Mistrust about the real nature of Blockchain technology
The apparent contradiction between privacy and transparency
The “seemingly contradictory” nature of blockchain has generated the skepticism of many, including regulators.
Blockchain structures, however, can quite intelligently reconcile both the transparency of on-chain transactions and the privacy of their users.
Because transactions are recorded on the blockchain in the form of a “alphanumeric code”, time-stamped, their architecture allows for some degree of transparency while protecting content logged on the network.
This alphanumeric code (which is known as hash) is equivalent to a “fingerprint” of data that exists outside the blockchain network.
The chances of two different transactions recorded on a blockchain having the same hash are virtually null. This is how transparency and confidentiality can be reconciled on a blockchain.
Hashing is a tool that allows you to protect the contents of data entered in a blockchain network block. Remembering that hashing is the process of taking an input of any size and turning it into a fixed cryptographic output through a mathematical algorithm.
Therefore, blockchain technology allows the privacy of content registered on your network, while ensuring transparency at the protocol layer.
Another element of public blockchain architectures that also illustrates the tension between privacy and transparency and their apparent contradiction is public keys.
Public blockchains work with a key pair required for all transactions. A public key, which roughly looks like a bank account number, and a private key that can be compared to a PIN code.
Public keys are generally pseudonymous and “may be anonymous on certain blockchains” (this will be covered in separate article). But even without knowing who owns a particular public key, you can track all transactions for a public key and create a profile of the person behind the key.
Again here, a certain degree of privacy is guaranteed by the public key, and at the same time the transactions generated from it are fully transparent.
As is clear from the above, all the skepticism of some about blockchain technology comes from exactly that seemingly contradictory nature of blockchain.
Well then, the exact understanding of how blockchain structures really work assumes a fundamental character.
In order for the cursor to be placed in the right place, intense dialogue is required between the blockchain industry players and the various types of regulators. Whether those who demand transparency as a means of monitoring, those responsible for prosecuting crimes, as well as those who defend privacy as data protection authorities.
Push for more privacy could favor illicit transactions; pushing for too much transparency could drive companies and users away from blockchain.
Fact is, there is a tension between these two characteristics of blockchain structures.
However, the only way to solve it is to first understand what blockchain structures have to offer, make a choice and decide in which areas, considering society as a whole, transparency should be favored by privacy.
