Blockchain and GDPR compliance: Data Protection Challenges and Opportunities

GDPR and Blockchain: Key compliance challenges

As a reminder, the General Data Protection Regulation (GDPR) is a European Regulation designed to protect the personal data of individuals living in one of the GDPR countries.

It applies to you if you collect or use personal data from the EU or EEA, regardless of where your business is based.

The blockchain's features conflict with the 7 principles of the GDPR, including:

• Lawfulness, fairness, transparency, Purpose limitation and Data minimization: Blockchain data is visible to all participants in the network, so it is difficult to ensure control on how personal data is being used to guarantee that personal data will be handled responsibly and ethically
• Accuracy and right to be forgotten: Once personal data are recorded on the blockchain data, they cannot be altered or removed due to the blockchain's immutability feature. This can therefore hinder GDPR's right to be forgotten
• Storage Limitation: Blockchain's permanent and immutable storage conflicts with GDPR's requirement not to store personal data for longer than necessary
• Integrity and Confidentiality: Even though a private key is required to decrypt the data, the existence of the encrypted data at a specific address is visible to everyone. This means that, in theory, anyone can attempt to decrypt it, which could raise concerns regarding the GDPR's security principle. The level of risk depends largely on the strength of the encryption used, but the transparency of the blockchain still poses potential privacy challenges
• Accountability and Data controllers: Some argued that blockchain's decentralized structure can make it difficult to pinpoint a responsible party for data processing, complicating accountability

How does blockchain protect privacy?

At the same time, blockchain has the potential to help protect privacy and therefore help enforce the GDPR.

For example, its

• Immutability and transparent features preserve data integrity and makes it difficult to modify and revisit the terms of privacy policies which therefore help preserve the integrity of privacy policies
• Decentralized feature makes it difficult for any single entity to access, control, or compromise the data which helps prevent data breaches and therefore can help enforce GDPR cybersecurity
• Secure feature uses advanced cryptography measures (e.g., hash, public and private keys) which allows for better data encryption and confidentiality through pseudonymity. This can help prevent data compromise which reinforce GDPR integrity and confidentiality principle
• Costly nature can deter businesses from storing more data than necessary. Larger data are more expensive to store and verify and this can help to enforce GDPR purpose limitation and data minimization principles

Conclusion

As cryptocurrency adoption increases, it's crucial to monitor the evolving legal landscape surrounding blockchain. While its integration may pose challenges to GDPR compliance, it also offers opportunities to enhance data protection.

The key is to develop solutions that effectively balance both innovation and data protection requirements.

Although they raise new issues, several solutions have been developed to address these challenges, including:

• Zero-knowledge proof protocols (e.g., for decentralized identity verification)
• Private blockchain models restricting blockchain's transparency to authorized parties
• Off-chain personal data storage solutions that are linked to the blockchain
• Privacy focused blockchain (e.g., focus heavily on encryption strength)