Data protection calculations on blockchains could prevent violations


In the 19th century, the barons of American industries became famous for harnessing tangible resources like oil and steel. Today, corporate giants are trying to achieve even more wealth by collecting consumer data. But now, as then, the benefits of accumulating such resources come with a significant business risk: spillage.

Like oil spills, data leaks, whether accidental or as a result of hacking, can cause significant financial, legal and political damage to businesses and consumers. Look at the impact on Facebook earlier this year. In April, the phone numbers, full names, email addresses and locations of 533 million users were leaked to a hacking forum, causing an outcry among consumers and governments alike.

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Facebook is far from alone with its security problems. In 2020 alone, 1,001 data breaches were reported and more than 155 million people were exposed to data risks. These leaks are an expensive and time consuming problem for businesses. A 2020 report by IBM found that the average cost of a security breach exceeded $ 8.64 million and typically took 280 days to resolve, although these metrics vary by industry.

Despite the cost and PR issues, many companies would argue that the benefits the data provided are worth the multi-million dollar risk of exposure. Research has shown that big data enables companies to make better strategic decisions, reduce costs, improve operational processes, and gain a better understanding of their customers – all of which lead to higher profits.

Blockchain is the savior

Avoiding security risks from not using data is simply not an option. So the question is, how can companies get the most out of the competitive advantages that data offers without exposing themselves to undue risk of financial, legal, and PR disaster?

The answer lies in the data protection calculation on the blockchain.

This solution may seem counter-intuitive at first. After all, blockchain transactions find consensus among the public and are designed to be transparent and publicly accessible – two properties that run counter to the data security goals of companies. It’s the blockchain paradox: users can either share data to gain new insights that benefit society as a whole, or isolate data in protected silos that protect individual privacy.

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In recent years, the advent of data protection calculations has offered a third possibility. Verifiable calculations allow results to be publicly reviewed to demonstrate accuracy outside of the main blockchain network, eliminating the exposure risks associated with transparency. In addition, this security measure can be applied by integrating the data protection computation as a layer 2 solution and outsourcing the work to external nodes without unduly burdening or costing a company’s primary blockchain network.

In practice, the integration of this security measure means that companies have their cake and can eat it too. By integrating blockchain into the data management strategy, companies can drastically reduce the risk of security breaches and the associated consequences.

While there is limited research to maintain the value of layer-two, particularly the privacy-enforcing computation, the preliminary literature on blockchain-based security shows the technology’s potential as a privacy measure. In 2020, a review published in Sustainability found:

“The integration of [blockchain technology] in the industry can ensure the confidentiality and integrity of data and should be enforced to maintain data availability and data protection. “

Companies that use privacy-preserving calculations and other blockchain-based security measures not only benefit from improved security, but also have the opportunity to strengthen interoperability within industries that have been hampered by the threat of data insecurity in the past.

Healthcare as an example

In this sector, the exchange of data between providers, healthcare networks and third party researchers is crucial. However, data protection regulations have made it difficult for patients to transmit information. In particular, many health care providers used obsolete fax machines for years because their advanced electronic systems were not interoperable enough to securely transmit patient data.

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These silos have had a deterrent effect on healthcare innovation. As a team of German scientists noted in a 2019 article in the Nature Partner Journals of Digital Medicine:

“Hidden in isolated databases, incompatible systems and proprietary software, [healthcare data is] difficult to exchange, analyze and interpret. This slows medical progress because technologies that rely on this data – artificial intelligence, big data or mobile applications – cannot develop their full potential. “

The potential that the team is referring to is considerable. In recent years, AI researchers have turned patient data into remarkably accurate algorithms to aid doctors in making a diagnosis. For example, last year researchers trained a neural network to identify 26 of the most common skin conditions by linking it to over 16,000 teledermatology cases. This algorithm ultimately turned out to be just as accurate as trained dermatologists. One reviewer summarized the project:

“Although this tool has not yet been approved for clinical use, deep learning-based diagnostic and clinical decision support tools are gaining acceptance in many medical specialties and will change the way we experience medicine.”

Theoretically, but practically armed, the data (in) security represents an obstacle to progress. For the development of the teledermatology tool, the researchers had to tap into a huge wealth of data. However, sharing even small amounts of sensitive patient data is a privacy nightmare.

Think of the backlash that occurred last year when Google partnered with Ascension, a major hospital chain, to launch Project Nightingale – a tool for finding patient information. The news sparked an immediate and overwhelming backlash when critics berated the couple for sharing confidential medical records. Google and Ascension rejected the criticism, arguing that their data release complied with state data protection regulations. But as a Stanford University professor said in an interview with the Wall Street Journal:

“Some believe federal law is out of date, saying that the law’s protection has not kept pace with the technology sector’s growing demand for patient data.”

The point raised here is nuanced. The problem is not that companies are not complying with data protection regulations, but that the public does not trust these security measures. If healthcare companies really want to maximize innovation through the bold use of data, they have to stop sticking to the letter of the law and address consumer fears head on.

Imagine if healthcare providers had access to data security measures that use a verifiable Layer 2 calculation to securely exchange patient data without putting the consumer – or their organization – at risk. The safety and security that technology offers would completely change the proverbial game. It would encourage innovation, prevent malicious threats, and reduce the risk of data loss.

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The mistake that business leaders make too often is assuming that the benefits of blockchain are limited to funding. The security block chain could, however, lead to a massive change of perspective with regard to the possibilities of data exchange. The privacy-preserving computation enables fear to be eliminated. It enables companies to imagine what they could achieve if they could take full advantage of their data without fear of malicious glitches.

That’s not to say that there aren’t any barriers to implementing blockchain-based security as the norm – it certainly does. The first was mentioned earlier: Executives need to understand the value of blockchain outside of their stereotypical role in finance. Developers would then have to create industry-specific products that are based on the secure calculation of Layer 2 features. After all, these products would need to be widely adopted to enable data sharing between companies.

Even one of these steps can take years. But extended schedule or not, the fact is that this vision for a data-driven, blockchain-secured future is a possibility. Privacy-preserving calculations are a real solution to the data loss problems industry leaders have struggled over for years. We could see transformative innovations happening in all industries – if only business leaders take advantage of the blockchain.

This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.

Felix Xu is co-founder and CEO of ARPA. Felix graduated from New York University with a degree in Finance and Information Systems. Felix has been working on venture capital investments in fintech, big data and AI startups for six years. Most recently, Felix led blockchain sector research and early stage investments at Fosun Group, one of the largest conglomerates in China.