Blockchains are touted as subsequent technology databases that promise to facilitate safe and environment friendly transactions between unknown events. Nevertheless, one of many main pillars of a blockchain’s safety is the truth that individuals with entry to the blockchain can see your complete historical past of transactions executed on the blockchain – the end result being that every get together has an equal alternative to confirm the accuracy of data saved. But when all the data saved on the blockchain may be seen by anybody with entry to the blockchain, what occurs when that info qualifies as “private info” underneath Canadian privateness legal guidelines? Organizations that gather use or disclose “private info” are topic to quite a lot of compliance obligations, which as we set out beneath, may be tough to reconcile with sure blockchain fundamentals.
What’s private info?
In Gordon v Canada, the Federal Courtroom defined that private info is info that can be utilized to establish a person if the data “permits” or “leads” to the doable identification of the person, whether or not on the premise of that info alone, or when the data is mixed with different info from different accessible sources. Accordingly, an organization that merely “de-identifies” or “pseudonymizes” information should be topic to Canadian privateness legislation necessities as a result of there’s a chance that such information may be “re-identified”. This poses a novel problem to the builders of blockchain infrastructure, and the companies that function atop blockchain infrastructure, when the metadata that’s essentially ingrained in blockchain transactions could also be re-identifiable. Such metadata could represent private info when it reveals the place transactions are despatched from, who they’re despatched to (not essentially the title of the recipient, however the handle of the recipient), how a lot cash was despatched, and at what time.
Take decentralized functions (DApps) for instance, that are constructed from software program deployed on the blockchain (e.g., good contracts) which might be sometimes designed to execute enterprise operations for corporations. The operations of the good contracts that successfully facilitate the performance of the DApps are sometimes made publicly accessible to each node within the blockchain community as “bytecode”, which may be reverse engineered to disclose the identical transactional info as metadata in peer-to-peer transactions.
So, what does it imply if such information, saved and processed on public blockchain networks, qualifies as private info? The result’s considerably of a paradox.
The blockchain – privateness paradox
Immutability
Information revealed to a blockchain can’t be deleted, however most trendy privateness laws grant people a “proper to be forgotten”. How can a person or information topic train their proper to be forgotten when the data recorded on a blockchain’s ledger is everlasting?
Transparency
The very foundation of belief in decentralized networks outcomes from the transparency of the ledger. All members in public blockchain networks belief within the sanctity of the data as a result of they’ll all see and analyze that info equally and in actual time. But when all the data is clear, it turns into accessible to anybody and will, theoretically, be utilized by unknown actors for unknown functions. Accordingly, how can an entity that leverages blockchain know-how to execute transactions and/or retailer info present the suitable protections for information topics round how their info could also be used or disclosed?
Accountability
Public blockchains are deliberately decentralized so that there’s not one accountable entity. Furthermore, the networks composed by public blockchains usually span jurisdictions, and will include tons of, 1000’s, or tens of millions of people that all technically have the flexibility to tell updates to the blockchain (a capability akin to managerial resolution making). Beneath these circumstances, how can a regulator implement actions towards the supporters of a public blockchain, when tasks round maintenance, administration, and ongoing growth are unfold throughout a group of unassociated people?
Finest practices for managing private info within the blockchain context
No official suggestions or interpretations of course of private information on public or non-public blockchains have been revealed in Canada. Nevertheless, a broad interpretation of private info, which is customary underneath Canadian legal guidelines, may deter blockchain stakeholders from processing private information on public blockchains, as a result of information on a blockchain is accessible by anybody with entry to that blockchain, and distributed/saved amongst all nodes within the public blockchain community.
Within the non-public blockchain context, administration of particular person rights over private info is feasible as a result of there are designated and accountable entities that management the variety of stakeholders with entry to the blockchain. Beneath such circumstances, stakeholders could require compliance with privateness rules as a way of accessing the non-public blockchain and its related utility(s). Stakeholders might also be faraway from the community for failures to conform, and a sufficiently centralized non-public blockchain could also be overwritten by members by collaboration to reply to sure privateness infringing incidents.
The stakeholders behind DApps in both public or non-public blockchain contexts even have the flexibility to proactively mitigate privateness legislation dangers by designing applicable privateness insurance policies and implementing greatest practices that contain:
- Combining on-chain and off-chain information
The blockchain utility ought to keep away from storing private information as a payload on the blockchain (i.e., together with figuring out info within the message accompanying the cost itself), and as an alternative have blockchain transactions function mere pointers or an entry management mechanism to extra readily managed storage options off-chain.
- Using privateness centric applied sciences and cryptographic strategies
Encryption strategies at the moment being utilized by privacy-centric chains embrace ZK-SNARKS, Ring Confidential Transactions, and mixing strategies, all of that are supposed to masks the id of the sender or recipient and/or permit members to verify transactional legitimacy by cryptographically proving that they know one thing with out revealing the character and id of the data.
- Conducting information transformations
Different privateness enhancing encryption and destruction strategies could also be used to guard a person’s privateness rights, akin to hashing information or making use of different information transformation strategies to non-public info, and revocation of entry rights to a blockchain utility (or complete blockchain in a personal blockchain community). Nevertheless, Canadian regulators haven’t addressed whether or not such measures are ample to fulfill the calls for of Canadian privateness laws.
Organizations leveraging blockchain know-how to gather, use or disclose private info should take care to stay knowledgeable and compliant to necessities underneath Canadian privateness legal guidelines.
- Workplace of the Privateness Commissioner of Canada, Metadata and Privateness: A Technical and Authorized Overview (October 2014) at 6↩
- Di Filippi, “The Interaction Between Decentralization and Privateness” The Case of Blockchain Applied sciences” (2016) n. 7 Journal of Peer Manufacturing: Different Internets 5 (SSRN) at 8. ↩
