In this article, I will talk about the Since Blockchain Technology Is Public, How Are The Identities of Users Protected.
As already mentioned, blockchains enable transparency and decentralization; however, they also come with a concern of user anonymity.
I will try to focus on the different tools that are available like crypto pairs, the issues of deanonymization as well as regulatory compliance to know how the identity of the users is protected in this public environment.
Understanding Blockchain Technology
The Blockchain technology is a digital ledger system of transactions which is recorded on numerous computers in such a way as to provide enhanced security, transparency and immutability.
While databases are normally centralized and managed by single entities, a blockchain exists on a P-2-P network, enabling participants to control a common and distributed database.
Since Blockchain Technology Is Public
The blockchain technology has been devised and implemented on the premise that this is a public record which means that everyone can view every transaction.
Nonetheless, most users’ identities remain concealed by the same cryptographic algorithms.
Rather than using actual names, users are registered under their public keys, which are lengthy alphanumeric strings.
This makes it possible for the transactions to be seen by all, but the identity of the users is hidden from the public eye.
Step-by-Step Process
Step 1
As in other systems, users in a blockchain environment today use a combination of public and private keys which are issued in pairs, They are assigned to each individual.
Step 2
One of the two keys issued appears to be a public address on the blockchain which acts as the user’s address on the blockchain and is available for all to see. That is the key used in receiving transactions.
Step 3
On the other hand, a private key cannot be seen by others and allows the user to sign transactions as the owner of the public key but without exposing himself or herself.
Step 4
It is through these keys that one is able to remain anonymous in the network, that is by the active involvement in the blockchain network.
Final Summary
Identity in a blockchain system is protected through the application of cryptographic public and private keys leading users to be anonymous in their interactions with the public ledger.
How Blockchain Works
Blocks and Chains
As the name suggests, a blockchain contains blocks which contain a list of transactions which are linked to the next block, hence the chain.
This design makes it immutable, i.e, prevents any form of alteration during data entry.
Distributed Ledger
The blockchain networks entire data is safeguarded on a number of computers, called nodes whereby each one house the replica of the entire block chain.
This aspect of the network is termed as decentralization since there isn’t any single authority that rules the entire network making avoidance to fraud and payments abuse highly possible.
Consensus Mechanisms
To validate any transactions and to introduce new blocks to the existing chain, the blockchain networks rely on consensus mechanisms such as PoW and PoS.
This prevents a situation where there are disagreements from members before transactions are recorded.
Conclusion
To sum up, although it is not possible to hide the blockchain, users’ identities are concealed because of keys’ a priori reliance during exchanges.
But certain issues like the risk of deanonymization and regulatory requirements remain.
It can be noted that user guidance regarding the key as well as privacy features should be adhered to in order to protect user identities.
In addition, developments in technologies designed to protect privacy will be an important factor in improving security.
At the end of the day, the need to combine transparency with the need to protect users is necessary for looking ater the trust and proliferation of the technology in blockchain and in a number of other contexts.
