Ensuring privacy is one of the biggest challenges for the blockchain industry if it is to sustain the exponential growth it has been witnessing for quite some time. Crypto exchanges, built on these networks, have been targets for hackers.
Although a host of solutions has made blockchain-based transactions safer and reduced the quantum of loss, the scale is still pretty significant. In 2022, all crypto hacks resulted in a loss of $3.8 billion, and while the number came down to $1.7 billion in 2023, it still remains substantial.
While the hacks and losses are easier to understand because they can be measured in numbers, the lack of privacy also leads to intangible losses like declining trust and stunted adoption. Therefore, the issue of blockchain privacy has to be read in its totality.
Why Privacy is Crucial for Blockchain Networks
When we discuss blockchain networks, it’s important to remember that there are many types. For instance, public blockchain networks are open to anyone, and all its members—usually anonymous—can validate transactions if they choose. There are also private blockchains that ask for membership and credentials before allowing access to the network’s data. Apart from these two, there are hybrid blockchain networks that operate on an interoperable mix of private and public blockchains.
Steering through these networks and choosing the best fit is not as easy as it often appears on paper. Blockchain networks are vulnerable to various cyberattacks, including 51% attacks, routing attacks, Sybil attacks, and phishing attacks. Institutional adoption of blockchain network security mechanisms is often the key to combating these threats, as it helps achieve scale while carrying out tasks like identity and access management and effectively managing governance and risk parameters. Several companies, including both large tech firms and highly specialized providers, help deal with blockchain network security in the most efficient way possible.
Companies Helping to Achieve Privacy on Blockchain
Ernst and Young (EY), for instance, has come up with Project Nightfall, a zero-knowledge (ZK) optimistic roll-up that enables private transactions on the public Ethereum blockchain. The adoption of Nightfall can help enterprises execute well-orchestrated private transactions on Ethereum EVM-compatible blockchains without compromising the data immutability and security Ethereum provides.
In terms of scale and compute capacity, EY claims that its solution can handle up to 400 million transactions a day on the Polygon Proof of Stake Network and about 40 million a day on the main Ethereum network. Looking ahead, EY aims to offer roughly 4 billion transactions per day at a cost of under $0.01 each.
While scale and cost-efficiency are important, companies like Data Ownership Protocol are delving deeper into the problem. One of the most striking features of this protocol is its selective or flexible transparency that empowers users to choose what to share and with whom, including the visibility of specific tokens or the amount of assets.
Additionally, DOP takes care of privacy while staying within regulatory boundaries. To remain regulatorily compliant, DOP works alongside the pioneers in this industry, such as Chainanalysis and zkMe. However, these features do not make DOP a slow contender. Over the years, it has ensured that its solution is fast, easy to use, accessible, and user-friendly.
Another company excelling in this field is IBM. In December 2023, the company announced its Hyper Protect Offline Signing Orchestrator (OSO), a new technology designed to deploy cold storage solutions for digital assets and a cutting-edge addition to IBM’s confidential computing portfolio.
The solution helps safeguard high-value transactions by offering additional security layers, including disconnected network operations, time-based security, and electronic transaction approval by multiple stakeholders.
According to Adrien Treccani, Founder and Chief Executive Officer at Metaco, an IBM business partner and digital asset custody provider, Metaco’s catalog of institutional cold storage solutions is well complemented by the unique air-gapped cold storage that OSO enables, “especially as cold storage requirements are increasingly being stipulated by regulators in markets such as Singapore, Hong Kong, and Japan.”
Privacy in blockchain networks is something that is being taken seriously by companies worldwide. These entities are ensuring that networks are secure without the security mechanism taking a toll on the network’s performance. Large and specialized companies are coming up with innovative solutions while prioritizing user convenience and autonomy. There is every reason to hope for a more structurally secure blockchain industry in the future.
