Balancing Act:  Three Reasons Blockchain Privacy is More Difficult than You Realize

FinanceFeeds Editorial Team

It’s been said that for any project, you can look at the objective of low cost, fast schedule, and high quality.  Then, you can pick two. While not exactly a zero-sum game, projects seem to be bound by these constraints, and it is rare that a project can exceed in all three.  And if it […]

It’s been said that for any project, you can look at the objective of low cost, fast schedule, and high quality.  Then, you can pick two.

While not exactly a zero-sum game, projects seem to be bound by these constraints, and it is rare that a project can exceed in all three.  And if it does, it’s very likely because the original estimates were absurdly generous.  

Another example of this “attribute tug-of-war” is security.  Think of your private data.  Do you want anyone stealing it?  Of course not.  But what are you willing to give up to make that happen?  You might say that you want it absolutely secure.  Unfortunately, if you want your data to be “absolutely” secure, the only way to achieve this is by deleting the data itself and probably smashing any hard drive that had held the information.  Indeed, in secure facilities, if a classified document has been mistakenly printed, the required protocol is to destroy the printout—but also the printer itself; just to be sure.  In the case of security, the “tug-of-war” is actually between security and accessibility.  As you move closer to one, you move further away from the other.  An optimum solution is found when you:

  • Realize that there is a tradeoff; saying “I want both!” is not helpful.
  • Examining your risk profile is important.  You need to truly know yourself, and know what you are willing to risk for the sake of convenience.
  • You need to establish a protocol that matches your risk profile and reassess regularly.

This can be a lot to take in when it’s presented this way; mainly because we don’t like to compromise.  The bad news for things like project management and security is that at the end of the day, there is always a compromise.  

For blockchain, the problem is even more complex.  Projects have to balance Privacy, Transparency, and Immutability.  Increasing one aspect affects the others, at least for the most part.  However, due to its complexity within the blockchain structures, there may be some unique solutions offered by platforms working to address this exact issue.  In this article we’ll look at each element driving blockchain, why it’s important, and what the risks are to companies using it.  Then we will highlight at least one platform that claims to have broken the “zero-sum” limitations, and how their platform aims to enhance privacy, transparency, and immutability all at once.

Privacy

One of the earliest and strongest promises of blockchain was that of privacy.  While for some platforms this takes the form of anonymity, this isn’t strictly true for all blockchains.  After all, you can trace a number of transactions on a chain by following the viewable transactions of a given wallet.  While you may not be able to tie a particular person to a wallet on its own, you may be able to track a particular transaction made by a known party, then backtrack to their wallet.  After this, you have ruined their hope of privacy and you can see every transaction they make with a full realization of who they are.  For many people, this is less than ideal.  For a company, however, this can be disastrous.  Companies cannot pursue competitive advantages if the competition knows what they are buying and who they are buying it from.  The power of deduction is strong, and one can learn a lot from following wallet transactions.

Transparency

At the same time that privacy is highly valued, transparency is valued just as much on the blockchain.  Being able to see what proposals a DAO considers, along with the voting results, is crucial to the role of a decentralized governance body.  Without transparency in how a platform governs, and without transparency in how the smart contract operates, the trust would be lost.  For businesses who rely on the blockchain, trust simply cannot be lost, or the entire business is at risk.  Companies who hold key supply chain information, along with other key data, rely on it being transparent, even if only to those they entrust with the key to viewing it.  Many applications of blockchain rely on one party placing something on the blockchain so a second party can view its process/journey from start to end.  This creates trust, and trust allows an economy to flow.

Immutability

While sometimes overlooked in a normal debate around privacy, immutability is absolutely key for businesses who are relying on the blockchain to hold information and keep it unchanged; for themselves, for auditors, for customers, or for regulatory bodies.  Making data immutable takes it out of the company’s hands and ensures it is trustworthy.  This form of trust is critical across many industries, and a hack that affects immutability has the potential for breaking entire industries as blockchain reaches mainstream adoption.

What Are the Options?

After seeing the tug-of-war fallacy, your stomach may start to sink when looking at the balance of privacy, transparency, and immutability.  After all, in many ways they are opposing forces, and strengthening one may directly weaken another.  

There are different ways to try and solve this paradox, either through encrypting data before it is on the chain or creating processes that only put key pieces of data on the chain.  Each option has some promise, but not for every situation.  One emerging platform that has chosen to establish itself around optimizing the balance of privacy, transparency, and immutability is ParallelChain.  The platform is worth mentioning for a number of reasons.  First, their core team is tech-focused but has decades of experience at traditional firms with high-security needs combined with key external customers.  Before blockchain, these companies were trying to develop methods that balanced all three without compromise.  Second, the platform has developed a unique solution to addressing the “tug-of-war” curse that ensures a zero-sum game:  it has developed three “parallel” chains to focus on each aspect and has connected them in order to create a seamless solution for its company clients.

In order to balance the privacy and transparency issues, ParallelChain has literally created a chain for each.  Its ParallelChain Private is meant for internal use within a company, taking advantage of the decentralized nature of blockchain while also ensuring the data itself is firewalled and private.  There are no 51% attacks that will allow the leak of sensitive documents.  The next layer is the ParallelChain Mainnet, which brings with it the transparency that most blockchain platforms are aiming for with their stakeholders.  This allows specific information to be passed along the blockchain so that clients with the right access can see data moving through the process and verify it.

The third development is the infrastructure that connects the ParallelChain Private and Mainnet, acting as a gatekeeper to allow Mainnet data to flow easily into the Private Chain, but Private Chain data to be highly restricted and curated for only those parties with proper access.  

Putting it Together

Privacy, Transparency, and Immutability are three difficult objectives to meet for data on the blockchain.  However, with the proper setup by platforms like ParallelChain, and potentially other platforms over time, companies can begin to utilize blockstream in mainstream adoption opportunities while not risking the potential data leaks and compromises that might occur with a standard blockchain Mainnet.

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