Privacy Solutions Evolve to Address Business Needs for Blockchain

The blockchain sector is experiencing ongoing expansion as the technology evolves.

Recent research from Precedence Research forecasts that the worldwide blockchain technology market will attain $187 billion by 2034. The report highlights that the North American blockchain market was valued at approximately $8.1 billion last year.

While this is significant, industry analysts assert that privacy remains a primary concern for businesses implementing blockchain solutions.

Paul Brody, Global Blockchain Leader at Ernst & Young (EY), informed Cryptonews that privacy technology is still in its early stages. This presents a challenge, as Brody indicated that the foremost issue for enterprise users and serious institutional investors is privacy.

Privacy is missing ingredient for business blockchain adoption: EY exec
Paul Brody, EY’s global blockchain leader, emphasizes how privacy is the essential element for blockchain adoption in businesses and suggests potential solutions to enterprise challenges.#Norque #NOQ #Bitcoi…

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“For any business activity – aspects such as what you are purchasing, your terms and conditions, and volumes and expenditures – are highly sensitive and competitive matters,” Brody stated. “Blockchains simply aren’t practical for businesses without that capability.”

Public Blockchains Lack Privacy

Unfortunately, public blockchains do not possess inherent privacy features.

Avidan Abitbol, Project Director of Data Ownership Protocol (DOP), informed Cryptonews that there is a challenge in balancing transparency and data ownership within blockchain frameworks.

“In conventional blockchain networks, all transaction data is publicly accessible, which can expose users to risks,” Abitbol remarked.

As a result, private blockchain networks are likely becoming more appealing to enterprises.

Research from technology firm Wipro indicates that 40-60% of enterprises have implemented private blockchain networks – exclusive networks with restricted access, rendering them more centralized.

Jake Claver, Director of Digital Ascension Group – a family office focused on digital assets – told Cryptonews that he believes financial institutions and corporations generally function within permissioned ecosystems.

For example, Claver noted that the permissioned blockchain network R3 Corda is the primary solution provider that Digital Ascension Group observes most institutions utilizing.

A Privacy Solution For Public Blockchain Advances

While private blockchains may be favored by enterprises, several privacy solutions aimed at public networks are progressing swiftly.

For instance, Brody mentioned that EY has developed an Ethereum Layer 2 (L2) network named “Nightfall” that enables businesses to transfer tokens confidentially. Nightfall was introduced in 2019, yet the surge in tokenization has facilitated the solution’s development.

“Every business agreement involves an exchange of money for products or services under agreed terms,” Brody explained. “With blockchains, you can tokenize both the money and the products, and you can embed the terms into a smart contract.”

Brody added that EY has created an application called “Starlight,” which allows businesses to convert a solidity smart contract into a tailored zero-knowledge circuit.

“This represents a type of customized private black-box on-chain,” he noted.

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— Svante.eth (@svantetobias) August 16, 2024

Public Blockchain Transparency Becomes Private

DOP also aims to address the challenge of balancing transparency and data ownership in public blockchain systems.

Abitbol highlighted that DOP achieves this through “selective transparency,” which empowers users to manage how much of their information is disclosed on a blockchain.

“DOP’s selective transparency features enable organizations to share only the necessary information with their stakeholders, such as partners, clients, customers, and employees, while safeguarding sensitive data,” Abitbol explained.

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He elaborated that incorporating DOP into an enterprise blockchain solution allows an organization to obscure any type of data.

“For example, when an enterprise compensates employees in cryptocurrency, without DOP, employees could potentially trace the transactions back to the company’s main wallet and gain insights into other employees’ salaries, the company’s overall crypto holdings, or other sensitive financial information,” Abitbol added. “This absence of privacy could result in various issues, such as internal disputes, information leaks, or even attempts at manipulation.”

According to Abitbol, DOP enables enterprises to reveal only the essential data required for each specific transaction, ensuring that sensitive information remains confidential.

DOP is an EVM-compatible protocol and includes key features such as encryption of token balances and transaction data. Abitbol noted that DOP can be integrated with popular wallets and blockchain platforms.

Recording Private Transactions on a Public Network

Charles Adkins, President of Hedera – an open-source public ledger – further informed Cryptonews that Hedera can provide public permissions in its network through the “Hedera Consensus Service” (HCS).

According to the Hedera website, HCS facilitates verifiable timestamps, decentralized ordering, and privacy for sensitive information, for enterprise applications and consortiums.

Adkins added that on private networks, HCS can be utilized to document the state of private transactions on the public ledger. This allows for privacy while still benefiting from the trust and security that a public blockchain provides.

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“Hedera ensures that transaction privacy is preserved by only submitting a hash of the transactions to the public ledger, which can be utilized later for verification without disclosing any sensitive details,” Adkins stated.

He also mentioned that since transactions on private networks may not be public, these can still be anchored to the public Hedera Layer 1 network for consensus.

“This indicates that while private networks may manage sensitive or private data internally, they can utilize Hedera’s mainnet for final consensus, ensuring a high level of security and decentralization without compromising privacy,” he remarked.

Challenges With Privacy Solutions For Public Blockchains

While it is crucial to comprehend how privacy solutions are evolving, several challenges may impede adoption.

For instance, Brody pointed out that the mathematics behind the solutions developed by EY is complex.

“Due to the complexity of the math, this results in high gas fees on-chain, so reducing the cost of each transaction is very important,” he noted. “We can currently execute transactions for as little as $0.01 with privacy, which is significant, but we’re aiming for an additional 10x reduction in cost.”

Moreover, Brody mentioned that customized digital contracts still necessitate considerable human support.

With this in mind, Brody hopes that EY can soon implement no-code drag-and-drop smart contracts to establish business agreements with privacy on-chain.

“Our objective is relentless simplification to the extent that no one will truly understand or care about the underlying math or technology behind the system. They’ll just know that it functions,” he stated.

Beyond technology, Adkins believes that reconciling transparency with the necessity for confidentiality remains challenging.

“Businesses require privacy for sensitive transactions, yet they also desire the advantages of immutability and verification that public blockchains offer,” he remarked.

Another concern Adkins highlighted is regulatory compliance.

“Ensuring that the blockchain network complies with privacy regulations such as GDPR, which mandates the right to be forgotten, is a concept that’s difficult to align with immutable ledgers,” he noted.

Enterprise Blockchain Will Continue To Thrive

Despite these challenges, enterprise blockchain adoption is expected to continue to prosper in the future.

Claver anticipates that institutions will address challenges related to digital identity, liquidity, and regulations before the end of this year.

“There is an urgent necessity for institutions and enterprises to embrace blockchain technology to avert a global liquidity crisis,” he remarked.

In agreement, Adkins observed that “enterprises are becoming aware that blockchain can deliver unmatched efficiency to their operations.”

The post Privacy Solutions Advance To Meet Blockchain For Business Demand appeared first on Cryptonews.