food from your favorite restaurant straight to your home. These conveniences are hiding the loss of privacy that transpires every time you make a purchase or you sell some goods. So, what are the things that you might be unaware of?

1. The lack of transparency

Though many people know that their transactions are being tracked, they aren’t sure of how they are being used. Anyone could speculate that it’s being used for profiling people, or used for marketing purposes, or to derive insights about the person. All of them might very well be true. We cannot be sure of what goes on within a company and how the data is being used. The lack of transparency leads to a large proportion of people who are unaware that they are being exploited.

2. Aggregation and Selling of Data

An organization’s main goal is to derive all kinds of insights from customer data. However, it’s nearly impossible for a single organization to have all the necessary data for it. So, it often happens that large organizations sell user’s data to one another and have more details about them. While they enrich their data, they are also making profits out of selling them as a service.

Data aggregation allows them to apply various algorithms that further their goal of profiling a user. Here is a video that talks about why it’s important for companies to aggregate as much data as possible while convincing their users that it isn’t a big deal.

3. The Collected Data and inferred Insights are never revealed

Among all the collected data, the transactional history of a person is of paramount importance to most corporations. This importance comes with the fact that a person’s spending habit provides critical information on what can be targeted to that individual. It gives a lot of information without having to do much.

As users, we cannot see or use the transactional data that we have generated. It is because of our actions that they are able to process large volumes of data and derive insights. However, we never get to see what it tells about us. Neither will we ever be compensated for it.

Does this affect you?

The lack of transactional privacy affects EVERYONE! Yes, you heard that right.

To begin with, let’s classify people within the context of a transaction. This gives us two categories. “Buyers” and “Sellers”. When these people sign-up to an online platform, they agree to a lot of terms and conditions without reading them. These terms and conditions give your consent to the platform to use your data in any manner they deem fit. They would no longer need your approval nor would they owe you anything for profiting from it. But how does it actually affect each of the two categories, you may ask?

1. Buyers

As a buyer, all your transactions will be stored along with other information such as the date and time of purchase, items that you purchased, and more.

Consider Amazon. They get all kinds of data from the user, like what they buy, how often do they buy it, or even information such as monthly expenditure on their platform sorted according to categories. With time, as a user generates more transactional data, they are able to extract a significant amount of insights from it. With the latest AI-based algorithms and large enough data, corporations are able to extract more information than ever before.

Once your spending patterns are identified, they can then use that data to market certain products directly to you. What’s wrong with marketing a product? Well, targeted marketing has the ability to play with your psychology.

Consider this example. A large e-commerce company has found out through their data processing that men who spend more than $100 on video games are very likely to spend on gaming accessories as well. So, one day, you purchase a few video games and the days that follow the purchase, you will constantly be bombarded with fancy looking accessories throughout the internet. If this does get converted into a sale, then the people who helped in making that conversion are not rewarded in any sense.

There will be people who might say that the above example is completely fine and it’s not much of a big deal. However, it has a far more dangerous consequence.

These corporations can identify patterns in your spending and try to model your expenditure cycle. The cycle or the other patterns would allow them to predict when a particular product will be bought by that individual. Then, when the time is right, they can then start hiking the prices. The price hike may be small sometimes but when combined with millions of people paying slightly higher, it’s millions in additional profits to the organization.

To sum it up, the following are the two main reasons why it affects buyers:

  1. Not only are you helping them learn your behavior better, but you are also letting them exploit you based on it.
  2. Personalized marketing leads to the loss of freedom of choice. Instead of getting an unbiased view, you are fed with a highly edited and customized view of what they feel will generate more sales from you.

2. Sellers

Wait a minute! Sellers have unlocked opportunities to find new customers and make a lot more money through these online platforms. Why would they be bothered if their transactional or sales data is collected?

Many sellers would have found themselves asking this question and here’s a reason why I feel that this question represents a very shortsighted view.

When sellers start to sell on online platforms, they are actually generating valuable information for the platform. As time passes, these platforms have data on what sells and at what price point. Amazon is the perfect example in this case. As sellers sold electronics and PC accessories, Amazon collected all the sales information and also got a large user database for those products. Soon enough they launched Amazon Basics that sold the same electronics and PC accessories for a lesser price.

Though the sellers had short term gains, they were losing a lot on the longer run. Here is an article that shows Amazon’s tactics with an example: AmazonBasics is copying all the best products on Amazon and selling them for less

Many sellers lost business overnight! Many had even encouraged their in-store customers to purchase through Amazon to either make it more convenient or to sell at a higher margin. Even those customers were lost to lower prices which the sellers could not afford.

To repeat what I began with, all of us will be affected if we don’t have transactional privacy. Doesn’t matter where you are in the world, we are all in this together!

How Do we get back Transactional Privacy

Though it is very important that we have privacy in all aspects, tackling all of them at once is almost impossible. The aim here is to tackle one thing at a time. Since transactional privacy is the most important of them all, here are some ways in which we can try to get back Transactional Privacy.

We will look at two solutions. One which can be implemented immediately and the second which gives a sustainable solution but needs time to mature and get implemented everywhere.

1. The Trivial Solution

This is a very simple solution. Basically, it removes the fuel to the fire. We go back to what we were doing before the online conveniences came along.

If you are serious about protecting your transactional privacy, you can always walk to your neighborhood grocery store and pick up the things you want. I am not suggesting the complete boycott of online platforms like Amazon, Uber Eats, etc. I am suggesting to use them only in the time of real need. The situations where you find that you do have enough time, you could walk to or drive to the nearest store, restaurant, or pharmacy and buy the things you need.

Not only will you be protecting your transactional privacy, but you will also be helping out the local vendors who have taken a big hit due to their business being lost to online competition.

2. Blockchain to the rescue!

No one can refute the fact that the internet opens a lot of opportunities for sellers to increase sales tremendously. Buyers get convenience or even save money on purchases through online platforms. So, to ensure these opportunities are fair and stay the same way, Blockchains can help us!

There are many blockchains out there who have a lot of features that allow the transacting parties to have their transactional privacy. So, let’s look at how it is being done currently.

The nature of Blockchain

Many of you might be aware that most of the blockchain based currencies are public. All the transactions that have ever happened will be on the blockchain publicly FOREVER. So, where’s any privacy there?

To understand that, you have to know how blockchains work. For blockchains to work (mainly to verify and authorize transactions), all it needs is something called a private key. A private key is a digital key that is unique to each individual and allows that person to participate in the blockchain. Unlike Banks and other payment gateways, blockchains do not need your personal information on who you are, where you are from, and the reason for sending the money. Just a private key which authenticates you and ensures that you indeed have the amount that you wish to send.

So, even if someone does want to spy on you or collect transactional data, they do have all the transactions at their disposal but no information on whom those transactions belong. Blockchain’s inherent feature thus provides us with some amount of privacy. But. It’s not good enough!

The nature of the Internet

Why isn’t blockchain’s inherent feature good enough? Well, you see, the blockchain runs over the internet. So, a person who wants to perform a blockchain transaction will send a request over the internet. Each of these requests has some data attached to it. This attached data gives some information like which computer is making that request, which browser is being used to make the request, which is the country of origin, and more.

As you see, anyone using the internet (network) monitoring tools can easily find out that John Doe from Bangalore, India is making a request to the Bitcoin Blockchain to send someone 5 Bitcoins. Where’s your privacy now?

Privacy Focused Blockchains

To have true privacy, we need privacy focused blockchains and Verge Currency is one of them. Let’s take Verge as an example and see how it can help us protect our privacy. We will also see how our anonymity is preserved when we transact over the internet.

Firstly, blockchains such as Verge have TOR or I2P routing inbuilt into it. TOR and I2P are peer-to-peer networks that help users to be anonymous when connected to the internet. It’s almost impossible if not completely to know from where the request came while using these networks. So, we now have the privacy we need. However, the story doesn’t end there!

The idea is not only to have complete transactional privacy but provide mechanisms to have fine-grained control over our data. For example, some people might be willing to sell their data to online companies, some would never want to share anything, and some might want to share only a small portion of their transactions.

We would have to allow users to selectively expose their data if they wish to do so. This can be achieved with stealth features on the blockchain. Here is a quote from the Verge Currency Blackpaper, explaining the Dual key Stealth Addressing technique:

Stealth Addressing allows senders to create an unlimited number of onetime destinations addresses on behalf of the recipient without any interaction between the parties. Stealth addresses are a method by which additional obfuscation can be implemented to further protect the receiving party when transacting with Verge.

The Dual key here refers to the use of two private keys instead of one. While the first private key always remains only with you, the second private key called the scanning key has a different purpose. The scanning key can be given to anyone with whom you wish to share some transactional data and prove to them that the data is indeed yours. While the main private key is used to authorize transactions, the second key (scanning key) is only to validate that the transactions belong to the user who shared that key.

This technique gives the receiver full control of their data including to chose if they want to share it or not. But what about the sender?

An upcoming feature called Anon Transactions will allow the sender to do the same. The aim of anon transactions is to use dual-key technique along with a concept called RingCT to provide privacy and control to both the sender and the receiver.

With the Anon Transactions released, a sender will get full privacy through RingCT which obscures the transaction sent with other transactions in the blockchain, the stealth features will hide the amount being sent and TOR will hide the location of the person sending the transaction. The receiver will get full privacy through the use of stealth addressing and dual-key technique.

Everybody Wins! Isn’t that an elegant solution?

Your Views are very Important to me!

I have tried my best to explain everything about transactional privacy. Right from what it is to possible methods of reclaiming it. If you did learn something new or just enjoyed reading it, be sure to follow me on Medium.

Share your thoughts in the comments below. As I said, your views are important!


Follow us on Twitter, InvestFeed, Facebook, Instagram, LinkedIn, and join our Discord and Telegram.

Read about our upcoming Altcoin Magazine Mastermind Event here.