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Rachel Wolfson
Reporter
Rachel Wolfson
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The blockchain industry continues to grow as the technology advances.
Recent findings from Precedence Research predict that the global blockchain technology market will reach $187 billion by 2034. The report notes that the North American blockchain market was estimated to be worth $8.1 billion last year.
While notable, industry experts believe that privacy is a top concern for enterprises adopting blockchain solutions.
Paul Brody, Global Blockchain Leader for Ernst & Young (EY), told Cryptonews that privacy technology is still relatively immature. This is a challenge, as Brody mentioned that the number one issue for enterprise users and serious institutional investors is privacy.
“For any business activity – things like what you are buying, your terms and conditions, and volumes and spend – are very sensitive and competitive issues,” Brody said. “Blockchains just aren’t usable for businesses without that capability.”
Public Blockchains Lack Privacy
Unfortunately, public blockchains don’t contain native privacy features.
Avidan Abitbol, Project Director of Data Ownership Protocol (DOP), told Cryptonews that there is a problem with balancing transparency and data ownership within blockchain systems.
“In traditional blockchain networks, all transaction data is publicly visible, which can make users vulnerable,” Abitbol said.
Given this, private blockchain networks are likely gaining traction amongst enterprises.
Findings from technology firm Wipro show that 40-60% of enterprises have deployed private blockchain networks – exclusive networks with limited access, making them more centralized.
Jake Claver, Director of Digital Ascension Group – a family office specializing in digital assets – told Cryptonews that he believes financial institutions and corporations typically operate in permissioned ecosystems.
For instance, Claver mentioned that the permissioned blockchain network R3 Corda is the main solution provider that Digital Ascension Group sees the majority of institutions leveraging.
A Privacy Solution For Public Blockchain Advances
While private blockchains may be popular with enterprises, a number of privacy solutions geared towards public networks are advancing rapidly.
For example, Brody mentioned that EY has built an Ethereum Layer 2 (L2) network called “Nightfall” that allows businesses to move tokens around confidentially. Nightfall was launched in 2019, yet the rise of tokenization has helped the solution advance.
“Every business agreement amounts to an exchange of money for products or services under the terms of an agreement,” Brody said. “With blockchains you can tokenize the money and the products and you can write the terms into a smart contract.”
Brody added that EY has created an application called “Starlight,” which allows businesses to take a solidity smart contract and turn it into a customized zero knowledge circuit.
“This is a kind of customized private black-box on-chain,” he remarked.
Public Blockchain Transparency Becomes Private
DOP also seeks to solve the problem of balancing transparency and data ownership in public blockchain systems.
Abitbol pointed out that DOP does this through “selective transparency,” which allows users to control how much of their information is shared on a blockchain.
“DOP’s selective transparency features allow organizations to share only the necessary information with their stakeholders, such as partners, clients, customers, and employees, while keeping sensitive data protected and concealed,” Abitbol said.
He explained that integrating DOP into an enterprise blockchain solution allows an organization to mask any type of data.
“For instance, when an enterprise pays salaries in cryptocurrency, without DOP, employees could potentially trace the transactions back to the company’s main wallet and access information about other employees’ salaries, the company’s overall crypto holdings, or other sensitive financial data,” Abitbol added. “This lack of privacy could lead to various issues, such as internal conflicts, information leaks, or even attempts at manipulation.”
According to Abitbol, DOP enables enterprises to disclose only the essential data required for each specific transaction, ensuring that sensitive information stays confidential.
DOP is an EVM-compatible protocol and contains key features such as encryption of token balances and transaction data. Abitbol added that DOP can be integrated with popular wallets and blockchain platforms.
Recording Private Transactions on a Public Network
Charles Adkins, President of Hedera – an open-source public ledger – further told Cryptonews that Hedera is able to provide public permissions in its network through the “Hedera Consensus Service” (HCS).
According to the Hedera website, HCS enables verifiable timestamps, decentralized ordering, and privacy for sensitive information, for enterprise applications and consortiums.
Adkins added that on private networks HCS can be used to record the state of private transactions on the public ledger. This allows for privacy while still benefiting from the trust and security that a public blockchain offers.
“Hedera ensures that transaction privacy is maintained by only submitting a hash of the transactions to the public ledger, which can be used later for verification without revealing any sensitive details,” Adkins said.
He also noted that since transactions on private networks may not be public, these can still be anchored to the public Hedera Layer 1 network for consensus.
“This means that while private networks may handle sensitive or private data internally, they can use Hedera’s mainnet for final consensus, ensuring a high degree of security and decentralization without compromising privacy,” he remarked.
Challenges With Privacy Solutions For Public Blockchains
While it’s important to understand how privacy solutions are advancing, a number of challenges may hamper adoption.
For instance, Brody pointed out that the math behind the solutions created by EY is difficult to understand.
“Because the math is complex, that leads to high gas fees on-chain, so driving down the cost of each transaction is very important,” he commented. “We currently can do transactions for as little as $0.01 with privacy, which is important, but we’re aiming for another 10x reduction in cost.”
Additionally, Brody mentioned that customized digital contracts still require a lot of human support.
With this in mind, Brody hopes that EY can soon implement no-code drag-and-drop smart contacts to create business agreements with privacy on-chain.
“Our goal is relentless simplification to the point where nobody will really know or care what the core math or technology is behind the system. They’ll just know that it works,” he said.
Technology aside, Adkins believes that balancing transparency with the need for confidentiality remains problematic.
“Businesses require privacy for sensitive transactions, yet they also want the benefits of immutability and verification that public blockchains provide,” he said.
Another issue Adkins pointed out is regulatory compliance.
“Ensuring that the blockchain network adheres to privacy laws such as GDPR, which requires the right to be forgotten, a concept that’s difficult to reconcile with immutable ledgers,” he remarked.
Enterprise Blockchain Will Continue To Thrive
Despite challenges, enterprise blockchain adoption will continue to flourish moving forward.
Claver predicts that institutions will solve challenges related to digital identity, liquidity and regulations before the end of this year.
“There is an urgent need for institutions and enterprises to adopt blockchain technology to prevent a global liquidity crisis,” he commented.
Echoing this, Adkins noted that “enterprises are waking up to the reality that blockchain can bring unparalleled efficiency to their operations.”
