Blockopedia

How privacy is critical for blockchain based business of the future

Given the significant time and cost needed in adopting blockchain privacy, it’s natural to question whether it’s worthwhile. There can be no dispute when it comes to corporate use. For certain uses, such as fungible capital assets, blockchain networks without privacy aren’t all that different from stock exchanges and other open marketplaces, where it’s easy to see price and volume but not who’s buying and selling.

Zero Knowledge Proofs: 

The consensus algorithm, the mechanism that ensures the network’s authenticity, lies at the heart of blockchain technology’s enchantment. To put it another way, a consensus method entails everyone being able to double-check each other’s work. Zero-knowledge proofs (ZKP) are a kind of arithmetic that allows you to produce mathematical evidence that a proposition is true without having to supply the supporting facts. We can substitute actual data with a proof using ZKPs, preserving network integrity while allowing user privacy.

ZKPs are difficult to set up and maintain in the first place. In 2016, Zcash was the first to use them on a blockchain, and in 2017, Ethereum made several significant adjustments that made them viable.

Blockchains offer a fantastic potential to replace data silos between businesses with standardized, connected data. Inventory transfers might be represented as digital token transfers by businesses. Because only one person may own a token at a time, the system drives reconciliation between parties, resulting in substantially higher accuracy.

Blockchain-based supply chains: 

Blockchain-based supply chains would not only be more precise, but they would also be more efficient. Today’s businesses must methodically match purchase orders, invoices, and shipments, then double-check that the prices paid match those agreed upon in the master contract between buyer and supplier. Smart contracts would keep track of prices on the blockchain, apply volume discounts and rebates, and automate payments when deliveries are delivered.

On a blockchain, we can reduce the time it takes to process papers by more than 90% and the cost of administration by roughly 50%. Unfortunately, without robust privacy protections, none of this will be widely adopted. If a corporation implemented these techniques today, competitors would be able to know how much it was manufacturing, how much it was buying in raw materials, its important sales markets, and even the prices paid along the supply chain in real time. These kind of data are frequently among a company’s most tightly guarded secrets.

Way forward – Privacy Tools: The good news is that powerful privacy tools for businesses are on the way, after a lengthy wait and a lot of effort. It will be possible to exchange financial tokens as well as discreetly transfer supply chain tokens using Ethereum layer 2 networks such as Polygon Nightfall. Those who own the tokens will have access to historical data and traceability. External viewers, on the other hand, will only perceive a never-ending stream of mathematical proofs.

Securing business logic effectively: Token transfers that are secure and private are a fantastic start, but they don’t tell the entire story. The second piece of the issue is figuring out how to enable secure business logic, so smart contracts can do more than just move tokens discreetly. When you consider a normal commercial agreement between two parties, you’ll notice that it involves the exchange of money for goods under the conditions of the contract. Whether actual or virtual, crypto or fiat, digital tokens are excellent for expressing both “money” and “things.”

The part about reaching an agreement is more difficult. Complex reasoning is common in agreements, such as “If I spend more than $1 million, cut all of my list prices by 10% for the rest of the calendar year.” It’s more difficult, but not impossible, to turn this into private logic that’s both safe and scalable. There are a few options, like having both sides do the identical computations off-chain and comparing the results, or putting the entire logic into a mathematical circuit based on a zero-knowledge proof. Both techniques are under consideration.

Summing up

On the market, there are a number of privacy-enabling supply chain solutions. We’ll also witness the first systems that can handle sophisticated logic while maintaining privacy, as well as more systematically applied privacy tools to all types of blockchain solutions.

Privacy is important. Before widespread encryption, the internet was a fascinating place to visit, but it wasn’t really commercially valuable. Every message and transaction took place in full view of the public. The emergence of scalable public key encryption incorporated into the web browser was the catalyst for the internet’s transformation into the world’s commercial infrastructure. Previously, only the most naively adventurous among us would enter their credit card number into an online form. When we look back on the history of blockchain technology, we’ll notice that privacy technology has been widely adopted in the same way.

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