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GDPR and Blockchain: Between emerging technology and data privacy

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Data is akin to gold for organizations worldwide, so they often violate consumers’ privacy to collect, analyze, and store primary data.

Unhappy with this blatant abuse, the EU (European Union) passed the GDPR (General Data Protection Regulation) law to give individuals ultimate control over their data. But the GDPR framework is not without its challenges. Consequently, compliance with the law remains challenging for organizations operating within the EU.

Enter blockchain. Despite not meeting some of GDPR’s criteria, this emerging technology could be instrumental in implementing data privacy.

GDPR and Blockchain: The impact of disruptive technology on data privacy laws

The GDPR law came into force on May 25, 2018, and has since proved essential in safeguarding the data privacy of individuals—the data subjects—residing within the EU’s member nations.
This parliamentary measure gives individuals control over how their data is collected, used, stored, and secured. It empowers individuals and prevents organizations from exploiting their data subject’s personal and sensitive data for their gains.

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Though the policy is a boon for the public, it has been an uphill battle for organizations to implement the mandates, as they must gather data responsibly, use them after explicit consent, and store them securely.

Moreover, it’s been challenging for them to: 

  • maintain a clear record of the data they gather as they need to respond and process any requests to view, alter, and delete personal data, 
  • the way the collected data is used, and 
  • where it’s stored.

This is where the decentralized ledger technology (DLT) or blockchain comes in

Expected to grow at a CAGR of 59.9% between 2023 and 2030, blockchain is slated to reach a market valuation of approximately $469 billion. This technology will soon become indispensable to organizations worldwide and could potentially solve their data privacy challenges.

But to understand how blockchain can help organizations implement GDPR policies, it’s important to thoroughly understand GDPR and its objectives.

Understanding the GDPR policy and its objectives

The GDPR policy was enforced to safeguard an individual’s personal data and ascertain transparency and accountability in data processing. So to prevent organizations from processing consumer data for their gains, the EU laid down seven key principles of the law.

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GDPR principles

The seven principles of GDPR are:

  • Lawfulness, fairness, and transparency: the three parts of the first principle must be examined separately as:
    • lawfulness means you can process PII (personal identifiable information) only if you’ve got a legal standing. 

This means you can process data after you gain explicit consent from the data subjects, you need the data to enter a contract or perform your duties under one, you’re legally obligated to, you need the data to save an individual’s life, you’ve got the official authority to collect the data, or there’s some other legitimate interest,

  • fairness means that you should use the collected data only after considering its implications, and
  • transparency means you must explain everything you intend to do with the collected data in simple terms without adding complex legalese or ambiguous terms to fool your data subjects.

Purpose limitation: data must be acquired for defined and valid purposes only.The devil is in the details idiom doesn’t quite work regarding the GDPR. Organizations must use the acquired data only for the purposes they received the consent for.

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  • Data minimization: organizations must restrict themselves to collecting data relevant to the specified purpose. They must refrain from collecting data for the sake of collecting data.
  • Accuracy: the processed data must be accurate and, if necessary, be kept updated. If there’s some inaccurate data regarding its intended purpose, it must be deleted or updated at once.
  • Storage limitation: organizations must store data only till it’s required and no longer. 
  • Integrity and confidentiality: appropriate technical and organizational measures must be taken to secure the collected data against unauthorized or illegal purposes, intentional damage, and accidental loss.
  • Accountability: the data controller—bodies deciding the usage and purposes of the collected data—must be able to furnish details to demonstrate all the internal guidelines and procedures you’ve established and the steps you’ve taken to comply with the GDPR policies.

These seven principles are essential for achieving GDPR’s objectives. The primary objective is the protection of the fundamental rights of humans, particularly protecting their personal data. Moreover, it aims to facilitate the free movement of data among the member nations.

With that said, is there any guarantee that organizations would overhaul their existing processes, policies, and IT infrastructure to implement these data privacy and security mandates?

Do organizations comply with GDPR’s provisions?

Organizations based in the EU do comply with GDPR’s provisions due to two key reasons:

  • Organizations implementing the data privacy law can earn their customers’ trust, make their security infrastructure impenetrable, and instill more confidence in their business partners and clients.
  • The GDPR isn’t non-negotiable. Organizations must comply with the regulations since non-compliance with or breaching the policies attract hefty penalties based on the nature of the infraction.

While minor infractions are subject to a fine of 10 million euros or 2% of the total global annual turnover of the previous accounting year, whichever is higher, major infractions are subject to a fine of 20 million euros or 4% of the total global annual turnover of the previous accounting year, whichever is higher.

These reasons don’t just encourage organizations to comply with the data privacy law but are also incentive enough for them to consider disruptive technologies like blockchain to solve associated challenges.

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Integrating blockchain with the data privacy law

A blockchain is a decentralized ledger that records digital transaction data on encrypted blocks chained together. The data in the block is immutable and distributed publicly on all computer networks on a blockchain.

As a technology, blockchain has endless possibilities and is being adopted by businesses to tackle global issues. For instance, businesses in Europe are using blockchain to tackle climate change.

Being hosted on the blockchain has proven beneficial for cryptocurrencies, helping them evolve as an alternate form of payment. For instance, organizations can easily partner with a dependable global cryptocurrency payroll provider to pay their employees in their chosen digital currency.

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Blockchain’s dependability has also turned cryptocurrency into an investment vehicle, with individuals investing fiat currency into top cryptocurrencies for high returns. This technology isn’t just limited to cryptos. Blockchain can further GDPR’s data privacy cause due to the following benefits:

  • Decentralized data storage: with blockchain, organizations can store data transparently, making it easy for individuals to access their personal data and see how it’s being used. A decentralized data storage location will also allow organizations to securely share the data with their vendors or partners while keeping the data subject in the loop.
  • Immutable records: once stored on the blockchain, data can’t be altered or manipulated.
  • Enhanced security: blockchain is an effective measure against data breaches as the stored data is encrypted using cryptographic principles or hash codes and disturbed across the network. So even if there’s  a single point of failure in the network, it won’t affect the stored data as the encrypted data would be useless without the decryption keys.
  • Self-executing smart contracts: smart contracts are blockchain-based programs that get executed automatically when preset conditions are met. This could help organizations delete data that they no longer need.
  • Data portability: blockchain allows individuals to port their stored data. They just have to use their private keys to transfer the data to a new public key.
  • Data integrity: blockchain complies with GDPR’s mandate to maintain the data’s integrity even if there’s an unwarranted data breach or hardware failure.

Though blockchain can help organizations with GDPR compliance, there are some challenges that must be considered.

Challenges associated with integrating blockchain with GDPR

There are some challenges associated with blockchain’s integration with GDPR since it violates some of the mandate’s principles, such as:

  • Scalability problems: hardware limitations, high transaction fees, and time-intensive processing have raised concerns about blockchain’s scalability. This could make it challenging for organizations to use blockchain for data storage.
  • Uncertain regulatory compliance: unclear, distinct, and lack of adequate blockchain regulations could lead to regulatory compliance issues, making it difficult to gauge how GDPR’s concepts apply to blockchain. 
  • Incompatibility with GDPR’s right to be forgotten policy: GDPR states that individuals can contact data controllers to alter or delete their data. This presents two problems in the current blockchain environment. Blockchain is decentralized, so there’s no single data controller. The distributed responsibility often leads to minimal accountability.

Moreover, it’s practically impossible to modify and alter data once stored in the blockchain to uphold the data’s integrity and increase trust in a blockchain network.

Future implications of integrating blockchain with GDPR

Although placed on opposing ends of the spectrum, blockchain’s trustless, decentralized, and transparent nature can help organizations comply with GDPR. Blockchain will empower individuals by giving them control over their data, making them immutable and immune to hacks and data breaches.

While there’s some uncertainty regarding the definition of the data controller and the concept of anonymous data, permissioned or private blockchains could answer these problems. Further, private blockchain networks would also make it easier to comply with GDPR’s right-to-be-forgotten policy.

For partnering opportunities, contact [email protected] or [email protected]

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