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How Does Blockchain Support Data Privacy

How to keep data private on a blockchain

With an increasing number of blockchain applications going in to production privacy is a concern which, in most cases, still remains unanswered. A number of solutions are now emerging which look to address the issue of ensuring privacy of data on blockchains.

Why is privacy a concern when using blockchain technology? Unlike centralized systems where one centralized party can view all the data and control the access to it, the premise of a decentralized system is that the transaction data is shared with all participants. This sharing is required to enable all parties to agree on the validity of the transactions, a process called consensus. Disclosing information to multiple parties in order to have them validate the transactions introduces a problem if that data also needs to remain private.

For instance if I buy a pizza and pay with Bitcoin the whole world (well, everyone with access to a Bitcoin node) can see my payment-transaction as it is shared with all Bitcoin nodes. In public blockchain networks like Bitcoin and Ethereum this means that all transactions are shared with all nodes. And although it is hard, it is not impossible to reveal the real-life identities of the person involved in the transaction. In permissioned blockchain networks where only identified parties can participate, all identities are immediately known by definition.

The problem of disclosing private information in order to have multiple parties validate the transactions can be addressed in various ways, this article describe the 3 most common ways:

  1. Trusted computing
  2. Cryptography
  3. Selective multi-casts

1. Trusted computing

The concept of trusted computing originates from gaming where a gaming console can have more information about a game than the actual player who owns the gaming console. For instance in a first-person shooter game the fact that an adversary is hiding behind a wall may be hidden to the player even though this information is present on the gaming console.

Intel Security Guard Extensions (SGX) a feature found in modern Intel CPUs uses a trusted execution environment (TEE), an isolated part of the memory that can only be accessed through specific APIs. The TEE cannot be accessed by any other process, not even by the operating system or BIOS. The TEE is therefore sometimes nicknamed secure enclave (see purple square in the picture below). The SGX-CPUs also feature a built-in private key that remains unknown to the owner/operator of the machine. This private key is used to decrypt data in the TEE in order to execute logic on that data while the data remains secret.

This feature can be used in blockchain context such that transactions are encrypted and sent to all SGX-equipped machines involved in the validation. The SGX-equipped machines decrypt those transactions and validate them in the TEE. If the transaction is valid it is signed in the TEE with the built-in private key. This way multiple machines operated by multiple organizations can be used to validate blockchain transactions while keeping the content of the transactions secret because no-one, not even the owner or operator of the SGX-equipped machine, is able to access the confidential data.

Besides being useful for privacy, secure computing can also be useful in blockchain in order to make the consensus protocol more secure and faster as is done in Hyperledger Sawtooth that uses Proof of Elapsed Time (PoET) to reach consensus.

Though SGX is very promising technology, the current state is that regularly flaws are detected in the security of Intel SGX: it’s an arms race between Intel and attackers. Some examples of successful attacks on SGX:

2. Cryptography

Another option to address privacy on blockchain is with the use of cryptography. Obviously just encrypting or hashing data that should remain private has significant downsides as it makes it harder and often impossible to validate the transactions that use that data.

There are, however, more advanced cryptographic solutions which can be used to hide information while allowing for validation. One example of such a solution is Monero that uses:

  1. Ring signatures to hide the sender of a transaction
  2. Homomorphic encryption to verify that the sum of inputs of a (UTXO) transaction equals the sum of outputs of a transaction.
  3. Zero knowledge range proof to validate that a secret number (the secret amount of XMR paid in a transaction) lies in a known range (between 0 and a very high number) in order to prove that the paid amount is positive.

Another example is zCash that uses ZK-SNARKS, a generic zero knowledge proof that allow the user to create a cryptographic proof of any kind of statement. Because ZK-SNARKS are generic, they are a good fit to smart contracts that can model any kind of business logic (trade finance, international payments, identity management etc.). A downside of ZK-SNARKS is the trusted set-up phase: during bootstrapping of the network private key material is generated that needs to be destroyed. Bulletproofs however also allow generic zero knowledge proof but without the trusted set-up.

Zero knowledge proofs like the ones used in Monero and zCash have been used in production on public networks and therefore battle tested for many years and, contrary to SGX, no major vulnerabilities have been found in them. This is why ING is actively contributing to integrate Zero Knowledge Proofs in Blockchain technology.

3. Selective multi-casts

A good approach of selective multi-casts is implemented by Corda, a blockchain-inspired Distributed Ledger that sends transaction data only to the parties involved in a transaction and optionally to a consensus service (called Notary service).

For example, if one person pays another person using a token on Corda that represents 10 GBP, this transaction is not shared with the entire network but only with the sender and recipient of that token (and optionally with the Notary service). The recipient of the 10 GBP token will also receive the transaction history of that token to verify that the sender legitimately became the owner of it.

The notary service either receives the full transaction data in case of a validating notary, or just a hash of the transaction in case of a non-validating notary. This introduces a trade-off: using a validating notary will make the network tamper resistant (only valid transactions will be recorded on the distributed ledger) but will require the participants to share their private data with this notary service. On the other hand using a non-validating notary will keep data private between participants and though the DLT will still be tamper evident (in case an invalid transaction is submitted it is clear who submitted it) it is no longer tamper-resistant. When choosing the non-validating notary the network will remain tamper-evident (the participants of a transaction can see if an invalid transaction is submitted). Arguably tamper-evident could be robust enough on a network with known participants.

Selective multi-cast is for instance used in HQLAx on Corda.

Conclusion

We discussed 3 possible solutions to allow multiple parties to validate data while keeping confidential data secret. With SGX being very promising but at the time of writing not yet ready, this leaves us 2 viable solutions today:

▪ Cryptographic solutions such as Zero Knowledge Proof.
2. Selective multi-casts.

Which one you choose depends on your use case, so far we see in practice that cryptography, particularly Zero Knowledge Proof works well for public cryptocurrencies (like zCash and Monero) and selective multi-cast works well with production systems on permissioned networks.

What’s more, blockchain allows us to build networks without a central point. This removes the need for a middleman like Facebook or Google, so advertisers can interact directly with their prospective customers.

Because our data reveals a lot about the things we enjoy, it tells advertisers what we’re most likely to buy. Google and Facebook work with ad companies, using our data to help them target ads at people who will respond positively (read: click on the ad and buy what it’s selling).

With Data Privacy Making Headlines, Here’s How Blockchain Can Keep Our Data Secure

Because our data reveals a lot about the things we enjoy, it tells advertisers what we re most likely to buy.

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Another company with a similar model is BAT, who have built their very own browser, called Brave, to help make advertising a fairer place.

Using blockchain to make advertising better

These events are just the latest in a long history of strained relations between customers and tech companies when it comes to data privacy.

Even if you’re unaware of the details of the case, it’s clear that Facebook and other big platforms are coming under intense scrutiny for their use (or misuse) of their users’ data.
But here’s the thing — most people don’t see sharing their data as the root of all evil. In fact, more than half of all respondents in a recent survey thought data was essential to the running of the economy.

Another company with a similar model is BAT, who have built their very own browser, called Brave, to help make advertising a fairer place.

That’s why blockchain could be such a useful tool here. It’s built for transparency, allowing transactions to take place in a secure and trustless way and minimizing corruption.

Среди множества способов применения анонимных блокчейнов следует выделить два основных сценария.

Как блокчейн помогает сохранить анонимность? Ключевые игроки и примеры рыночного внедрения

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TON или Telegram Open Network изначально позиционировался как анонимная криптовалюта, которая должна была быть построена на основе клиентской базы мессенджера Telegram. Однако, позже команда проекта заявила, что откажется от идеи анонимизации создаваемой криптовалюты ради заключения крупных партнерств.

Также способом сокрытия транзакций может служить обычный перевод денег на криптобиржи. В текущей ситуации, когда криптобиржи практически не разглашают информацию о своей работе, скрывать деньги в криптовалюте можно, просто отправляя деньги на биржи и переводя их затем на нужный кошелек.

Loki использует собственный протокол для шифрования трафика, который является гибридом между Tor и I2P и получил название LLARP.
CoinJoin, разработанный Грегори Максвеллом, применяет микширование нескольких транзакций с целью усложнить их отслеживание.

Развертывание пользовательских децентрализованных приложений private dApps на базе предоставленной блокчейн-архитектуры.

Также благодаря сервис-нодам Loki, можно будет развернуть выходные узлы в обычный интернет, аналогично подходу, используемому в Tor. По аналогии с функцией Instasend в Dash, в системе Loki будут реализованы моментальные транзакции.

Также, в 2017 году известный защитник частной жизни Эдвард Сноуден назвал Zcash «самой достойной альтернативой Биткойну».

К тому же, публичный адрес получателя так же не будет раскрыт за счет создания временного публичного счета для получения транзакции который называется Stealth-адрес.

(читать далее...)
В последнее время, все большую популярность набирают анонимные блокчейн-протоколы, которые позволяют участникам сети скрывать адреса своих кошельков и транзакции из публичного поля. В этой статье поговорим об основных игроках рынка анонимных валют, механизмах шифрования и сценариях использования.

Monero использует кольцевые подписи (ring signatures), суть которых заключается в создании для каждой транзакции пула из 10 агентов, только один из которых является фактическим отправителем. К тому же, публичный адрес получателя так же не будет раскрыт за счет создания временного публичного счета для получения транзакции (который называется Stealth-адрес).

Помимо рассмотренных выше анонимных криптовалют, также существуют сервисы для обычных криптовалют, которые направлены на анонимизацию участников транзакции. Среди них стоит отметить миксеры монет (CoinJoin, Breeze Wallet) и протокол Mimblewimble. Подробнее рассмотрим каждый из них.
CoinJoin, разработанный Грегори Максвеллом, применяет микширование нескольких транзакций с целью усложнить их отслеживание.

В последнее время, все большую популярность набирают анонимные блокчейн-протоколы, которые позволяют участникам сети скрывать адреса своих кошельков и транзакции из публичного поля.

5 Blockchain Problems: Security, Privacy, Legal, Regulatory, and Ethical Issues

During the Arab Spring, western tech firms were cashing in by helping authoritarian governments surveil dissenters. The U.S.-based company Sandvine was also contracted by Belarus to shut down and block parts of the country’s internet as protestors contested the legitimacy of an election that saw «The Last Dictator In Europe» allegedly prevail.

Digital Mercenaries’: Why Blockchain Analytics Firms Have Privacy Advocates Worried

And the coins are moved from one address to another.

Blockchain analytics firms cash in on federal contracts (читать далее...)
The synthesis and analysis of that information gathered by blockchain analytics companies, according to O’Brien, is «not a harmless practice.»

What’s at risk

«In the law and in society, we’re still trying to develop to what extent companies – the public sector and the private sector – can collect that data that is just lying around, » O’Brien said. «And right now, crypto coins that aren’t privacy protected are data lying around in the blockchain. Not only is it public, but it’s replicated in anybody who runs a full node.» Grounded in a history of privacy and human rights abuse

Crimes tackled with blockchain surveillance
«Chainalysis only knows that a particular address belongs to a customer at that exchange, not who the customer is, » she said.
He sees the emphasis on creating further privacy tools as a natural reaction to years of parallel surveillance by governments. Bills like the Earn It Act and the Lawful Access to Encrypted Data Act (both of which push for government backdoors into encrypted systems) have come in response to services like Telegram or Signal, which, in turn, were born in part out of the NSA’s surveillance of unencrypted communications.

Subscribe to,

So the question is, what are the limits to what governments can do.

Open-source intelligence

O’Brien of EFF turned the KYC angle around a bit: He suggested that companies providing this service should, in turn, perform some KYC on any client they plan to work with. If they’re selling blockchain analytics as a service, they need to know that the companies or clients that they’re selling to are not using it in a way that will violate human rights.

§ During the Arab Spring, western tech firms were cashing in by helping authoritarian governments surveil dissenters. The U.S.-based company Sandvine was also contracted by Belarus to shut down and block parts of the country’s internet as protestors contested the legitimacy of an election that saw «The Last Dictator In Europe» allegedly prevail.
The synthesis and analysis of that information gathered by blockchain analytics companies, according to O’Brien, is «not a harmless practice.»

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