Solutions to Existing Blockchain Privacy Concerns
TL; DR
Worldwide cyber security incidents, such as data leakage, ransomware, hacker attacks, etc. are raging. Cyber security risks are on the rise as organized, targeted cyber-attacks worsen. Blockchain privacy solutions, including zero-knowledge proof, cryptocurrency mixing, and ring signature, may come to the rescue.
Worldwide Cyber Security Incidents Occur Frequently
Last year, one of the biggest US insurance companies CNA Financial suffered a ransomware attack. CNA tried to recover their documents but failed in vain. It was blackmailed for as high as $60 million by the hacker during their negotiation. Two weeks after the attack, the case was settled with $40 million in exchange for the regain of control over its own network. CNA Financial topped the released top ransomware payouts, breaking the record as the biggest such known payouts.
As The Record reported, the personal data involving over 533 million Facebook users from 106 countries and regions were leaked on a hacker forum, including user personal data, such as Facebook ID, full name, place, date of birth, email address, and any other details retrieved from user profiles. The leakage also reveals user phone numbers including those undisclosed ones, all retrieved through the database. The data was verified as authentic ones by random sampling.
Hackers were selling LindkeIn user data involving more than 700 million users on dark webs, offering sample data collection of around one million LinkedIn users. Personal data of around 92% of LinkedIn’s alleged 756 million users can be retrieved in this “leaked” database, making it the biggest data leakage since LinkedIn was founded.
Blockchain’s Double-edged-sword Solution
Worldwide cyber security incidents, such as data leakage, ransomware, hacker attacks, etc. are raging. Cyber security risks are on the rise as organized, targeted cyber-attacks worsen. Blockchain locks all data locally aided by decentralized distributed synchronous bookkeeping, tamper-proof, traceability, data encryption, etc. Cross-domain cooperation and sharing of multi-source data are achieved while data security is preserved. Trust, data ownership, and other issues plaguing traditional centralized systems are solved by smart contracts.
Existing network woes seem to have found their answers in blockchain, spurring the fast-track boom of this emerging technology in recent years. Blockchain becomes a hot topic of technological revolution as it verifies data using smart contracts and realizes transparency among network participants with immutable shared data. The secured, transparent traits, however, hinder the large-scale takeoff and popularity of blockchain applications. When I buy a pizza with Bitcoin, the transaction can be seen by the whole world (everyone who visits the Bitcoin node) as the action is shared among all Bitcoin nodes. All transactions are shared among all nodes in public blockchain networks like Bitcoin and Ethereum. As a transaction calls for confirmation from several parties, disclosure of private information becomes ever more prominent. The business world is cautious about sharing sensitive data in the ledger that cannot delete information, refraining many large organizations from entering the market.
Blockchain Privacy Solutions
Problems such as insufficient privacy protection of sensitive data are increasingly impeding the growth of the industry. The security of account privacy and the privacy of transaction data in blockchain have underpinned the major research areas and fields.
Zero-knowledge proof underscores the cutting-edge technology to protect account privacy and security, such as ZkSnarks. Proof that 1,000 times of signature verifications and other transaction verification are completed as instructed is sent on the chain, rather than the user’s signature data, with scalability realized and data privacy and security preserved. ZkSnarks divides the problem to be proved into several polynomials, forms an arithmetic circuit, and then transforms the arithmetic circuit into Rank-1 Constraint System (R1CS), which assists the proof. The circuit has input and output, where input is categorized into public input and private input, meaning close to the outside world. After the circuit is executed, proof that the calculation process from input to output is valid is generated. Comparing the circuit as an equation and the private input as the solution, that the equation can be solved is proved without disclosing the solution of the equation. This explains the magic of ZkSnarks.
Common solutions for transaction data privacy include Tornado cash, Monero, Dash, etc, all based on the UTXO model. Tornado cash adopts crypto mixing, while Monero and Dash are supported by the ring signature technology.
Merkle tree announces the essential data structure in mixed currency. The trick is to separate the input and output addresses in transactions, that is, to cut off the relations between the input and output addresses. It aims to improve the privacy and anonymity of cryptocurrency, imposing difficulties to trace the purpose of cryptocurrency and its owner.
An example from our daily life: Tourists are throwing coins of the same year into the wishing well. A third party is standing aside observing how many coins are thrown at what time by whom. But as the third party tries to inspect the coins in the well, he cannot figure out which coin is thrown by whom.
The concept of ring signature technology can be traced back to France in the 17th century. Legend has it that the then-French ministers came up with this brilliant idea as they proposed ideas to the king. Names of signatories were signed in a circle, making it hard to tell who initiated the proposal.
In a ring signature, all are ring members, not management, where no cooperation is required among members. The signature is independently signed using the private key of the signatory as well as the public key of other members in the group, with other members may not even realize its passive involvement. Ring signature hails anonymity but loathes counterfeits. The stressed anonymity fires up the obstacles for audit and supervision.
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