The Crypto Korner #38: Storing and managing sensitive data with blockchain

Hi, I'm?Javier Perez?(Linkedln/Twitter), a Blockchain enthusiast. Welcome to our newsletter where we talk about blockchain, crypto and web3.

In today's article we will talk about data privacy and how blockchain can help us managing it. Let's start:

Sensitive data is crucial, but dealing with its storage can be difficult. Blockchain has many benefits, but it's not necessarily the best choice for all data. Blockchain is permanent and immutable, making it difficult to delete, modify, or undo data. Due to its fundamental nature, hackers have a larger surface to exploit compared to traditional databases. However, there are still benefits of using blockchain for sensitive data storage. It can prove ownership, streamline business processes, and provide an auditable and irrefutable chain of custody.

Challenges of Storing Sensitive Data on Blockchains

Storing sensitive data on blockchains is not without its challenges. The permanence of blockchains means that data is there forever, and this makes the surface area for hackers to attack much larger than with traditional databases.

Additionally, the slow and expensive operations of blockchain, coupled with smart contract development complexities, can make handling sensitive data on blockchains difficult. This is not to mention the data privacy and regulatory shortcomings of storing sensitive data on blockchains, which need to be dealt with using appropriate techniques.

Ways to Deal with Privacy Shortcomings of Blockchains

Option #1 - Forget About It: Just running a blockchain and doing nothing to protect sensitive data is extremely dangerous. Cryptography doesn't automatically encrypt or make the data private.

Option #2 - Encryption: Encrypting data prior to storing it on the blockchain is an option. However, dealing with keys manually is cumbersome and prone to human error. Losing or compromising keys will make the information stored on the blockchain public forever.

Option #3 - Hashing: Storing hashed data on the blockchain is useful if you're okay with being able to only look up a specific hash. However, after several hashes, it's difficult to remember which customer is represented by an alpha-numeric string.

Option #4 - Anonymizing: Anonymizing data is only partially useful, as it doesn't make sense to display anonymized data to the customer. The degree of anonymization to be used depends on the analysis. Higher levels cost more in resource time, labor, and expense.

Option #5 - Splitting the Data: Splitting the data model and storing only the minimum amount of information on the blockchain is an option. However, it limits access to the data and may make it difficult to use the data for its intended purpose.

Blockchain as an Alternative

Bitcoin was the first blockchain application, allowing users to transact without requiring trust from anyone or a third party. The decentralization of the blockchain ensures that everything is encrypted and tamper-proof without the need for a central authority.

Cryptocurrency exchanges like have made it easier for practically everyone to get into Bitcoin with a click of a button. Blockchain technology can also be used in distributed storage software, distributing data across a network of people globally and making it available even if part of the network goes down.

Benefits of Blockchain for Sensitive Data Storage

Blockchain technology offers numerous benefits for sensitive data storage. Improved data integrity and ownership provide an irrefutable chain of custody, while streamlining business processes across multiple entities create better efficiency. Another significant benefit of using blockchain is the auditable nature of its transactions, ensuring that sensitive data remains protected.

With such robust measures at play, blockchain-based data storage is a highly preferable solution for businesses looking to preserve the privacy and security of their sensitive data.

Limitations of Storing Sensitive Data on Blockchains

Blockchain technology has its limitations when it comes to storing sensitive data. Operations are slow and expensive, and smart contract development is a complex process compared to conventional data-stores. Additionally, if the network is down, data becomes inaccessible which can cause a lot of issues.

With no central authority, managing the blockchain can be a herculean task. Overall, it is clear that blockchains aren't the perfect solution to all data privacy problems, but with the right strategy, blockchain can be used as a secure alternative to store sensitive data.

Conclusion

Sensitive data cannot go on blockchains, but blockchain can offer improved data integrity and ownership, streamlined business processes, and an auditable chain of custody, among other benefits. However, it also has limitations such as slow and expensive operations and data inaccessibility if the network is down.

While a new solution is needed, blockchain is a mixed bag of benefits and challenges. Nonetheless, it remains one of the major technological breakthroughs of this century.