The sheer amount of data we generate in the modern world is staggering to consider. Research suggests that in 2020, 1.7 megabytes of data will be generated each second, for every single person on earth. Therefore, it’s hardly surprising that data management has become one of the biggest challenges of the 21st century.
Managing data creates risks and liabilities for both individuals and enterprises alike. From the individual perspective, we are often asked to hand over personal data without having a full understanding of how it will be used, or by whom.
Legislation such as the European General Data Protection Regulation is supposed to help bring more clarity to data usage. In reality, it means we have to read lengthy privacy policies and terms and conditions, often written in overcomplicated legal jargon. Each time we sign up for a new service, we have to provide yet more data, and safeguard another password.
For companies, the process is no less painful. When the GDPR was introduced in 2018, it was estimated that companies would spend an average of €1.3m ($1.4m) each on systems and training to ensure compliance with the rules of being a data controller.
Protecting data against hackers is also an ongoing concern. IBM puts the average cost of a data breach at nearly $4m, with each breach disclosing around 25,000 records. For individuals, data breaches create the risk of identity theft, which can result in debts, poor credit ratings, and the denial of loans or mortgages.
Blockchain — A Revolution in Data Management
It’s not an overstatement to say that blockchain has the potential to revolutionize the way that we store and manage data. This stands true whether you’re an individual concerned about privacy, a business looking to harness data to make marketing decisions, or a government body looking for ways to make data management more efficient and effective.
Blockchain enables businesses and entities to empower their customers and users to manage their own data and who has access to it. Blockchains use public key encryption, meaning that a customer could approve which parties are able to access which sets of their user data.
A blockchain-based data management system offers several possibilities and benefits that go above and beyond a mere database:
· A single sign-on for individuals to access all of their personal data
· Data security through end-to-end encryption, providing a powerful defense against hackers
· Data self-sovereignty for users, meaning enterprises can relinquish their responsibility of controlling data, and all the compliance requirements therein
· Full transparency of data movements, meaning any data leak can be traced to the source
As a user, imagine the possibility of a single, self-sovereign identity in the form of a digital wallet. In this wallet, you could store all of your personal data, including documents such as identity cards, passports, or a driver’s license.
The wallet can also store other information such as credit rating, medical data like blood type or known medical conditions such as diabetes or allergies.
Furthermore, your blockchain wallet can be used as a data repository for ongoing data collection and storage. This might be data such as your medical history, but it might also be other data, for example, driving offenses or car accidents. All your personal information are in your own hands, it saves you lots of trouble from asking your own data from your doctors, service providers or whoever has your information.
End-to-end encryption provides a secure means of transferring and sharing data. The only way to decrypt the information is with a private key, which is only held by the user who has the right to access the information. Even if a hacker were to somehow get the file, the data would be unreadable.
The data itself is not stored on the blockchain. Instead, the data is encrypted into hash form, and the hash is stored on the blockchain. The data can be safely stored on any publicly accessible storage.
The cryptographic hash ensures that the data packet obtained is genuine. The user access to the data is controlled with tokens on blockchain. Every wallet, which obtains the file-access token triggers a decryption process. This end-to-end encryption makes sure that data is personalized and can only be consumed by a legitimate party who has the access token.
In simple terms, this means that you hold the key to the data, which allows you to access the data itself, in your wallet. By giving tokens to another person you transfer the right to read this data. Every piece and bit of the data can be fragmented. You can separate your health data from your income information, your hobbies and interests from your professional information.
As an example, let’s say that you as a data user have just moved home, and need to register with a new General Practitioner Using your private key to decrypt your medical data, you can give the new GP the right to read your medical data and history. The new GP can only see your medical data and history, but not any of the other data held in your personal data wallet.
Similarly, if you want to change your car insurance to a cheaper provider, you can allow the new insurer to see your driving license and history, while keeping your medical records private.
Data Self-Sovereignty for Users
A blockchain-based data management system also takes away compliance headaches for organizations. This legislation makes reference to organizations as “data controllers” because they hold users’ personal data on their own servers.
With a blockchain solution, the data governance is held on blockchain. When the user gives data access to the organization, it’s on a read-only basis. There is no need for the organization to copy the data onto their own servers, as the read-access can remain in place for as long as necessary. As the organization is no longer a data controller, they reduce or eliminate their data controller responsibilities under the GDPR.
The blockchain can record each instance that data changes, or access provision, including who made which changes, as a transaction. It would be impossible for anyone to fraudulently change data, because they’d have to use their private key to do so. Their private key is linked to their blockchain account, which would identify them as the party who made the change.
Beyond the Essentials
The blockchain digital wallet concept can also be extended to all kinds of other personal data. Currently, many outlets collect personal data through systems like loyalty programs. However, with a blockchain-based information repository, customers can choose to share data.
For example, when a customer registers for a new user account with an online grocery store, they could choose to disclose information about allergies or purchasing history. Brands would still have the benefit of being able to make tailored recommendations, increasing the chances of a sale, while the customer retains control over their own data.
Legislation such as the GDPR was put in place to protect users. However, where it fails is that it’s a reactive solution. Using blockchain in data management fundamentally rethinks the way that data is collected, stored, and handled. At the current pace of data generation and in light of ongoing privacy scandals and breaches, a fundamental rethink is what’s badly needed.
This article is brought to you by CoreLedger.
As a prominent blockchain infrastructure provider, CoreLedger is making blockchain technology simple for businesses to use. With CoreLedger’s offerings, clients can readily tokenize their offerings with fast-to-implement resources that will allow them to modernize their services. Thanks to our in-house developed software solutions and experienced blockchain specialists, CoreLedger is ready to help you make your next move with blockchain technology.