While transparency is at the core of traditional public blockchains, creating trust through verifiability, it doesn’t work well when it comes to sensitive information. Privacy chains, built to address this issue, often overcorrect and implement catch-all blanket secrecy. This unfettered secrecy creates space for illegal activities and raises regulatory concerns, especially in heavily regulated industries like finance and healthcare, where some level of data verification is essential (and sometimes required by law).
Data protection blockchains, in contrast, offer a balanced approach, providing manageable, granular confidentiality while retaining trust through verifiability, all thanks to zero-knowledge proofs (ZKPs) technology. This approach creates a new category that stands apart from conventional public, private, and privacy blockchains, enabling a ‘best of all worlds’ solution.
What is a data protection blockchain?
A data protection blockchain is a distributed ledger designed to help application developers and organizations make nuanced decisions about how to handle sensitive information. Standout features of a data protection blockchain include:
- Shielding: applications can implement transactions and smart contract interactions that can occur without leaking user data or metadata.
- Selective disclosure: a crucial feature of data protection blockchains, selective disclosure enables application developers to shield transactions, while enabling the creation and use of access keys that allow very specific actors (such as regulators) to view certain encrypted data.
- Verifiability: ZKPs ensure that statements about a piece of data can be confidently verified on-chain and trusted without revealing the underlying information. Importantly, this allows businesses to adhere to the data minimization principle (a cornerstone of GDPR and many other data protection regulations worldwide) while preserving proofs on-chain.
Comparing different types of blockchains
While all blockchains aim to establish trust and verifiability between multiple parties, they vary in how they manage privacy and transparency.
Traditional public blockchains, like Bitcoin and Ethereum, make all transactions viewable to anyone.
Private blockchains, like Hyperledger Fabric, restrict access to specific participants within a closed network, offering tighter control and some privacy. This model suits organizations needing internal data visibility and protection, but it lacks the broader decentralization and public accountability of blockchain technology.
Privacy chains, like Monero and Zcash, use advanced cryptographic techniques to protect transaction details, aiming at providing complete privacy, but often limiting the ability to verify information.
Pioneering the data protection blockchain category, Midnight offers programmable data protection designed to help developers incorporate business policies, such as user data preservation for regulatory requirements, into their applications.
Here’s a comparative overview of these four blockchain categories:
Where data protection blockchains stand out
Data protection blockchains shine in use cases that demand shielding and regulatory alignment without compromising on verifiability, such as:
- Healthcare: selective sharing of medical records, so only authorized parties can access patient information, maintaining compliance with health privacy regulations.
- Finance: controlled transparency supports institutions in verifying users’ credentials for regulatory compliance (eg Anti-Money Laundering and Know Your Customer regulations) while protecting clients’ sensitive information.
- Balloting: fraud-resistance balloting for use cases like surveying, polling, and voting, that can prove eligibility and participation status without disclosing personal information or publicly recording individual choice.
Why data protection blockchains are the future
Data protection blockchains are emerging as a critical technology in response to strict global privacy regulations.
With a more balanced approach to transparency and confidentiality, and built-in programmable disclosure, these networks can potentially enable industries and use cases that have been so far out of reach for other traditional networks. This equilibrium is crucial as industries increasingly require solutions that protect sensitive data without sacrificing openness.
By prioritizing these values, Midnight emerges as a pioneering solution in the blockchain space, designed to meet the complex demands of modern industries.
Explore the Midnight Nightpaper for a deeper dive into the blockchain’s technical aspects and vision. Discover how the network helps shape the future of blockchain by aligning with the needs of a data-conscious world.