Is the combination of blockchain and privacy computing an inevitable trend?

Is the combination of blockchain and privacy computing an inevitable trend?

Our current framework for thinking about this question is whether blockchain technology is limited in its adoption and cannot move forward without combining it with privacy computing technology, and whether privacy computing technology is limited and cannot move forward without combining it with blockchain technology. If they are both necessary for each other, then the trend toward combining them is inevitable.

Here are our thoughts on this issue:

1. Is the application of privacy computing technology a necessity for blockchain technology

Blockchain technology has huge advantages, but without privacy computing technology, the application of blockchain technology will be greatly limited because it cannot solve the problem of privacy protection of data on the chain.

(1) Limitations of Blockchain Technology

First, the openness and transparency of the data on the chain is insufficient for data compliance and privacy protection. Blockchain is a distributed ledger system, and although the openness and transparency of the data is conducive to the verification of the evidence and the prevention of tampering, there is a risk that the data can be easily copied and the privacy of the individuals can be leaked. Blockchain requires different nodes on the public chain to verify and maintain transactions and transaction status to form *** knowledge, so each participant can have a complete data backup and all transaction data are open and transparent. If a participant's account is known, it is easy to obtain every transaction record, and thus infer his social identity and property status. Taking consumption scenarios as an example, there are barriers to competition between platforms, and users also want to keep their consumption privacy. Therefore, the blockchain lacks the ability to protect data related to corporate and personal privacy, such as user flows, logistics information, and marketing, often leading to the reluctance of data owners to allow data to enter the circulation chain. Transactions in the on-chain system are no longer controlled by the centralized ledger, and users conduct transactions by using unique private keys, the transaction process is encrypted and it is difficult to restore the data before encryption, and the transactions within the blockchain become more anonymous and uncontrollable by using the private key as the transaction credentials only. In the distributed ledger system, all transfers are made in the form of addresses, and in the event of fraud or money laundering and other financial crimes, even if the address can be publicly queried, it is extremely difficult to track the funds and it is difficult to prove the identity of the user with the private key as the transaction credentials. Therefore, many enterprises and individuals carry out illegal transactions such as money laundering through the blockchain, which is not conducive to the compliant processing of the data and the legitimate **** enjoyment of the data.

Second, the lack of data processing capacity restricts the further development of the technology and commercialization of the expansion of on-chain computing is limited by the performance of the network **** knowledge, which makes it difficult to have real-time and high-efficiency on-chain transactions, and the computational capacity of blockchain smart contracts needs to be expanded. In the case of Bitcoin, the largest crypto-payment system, for example, it is only able to process about 3 to 7 transactions per second5 , and the validity of the current transactions is affected by network transmission, so it often takes about 10 minutes of bookkeeping before the nodes on the network*** know the content of the transactions. In addition, if two or more nodes on the chain compete for bookkeeping power at the same time, they need to wait for the next bookkeeping cycle to confirm the accuracy of the transaction, and ultimately the chain with the longest block and the most bookkeeping content completes the confirmation.

A completely decentralized system is not compatible with most of the existing systems in reality, and the lack of on-chain and off-chain synergy and multi-business development systems and functions restricts the further implementation of blockchain technology. In the process of implementing blockchain technology, firstly, as various industries have mature systems, the completely decentralized form of blockchain may not be suitable for all fields and industries; secondly, the platform design and actual operation costs of blockchain are huge, and its inefficiency and delayed transaction defects are very obvious, so whether it can make up for the loss of the replacement of the original system needs to be subjected to a certain degree of actuarial calculations and comparisons; furthermore, the storage of data on blockchain requires a certain degree of compatibility with most of the existing systems in reality. In addition, using blockchain to store data requires organizing the original data format, and when it comes to sensitive data in the government and judicial fields, it is even more necessary to establish a credible channel linking online and offline data to prevent data entry errors, which brings higher human and material costs.

(2) Privacy computing technology helps blockchain technology

Privacy computing technology guarantees the privacy of data in the whole life cycle from generation, perception, publication, dissemination to storage, processing, use, destruction, etc., to make up for the privacy protection ability of blockchain technology, and to realize the "availability and invisibility" of data. available but not visible". Through the introduction of privacy computing technology, the number of users' income and expenditure information, address information and other personal data are presented in the form of secret text, which can prevent data leakage and safeguard users' personal privacy in the process of data*** enjoyment on the platform, and is conducive to further breaking the effect of data silos, and promoting wider multi-party data collaboration. Privacy computing technology can form a technical combination with blockchain technology to enhance data processing capacity and expand the scope of application. By standardizing data processing, privacy computing technology can improve the efficiency of data processing and data sharing, and enhance the data processing capability of blockchain. In addition, the combination of privacy computing technology and blockchain technology can be applied to cooperation areas that lack a centralized system but have a strong demand for sensitive data sharing, thus expanding the application scenarios of blockchain technology.

Whether the application of blockchain technology is the immediate need for privacy computing technology

(1) Limitations of Privacy Computing Technology

Firstly, there is a lack of security checks on the sharing of data, which restricts the credibility of the data flow

The whole process of data sharing involves collection, transmission, storage, and distribution of data.

The whole process of data sharing involves collecting, transmitting, storing, analyzing, releasing, and accounting for multiple processes, and the privacy calculator mainly solves the problem of data "availability and invisibility" of the whole process, but it is difficult to ensure that the data source is credible and the calculation process is credible.

From the perspective of credible data source, in the process of data collection, the data content itself may be incomplete, and there may be errors in data entry; in the process of data transmission, the data transmission may be attacked by other clients, resulting in data leakage in the process of data transmission; in the process of data storage, the role of the data storage party may tamper with the data, or copy the data and resell it to the black market, all of which are not covered by privacy policy. In the data storage process, the actor storing the data may tamper with the data or copy and resell the data to the black market, which will not be recorded by privacy computing technology. If there is no guarantee that the identities of the parties enjoying the data*** are "credibly verified", it is possible that the privacy of the data will be "in name only". From the perspective of trustworthy computation, it is possible for data users to falsify the results of data processing by altering the results and content of the data at the point where the data is analyzed and published. Therefore, once the information has been verified and added to the privacy computing environment, it is difficult to find out whether the data has been tampered with or leaked, and it is difficult to prevent data falsification at different nodes at different points in time, and it is difficult to prosecute a series of legal issues arising from erroneous data in key areas such as finance, government, healthcare, and charities.

Second, the overall level of business level is not uniform, restricting the expansion of the technology platform

Currently, the technical realization path of privacy computing is mainly divided into three: multi-party secure computing, federal learning, TEE Trusted Execution Environment. The three technology paths have their own application flaws and problems. Due to the limited technical mastery and R&D capabilities of different companies in the industry, the actual application scope of the technology platform is limited and the scalability is insufficient.

Multi-party secure computing, despite its complex and high-standard cryptographic knowledge, suffers from inefficiencies in its computational performance in practical applications. As the scale of the application grows, it is a challenge for technology vendors to adopt a suitable computing scheme that ensures that the computation delay varies linearly with the number of participants. Although multi-party secure computing can ensure the privacy of multiple parties in data fusion computing, it still needs to be matched with other technical means to prevent data leakage and tampering in the access, control, and transmission of data.

Federated learning technology is often used in the industry as a base model for third-party platforms, and privacy calculations are performed on top of the base model, which has the potential to be implanted with viruses by developers. In addition, the federated learning mechanism defaults all participants to be trustworthy, and there is no way to prevent a participant from maliciously providing false data or even diseased data, which may cause irreversible damage to the final training model. Since federated learning requires computation by each participant node, the computational power of the nodes and the state of network connectivity will limit the communication efficiency of federated learning.

TEE Trusted Execution Environment, the core hardware technology in China is currently in the hands of a few foreign core suppliers such as Intel, Qualcomm, ARM, and so on, and there is a very high security risk and application risk if it is purchased from foreign countries in key areas. Third, the lack of a mechanism for data **** enjoyment, restricting the applicability of data circulation Privacy computing through the use of multi-party data **** with the calculation, the results, however, in the actual process of cooperation, due to the different levels of business of each data **** enjoyment of the party, the quality of the data is not the same, resulting in each link in the data processing is difficult to achieve a reasonable right.

According to the conventional benefit sharing mechanism, the data owner with high quality data and high contribution rate should get more profit from the data, but the privacy calculation only takes into account the "usability and invisibility" of the data, and it is difficult for data users to judge who's data contributes the most to the result from the final result, which results in unfair benefit sharing. This results in unfair distribution of benefits. In the absence of a reasonable mechanism for assessing contributions and distributing benefits, it is difficult to incentivize data owners and other data holders to collaborate. In particular, in the case of untrusted multi-party collaboration, the cost of trust increases, making it difficult to achieve multi-party collaboration and limiting the practical application of data flow.

(2) Blockchain technology helps privacy computing technology

Blockchain technology records all the links and participants in the data flow, realizes the separation of rights and responsibilities in the data *** enjoyment process, and enhances the credibility of the data flow. In the link of data transmission, blockchain records the data provider, confirms the authenticity and validity of the identity of the data provider, is conducive to the confirmation of data rights, and provides reference for a fair and feasible benefit distribution mechanism; in the link of data storage, blockchain ensures that every modification of the data can be traced, and prevents malicious tampering of the data. Blockchain technology can be used as the underlying platform of privacy computing technology to ensure the authenticity and validity of the encrypted data itself, enhance the credibility of the data circulation in the privacy computing platform, and expand the scope of application of privacy computing technology.

3. Conclusion

The integration of privacy computing technology and blockchain technology is an inevitable trend. For the flow of data assets, without privacy computing, the security and privacy protection of the data itself cannot be solved; without blockchain, the authentication of the data and the collaboration of the data network in a wider scope cannot be solved. Combining blockchain and privacy computing to build a large-scale data circulation network has become a direction of exploration in current practices.

What will the combination of blockchain and privacy computing change?

1. Forming a large-scale data circulation network and data factor market

Currently, there are three problems with data circulation: it is difficult to realize the data protection and data rights of the data owner; the cost of integrating and processing data from different sources is too high, and there is a lack of unified standards; and the mechanism for distributing the benefits of the data is not perfect.

As mentioned above, the combination of blockchain and privacy computing technology can solve the problem of privacy protection on the one hand, and solve the problem of data authentication and multi-party collaboration on the other, so as to establish a large-scale data circulation network.

On the basis of the establishment of a large-scale data circulation network, the real sense of the data factor market can be formed, and the value of data as a factor of production can be fully explored.

2. Promote the development of data assetization

The so-called asset refers to the resources formed by the enterprise's past transactions or events, owned or controlled by the enterprise, and expected to bring economic benefits to the enterprise.

Assetization of data means that data can be found in the marketplace and can create new economic benefits for the enterprise.

The formation of large-scale data distribution networks and data factor markets will greatly promote the discovery of data value and the development of data assetization.

From the enterprise side, the data deposited in the production and operation activities of enterprises will become valuable assets. On the one hand, the analysis and use of these data will drive the enterprise to improve its own business; on the other hand, the **** sharing of data with external organizations will drive the data to greater value, and the enterprise itself will gain more revenue from it. This, in turn, will further promote the digital transformation of enterprises and the management of data assets. In the future, the inventory of data assets may become the "fourth table" in addition to the balance sheet, cash flow statement, and income statement.

The development of data assetization will also drive the formation of a new service system around data value mining. This includes data rights, pricing, trading and other aspects. Ding Botao, deputy director of the Institute of Information Studies at the Shanghai Academy of Social Sciences, divided the organizations in the future data asset service system into four categories:

The first category provides intermediary services, including data brokers, as well as data agents.

The second category provides data evaluation. Due to asymmetric or chaotic information in the data market, there is a need to provide compliance evaluation, data quality and data price evaluation.

The third category provides price consulting, such as providing legal and economic consulting or listing counseling.

The fourth category provides professional and technical services, including data development, data processing services, and data delivery services. The development of data assetization will bring about the enhancement of people's cognition, the improvement of productivity, the reorganization of production factors, the generation of innovation, the development of the economy, and the enhancement of the overall welfare of the whole society.

3. Changes to the existing industry

The combination of blockchain and privacy computing will enhance the enthusiasm of enterprises and individuals to share and utilize data, and further promote the breakthrough of "data silos". The changes to the existing industry are mainly reflected in the following levels:

First, it will bring new data and technological changes.

First, it will promote the arrival of the data-dense state era. At the heart of the data encryption era is a dramatic change in the way data is circulated and used. Data will flow and be calculated between subjects in encrypted form, significantly reducing the risk of data leakage and supporting the development of various forms of business under the premise of compliance. Previously, data was encrypted and could only be used for transmission or storage, but in the future, data will be encrypted and can be computed. This will create a new set of issues and challenges that will trigger a chain reaction in many related technology areas.

Second, it will reshape the big data industry. As the flow of data becomes more secure, previously more sensitive areas of data are gradually being opened up. In the case of government data, for example, privacy computing makes it possible to model and analyze data from multiple parties, such as government, enterprises, and banks, further releasing the value of data applications and creating diverse application opportunities.

Third, the AI industry is poised for a new round of development. Data, algorithms, and computing power are the three elements of AI development. In recent years, the development of AI has suffered a bottleneck due to the lack of available data. In the future, the development of 5G and IoT will make everything interconnected and the amount of data will increase dramatically. The application of blockchain+privacy computing technology will enable AI to optimize its models using massive amounts of data and truly move towards "intelligence". Fourth, this will bring new opportunities for the development of the blockchain industry. The combination of blockchain and privacy computing will expand the number of nodes in the federation chain, thus further expanding the scope of data resources that can be utilized together.

Second, on top of the technological changes, the combination of blockchain and privacy computing will bring changes to many traditional industries.

In the field of government affairs, on the one hand, it can realize the interconnection and data*** sharing between different government departments, thus promoting the synergy of different government departments, improving the efficiency of the government as well as the quality of decision-making, and promoting the construction of a smart city; on the other hand, it can promote the bidirectional openness of governmental data and civil data. On the other hand, it can promote the two-way opening of government data and private data. By opening government data to the society, it can be used by enterprises or academia, thus releasing more value. The opening of private data sources to the government can improve the efficiency of the government's decision-making and administrative processes.

In the financial sector, there will be changes in payment, credit, credit, securities management, and other areas. Overall, it mainly affects the two aspects of financial risk control and marketing. The combination of blockchain and privacy computing technology can, under the premise of complying with legal regulations and not disclosing the original data of all parties, expand the source of data, including the use of Internet data external to the financial system, realize multi-party data*** enjoyment, joint modeling, so as to effectively identify the credit rating, reduce the risk of multiple credits, fraud, etc., and also help the accurate pricing of financial products such as credit and insurance; similarly, the integration of internal and external multi-party data*** enjoyment is also a good way of identifying credit rating, reducing the risk of multiple credits, fraud and so on. Similarly, the fusion of internal and external data*** sharing also helps to improve the anti-money laundering screening capabilities of financial institutions.

In the healthcare sector, blockchain and privacy computing can boost healthcare informatization and bring about great changes in disease treatment, drug research, and health insurance. In disease treatment and drug research, the combination of blockchain and privacy computing can facilitate more medical data to be analyzed and researched together, thus bringing new breakthroughs in the treatment of many diseases. In health insurance, the combination of blockchain and privacy computing technology will enable insurance companies to utilize more data to improve the design, pricing, and marketing of insurance products, and even facilitate the management of customers' health by insurance companies.

The combination of blockchain and privacy computing technology is currently being applied in government, finance, and healthcare, but in the future, its application will not be limited to these three areas, but will also play a role in more areas.

Third, data rights and interests will be redistributed.

This is probably the most central and profound change that the combination of blockchain and privacy computing technology will bring about, and it's one that has a lot to do with everyone's personal interests.

First, it involves redistributing the benefits of different parts of the chain.

The aforementioned application in the field of advertising and marketing, for example, the distribution of interests in advertising and marketing was mainly between advertisers and channel providers. However, in the future, the application of blockchain and privacy computing technology will enable data collaboration on a wider scale, which will solve the problem of multi-party data collaboration between advertisers, multiple channels, and consumers, which involves the division of rights and responsibilities and redistribution of benefits among multiple parties.

Secondly, it involves a redistribution of benefits between businesses and individuals.

The EU's GDPR, the US CCPA, and other bills involve an important right of the user, namely "portability". That is, third-party applications can not block personal data, once the individual has a download request, APP needs to provide a convenient API to facilitate personal copy data. U.S. companies have been providing APIs to their users, and if there is a lack of functionality in this area, the individual customer can file a lawsuit, and the company will also face a large fine. China's Personal Information Protection Law also contains relevant provisions. Article 45 of the Personal Information Protection Law states that "an individual shall have the right to inspect and copy his or her personal information from a personal information processor" and "if an individual requests to inspect or copy his or her personal information, the personal information processor shall provide it in a timely manner. If an individual requests that his or her personal information be transferred to a personal information processor designated by him or her, and if the conditions prescribed by the state net information department are met, the personal information processor shall provide the means for the transfer."

Currently, Chinese companies' blockchain+privacy computing explorations are mainly focused on To B services, but blockchain is a globalized business, and if such a model has already emerged in the United States, the odds are that China will not be completely unaffected. Along with the improvement of consumer-level hardware and software technology capabilities, the combination of blockchain and privacy computing technology will gradually transform data services between individuals and organizations. Individual users will have the opportunity to gain full control of their own private data and obtain stronger technical guarantees for the data privacy needs involved in the data business process. Currently, the domestic industry is still exploring issues related to To C services.

Why hasn't blockchain+privacy computing been widely adopted?

First, the application of blockchain + privacy computing is mainly in the case of multi-party data collaboration, and the actual demand has not yet exploded.

From the perspective of the development of privacy computing technology, privacy computing is still in the early stage of landing, solving the problem of data collaboration between two parties, and there are not many scenarios involving multiple parties, so very often the need for blockchain + privacy computing applications has not yet been experienced.

From the perspective of blockchain technology development, the application of blockchain technology in many fields is not an immediate need. Many problems can be solved by applying blockchain, but they can be solved without blockchain technology, and the cost of applying blockchain technology to solve them is higher. Therefore, at present, the construction of blockchain project is mainly the government departments and large enterprises are more active, because the government and large enterprises from the perspective of long-term development to consider, can do forward-looking investment in construction and technology layout, but most of the commercial organizations need to weigh the input and output.

Blockchain technology, combined with privacy computing, is primarily used to address data collaboration. From a data governance perspective, most organizations are dealing with their own internal data governance issues, and it will take time for them to sort out their internal data systems before they can collaborate with the outside world.

Second, blockchain+privacy computing is a more complex application, involving the creation of new business models, redistribution of rights and responsibilities, and benefits, so it will take longer.

Taking the application in the field of advertising and marketing as an example, most of the current applications have only landed on the privacy computing platform, which mainly involves the collaboration of two parties' data, and the direct application of the privacy computing technology can continue the previous business applications. However, if blockchain technology is introduced, it is necessary to solve the problem of data collaboration between advertisers, channels, and consumers, which may involve the division of power and responsibility between the parties, the redistribution of benefits, and the formation of new business models need time to explore.

What are the issues that need to be resolved for mass adoption?

Before the application of blockchain+privacy computing can be spread on a large scale, there are still three conditions that need to be met:

First, from the perspective of the external environment, it is necessary for the whole society to improve the level of digitization as a whole. As an analogy, blockchain + privacy computing will form a highway for data circulation in the future, but there should be enough cars on the road. At the moment, the digitization of society as a whole is progressing at a rapid pace, and most organizations are working on their own internal data governance, and it will take time for them to deal with their own data before they need to collaborate more with external data.

Second, in terms of technology development, the technology needs to be matured.

Blockchain+Privacy Computing Technology is actually a way of sacrificing the efficiency of data circulation and improving security, but the efficiency of data circulation is also very important, and in the future, we need to form a certain balance between the two aspects of efficiency and security, with security to be safeguarded, and sufficient efficiency to be met. This involves a lot of technical research and development, the development of industry standards, the development and refinement of technical productization, and the further reduction of technical costs, which will take time.

Third, we need to improve relevant laws and regulations, as well as the formation of business models for data transactions.


Third, we need to improve the laws and regulations, and form a business model for data transactions. Because as demand explodes and technology improves, relevant laws and regulations and business models will be formed, this condition is not the most critical factor limiting the application of blockchain and privacy computing technology at this stage.