How Blockchain Supports Data Privacy

Salomon Kisters

Salomon Kisters

Jun 28, 2022

This post may contain affiliate links. If you use these links to buy something we may earn a commission. Thanks!

Data has become the new oil since the internet spread to all four corners of the globe in the early 2000s.

Everything today generates massive amounts of data, from your online activity to the Internet of Things (IoT). This information is extremely valuable for a variety of purposes, including research, marketing, and commercial applications.

Users, however, have no control over how their data and personal information will be used due to the nature of centralized data storage and data management approaches. Without your permission, these personal records may be shared or sold to anyone.

Furthermore, because data is so useful in so many ways nowadays, it is vulnerable to online breaches and hacks. And due to the rising costs of acquiring effective data management and security services, businesses frequently fail to implement the necessary data protection measures.

Fortunately, blockchain technology provides an innovative and cost-effective solution for all these problems. Most blockchains and decentralized ledger technologies (DLTs) structure data in such a way that it abides by security principles and gives the users complete control over their data.

Storing the data on blocks and connecting them chronologically provides blockchains immutability, making it impossible for hackers to tamper with them.

In this article, we will discover how blockchain technology supports data privacy and integrity in different ways.

Data Privacy Concerns

One of the major data protection concerns these days is the privacy of personally identifiable information (PII). As evident by the name, it includes the data that can be used to trace and identify an individual.

For example, biometric data, security numbers, birth date, geo-location data, phone numbers, addresses, postal codes, etc., are all counted as PII. It is considered the most delicate type of data.

Nonetheless, most organizations store users’ PII in unencrypted form. Hackers can easily steal this data and impersonate someone else, ruining their reputation.

Despite all the recent developments in cybersecurity and data privacy technologies, privacy breaches are at their peak. According to the year-end report by Flash, a total of 4,145 publicly disclosed breaches took place in 2021, in which more than 22 billion records were stolen.

These stats make 2021 the second-worst year with respect to data privacy. However, at the current pace, 2022 is expected to surpass last year by 5% more data breaches.

Though the organizations collecting and storing data are responsible for its protection, they can use users’ information for personal motives to improve their service offerings and engage in promotional strategies.

Moreover, the amount and range of data being collected are growing daily, while users are not even aware for the most part.

How does Blockchain Support Data Privacy?

Decentralized Identity

Different platforms organically create our digital identity as we transact with them. New data, such as personal information and online activity records, keeps on getting linked to this identity over time.

The identity can be anything, like your device’s IP address, and the linked data may include usernames, passwords, online search history, online shopping history, medical history, and more. Since this digital identity is not stored on any personal database, the user has no say in what should or should not be available for the companies and organizations to view.

This problem can be solved easily by using a self-sovereign identity integrated on the blockchain, called decentralized identity (DID). It is one of the prime proponents of this technology, focused on improving data privacy and security significantly.

DID allows individuals to store their data independent of the databases of the websites they interact with. Instead, it is kept on personal devices, such as PCs, mobile phones, cloud storage, and offline hard disks.

They can then store the pointers to this data on the blockchain, which can be used by organizations to authenticate the claims made by users regarding their personal records.

An individual can create multiple DIDs for different purposes, each of which will be protected by a private key. Only the person with the private key can prove the validity of the stored data. It works almost the same way as email address verification.

When you try creating an account on a gaming platform using an email address, the site may ask you to verify your digital identity by sending security keys to the provided email.

The only difference is that DID will be owned by the user only, rather than the email server, and they will get to choose which information to share.

Blockchain-federated Identity

DIDs and decentralized databases can not only help users ensure the confidentiality of their personal data, but they can also improve protection against hacking attacks.

Typically, the data recorded by different platforms are stored on a single central database or server. Users of the system are assigned a digital identity, called federated identity.

This identity allows users to switch between multiple platforms quickly. It can also be used to avail services provided by the platforms, as well as access the information on the server.

A federated identity framework is enabled by using a single sign-on (SSO) authentication protocol. SSO allows individuals to use just one set of credentials for all linked websites and applications.

Though this method makes the entire procedure more convenient, as users don’t have to remember separate passwords for each application, it compromises data protection to a significant extent.

For instance, consider a healthcare system, which may involve several organizations, such as hospitals, pharmacies, urgent care clinics, and insurance companies. If the system follows traditional user data management practices, records from each entity are kept on one central SSO-protected database, managed by a third-party provider.

Such a system will be more vulnerable to hacks, as the attacker will have to breach just one security layer to get their hands on all the stored information.

The decentralized nature of blockchain ledgers offers opportunities to implement federated identity and SSO protocols much more efficiently. In a blockchain network, the system participants can determine and authenticate the identity of users without relying on a third party.

And thanks to the immutability of the blockchain, the data and identities will be much more secure than they are in a central database.

Moreover, the blockchain-based federated identity framework will allow participants to use smart contract audits to control how much of their data will be visible to the various entities. It also helps businesses and organizations to observe the performance of the entire network.

Zero-knowledge Proof

Zero-knowledge proof is a cryptographic method to approve information validity without compromising the user’s privacy and control. In this method, the user (prover) tries to prove to the validator (verifier) that a piece of information is authentic without exchanging or revealing any data.

Take the example of a store selling tobacco. An individual who wants to buy cigarettes must prove that he or she is of legal age (18) for smoking. One way of doing it is to show your driving license to the verifier. But the driving license contains more information than required: name, height, gender, home address, etc. If revealed, this information can be misused or stolen.

Alternatively, the prover may use zero-knowledge proofs to verify their age through a mathematical code. It can be done by the state uploading license numbers of all individuals aged 18 years or above and have their driver’s licenses on to the blockchain at the time of issuance. Afterward, these individuals will hash their fingerprints to the respective license numbers.

In the example mentioned earlier, at the time of purchasing cigarettes, the prover can simply provide their fingerprint to the hash generator, and the verifier can check if the provided biometric is linked to any 18 years or over license on the blockchain.

Hence, the legal age of the prover will be verified without them having to share any sensitive personal information.

Usually, two main types of zero-knowledge proof methods are used in decentralized ledger technologies: interactive and non-interactive.


The most commonly used zero-knowledge protocols are interactive. It involves the prover solving a series of algorithmic riddles presented by the verifier. These codes are designed so that the prover can solve them only if it actually owns the data it claims to have.


Such zero-knowledge proof protocols do not require the prover to interact with the verifier. Instead, both parties have access to a shared source of data pointers which they can refer to validate the claim.


Since the inception of the World Wide Web, businesses and enterprises are gradually shifting their corporate models to online platforms and digital databases.

As a result, the 5 billion daily active internet users are generating a whopping 2.5 quintillion bytes of data every day. This trend is witnessed across the board and in almost every field.

Even 60% of the global GDP is expected to be digitized by the end of 2022, blurring the lines between the digital economy and the real economy.

Meanwhile, blockchain technology, which is undergoing rapid transformation, is offering data management and storing solutions that have never been envisioned before.

With the implementation of this invention, we can establish ethical data standards that ensure users’ data privacy and protection are never compromised.

Stay informed with the latest insights in Crypto, Blockchain, and Cyber-Security! Subscribe to our newsletter now to receive exclusive updates, expert analyses, and current developments directly to your inbox. Don't miss the opportunity to expand your knowledge and stay up-to-date.

Love what you're reading? Subscribe for top stories in Crypto, Blockchain, and Cyber-Security. Stay informed with exclusive updates.

Please note that the Content may have been generated with the Help of AI. The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.


Blockchain Security Audit: Definition, Process, and Importance

Salomon Kisters - Jun 28, 2022

A blockchain security audit is a secure technology that supports high-value transactions taking place on a blockchain. The process involves sophisticated code analysis to identify and eliminate vulnerabilities in applications.


3 Ways Blockchain Supports Artificial Intelligence

Salomon Kisters - Jun 27, 2022

Almost everyone has heard about artificial intelligence. But how does it connect to blockchain technology?


Does Dogecoin Coin Have Utility?

Salomon Kisters - Jun 27, 2022

Dogecoin came into being in 2009 with the launch of the first decentralized blockchain, but does it have any utility?

Protect your documents

Your gateway to unforgeable data. Imprint the authenticity of your information with our blockchain timestamp

Get started