29 Jan 2025
In this digital age, as time progresses, future generations will get more and more involved with technology, so there is definitely no going back. This commonly understood fact brings you to your next big concern: data privacy 2025 and data security. Whether you are using online digital platforms for personal use, business use, or to run a government system, the most important thing to protect is your data.
As of now doing something as simple as making an online money transfer is not always safe due to issues like unethical data modernization, invasive surveillance and high-profile data breaches in the traditional systems. This begs the question of whether blockchain encryption could tackle the pressing concern of data privacy and security. This blog explores exactly that.
Know thy enemy: The first step to solving a problem is to acknowledge it and to gauge its size, extent of influence, and momentum. Over the recent years, the world has witnessed giant data breaches, exposing billions of records from social media platforms to financial organizations. There are certain key issues with this crisis described below before we discuss blockchain for privacy:
Imagine yourself as a hacker. Would you prefer the data you require to be in one place or in hundreds of different places all at once? You will probably choose the former option. That is how centralized databases are easier and preferable targets for hackers compared to decentralized blockchain data protection. It is like catching all the good fish from a single pond.
Many traditional systems that keep records of data require some form of authorization to access that data. However, if your authentication systems are weak, you are more likely to fail in trying to prevent someone from sneaking in and wrongfully accessing important data. Resolving data privacy issues such as this is crucial.
Users of any kind of system such as social media platform usually are unaware of how their data is being used or shared. Sometimes it is simply because people prefer not to read terms and conditions, sometimes they crack under peer pressure to be in line with new trends and sometimes they are simply lied to by deceitful organizations. Blockchain security solutions can help with minimizing that gap in transparency.
There is no such thing as a free lunch indeed. A lot of companies, on receiving your data as a price for using their services, maintain control over your private data. This limits an individual’s control over their data privacy.
These factors are precisely why data privacy crisis is a big deal and everyone needs to take it seriously to be able to start looking for ways to deal with it. Let's look at how privacy in blockchain technology works.
There are several features of blockchain technology that make it perfectly suited to handling data security issues of today’s digital world. These features include decentralization, encryption, transparency, and user control. Let’s look at each feature one by one:
This is a greatly transformative aspect of blockchain technology. Blockchain security solutions allow you to have a self-sovereign identity. Consider this example: you can store your private credentials, such as your medical records, on the blockchain and give access to that data only to specific entities or individuals on a need-to-know basis. This is far more private than having to hand over your data to central authorities.
You can decide who gets to have your data, for what reason and for how long a time period. Blockchain data privacy works this way: Your data will also be conveniently portable, meaning that you can move it across varying platforms and still be in full control over it because your data is not locked into a singular service provider.
When you hear that blockchain is immutable, it means that it is unchangeable. This means that records if stored on a blockchain, cannot be edited, deleted or tampered with in any way shape or form. All transactions and data interactions are recorded without error, and they are only visible to authorized parties. This level of transparency and privacy in blockchain technology can put every individual’s mind at ease when it comes to the safety of their data and legitimate interests.
A system that protects data this way can bring about a major breakthrough in holding the right parties accountable and building trust among users.
So, how does blockchain data protection actually work? Blockchain technology uses cryptographic techniques to protect data stored in it. This sort of encryption is applied to each piece of data before it is stored on the blockchain, and only parties that possess decryption keys can access that piece of data. This way, an individual can keep any sensitive information secure and protected from potential hackers.
If data is attempted to be altered in any way, cryptographic hashing can detect it immediately. So nobody can get away with making even a slight change to data without alerting the network. Most transactions done through blockchain security solutions keep the user’s identity completely or at least partially hidden.
Blockchain’s most commonly heard feature is decentralization, meaning that data is not stored on a central location. It is not controlled by a single entity either because it is distributed across multiple nodes (computers) in a network. Data privacy in 2025 is ensured through decentralization as it reduces its risk of getting hacked because the data is distributed across a whole network. Hacking a central server is far easier than hacking an entire network.
Another great advantage of decentralized blockchain security solutions is that they eliminate the risk of single points of failure. In a traditional system, if the central entity containing all the data is compromised or crashes, the whole system will come to a halt. In contrast, in a blockchain network, systems keep running even if some nodes (computers) crash within the network.
Now, the main question is, if privacy in blockchain technology has so much to offer, how can it be leveraged to modernize real-world systems and fix the data privacy issues they face?
The issues of data breaches, counterfeit drugs and fragmented patient records are quite common in the healthcare sector. With blockchain, healthcare systems can keep and organize unified health records. The data stored in the single and secure repository will make sure that the patient’s medical histories are accurate and complete.
You can build greater trust in patients through blockchain encryption as they will have more control over their health data. For instance, a patient can give temporary access to their health records to a doctor for a consultation or a procedure. This maintains transparency and privacy.
The immutable quality of data stored on a blockchain can also help pharmaceutical companies trace a particular medication from production to distribution, tackling the flow of counterfeit drugs in the supply chain. A good example of this is Estonia, which uses blockchain data protection to store medical records and gives patients more authority over their health data and how it is used.
When we talk about sensitive data, banks and financial institutions have to deal with tons of it. With blockchain technology, the financial sector can easily store their customers’ sensitive financial data on a safe network. The records are tamper-proof and cannot be changed without alerting the system so there can be no financial fraud, consequently solving data privacy issues.
The Know Your Customer (KYC) process will become much easier and simpler because each institution will not need to duplicate KYC efforts each time, as the data encrypted on the blockchain can simply be shared. The blockchain will verify the identities of customers and all the transactions will be verified in real-time, so issues of identity theft or fraud are minimal.
For example, the Monetary Authority of Singapore (MAS) has tried to incorporate blockchain security solutions to secure identity verification and interbank payments through projects like “Ubin.”
If we look at traditional identity systems, they rely on centralized databases which can easily be hacked or misused. A decentralized blockchain identity system will ensure self-sovereign identities where an individual can manage their own digital credentials without needing a third party. This significantly reduces the risk of identity theft.
When it comes to usage of blockchain for privacy, the encrypted identity records spread over a network are very difficult to hack and specific credentials of a person, including terms like age or citizenship can be shared by that individual without needing to share unrelated details along with it. So, people can use online services to send money online for example while only sharing specifically needed credentials.
Azure Active Directory Verifiable Credentials is a Microsoft project based on blockchain technology and it creates tamper-proof and decentralized digital identities.
Global supply chains can be transformed in terms of their operations if they leverage blockchain technology. For example, supplier information and transaction details can be encrypted and only shared with authorized authorities to avoid data misuse. The entire journey of a product can be traced through blockchain, ensuring accountability of the right parties if a problem arises.
Supply chains can be made efficient and robust with counterfeit goods are identified easily because of blockchain’s immutable nature. A good example of this is IBM’s Food Trust which is a blockchain-based solution. It ensures transparency of the food supply chain while also safeguarding supplier data.
Despite its huge advantages, there are certain gaps that need to be addressed before blockchain security solutions can be widely adopted across the globe.
Large-scale data systems cannot be handled yet by existing blockchains like Ethereum and Bitcoin. They can only handle a limited number of transactions per second so far. A possible solution could be to move towards efficient mechanisms such as Layer 2 solutions and Proof-of-Stake solutions which can enhance scalability and reduce resource demands.
Implementing blockchain requires a thorough understanding of how it works and what infrastructure investments are needed for it to be applied. The organizational processes also need big alterations, which calls for more user-friendly blockchain platforms. Training programs can also help minimize the intimidation effects of blockchain.
Blockchain and digital rights go hand in hand. Governments and international organizations still need to work on how to collaborate and create clear policies regarding the usage and implementation of blockchain systems. The existing legal frameworks in many countries are still at an evolving stage. Consider the example of General Data Protection Regulation (GDPR) which is a law set by the European Union for handling the data of EU citizens.
The law was designed to give citizens more control over their personal data and to regulate organizations using consumer data. Blockchain and GDPR are similar because they both focus on data but the key difference is that blockchain data is immutable while GDPR has a “Right to Erasure” clause whereby certain can be deleted.
There are issues like environmental concerns which arise because of consensus mechanisms like Proof-of-Work (PoW), used by Bitcoin, as it consumes a lot of energy. Switching to more efficient mechanisms, such as proof-of-stake (PoS) could be a possible solution.
There is no doubt that blockchain technology holds great potential to transform traditional systems and how we treat data. From the healthcare industry to supply chain and governance, there is a place for blockchain almost everywhere. Who knows, perhaps in the coming years, whenever you do something as simple as making a money transfer, it might be recorded on a decentralized blockchain. There is, however, still room for collaboration and improvement to fully adopt this futuristic avenue.
Blockchain enhances data privacy by decentralizing data storage, using encryption to secure information, and giving individuals control over their data. These features reduce vulnerabilities associated with centralized systems.
While blockchain cannot entirely prevent data breaches, its decentralized and immutable nature makes it significantly harder for hackers to access or alter data stored on the network.
Yes, blockchain can benefit small-scale businesses by providing secure data storage, efficient payment systems, and transparent supply chain tracking, among other applications.
Challenges include scalability, regulatory uncertainty, integration complexity, and, in some cases, high energy consumption. However, ongoing advancements aim to address these issues.
The future lies in integrating blockchain with emerging technologies like AI and IoT, developing energy-efficient models, and creating interoperable networks to enhance data privacy and usability further.
