Privacy-Preserving Technologies in Decentralized Networks

Online communication, collaboration, and file sharing play a crucial role in people’s daily lives. Centralized networks face many difficulties including data breaches, censorship, privacy violations, and etc. Therefore, decentralized networks are becoming more and more popular in the world.

According to statistics, global decentralized social network sales revenue seeks more than US$ 12 million in 2023. It is assumed that the global decentralized social network sales revenue is likely to increase more than 8 times by 2033. Another example is BitTorrent – a well-known decentralized data storage network that accounts for less than 3% of all user traffic globally. The decentralized networks indeed offer an innovative approach to privacy and security in the digital realm. In this article, we will learn more about privacy-preserving technologies within these networks, highlighting the advancements and challenges that define the current landscape.

Introduction to Decentralized Networks and Privacy

Decentralized networks represent a paradigm shift from traditional centralized systems, where a single entity holds the authority and control over the entire network. The centralized network has its limitations. No matter how tight the security measures are, there is no 100% foolproof method of protecting the entity. This raises potential concerns about data accessibility, transparency, and control. In addition, hackers can more easily target a single point of failure when trying to access large amounts of data because everything is in one place.

In contrast, decentralized networks distribute this control across multiple nodes, making them inherently more resistant to censorship, outages, and attacks. In other words, this architectural difference lays the groundwork for enhanced privacy and security features and allows large amounts of data to be stored without a central server or provider, helping to eliminate potential censorship and privacy invasion issues.

The Significance of Privacy-Preserving Technologies

In an era where data breaches and privacy invasions are all too common, the demand for technologies that safeguard user privacy has skyrocketed. Decentralized networks aim to revolutionize traditional centralized networks by providing more transparency and accessibility. However, previously mentioned benefits often come with disadvantages, for instance, reduced privacy because the user’s information is visible to all decentralized network participants. For this reason, privacy-preserving technologies are necessary to ensure privacy. Indeed, privacy-preserving technologies in decentralized networks are not just tools; they are the backbone of a movement toward a more secure and private online world. These technologies leverage cryptographic methods, such as end-to-end encryption (E2EE), homomorphic encryption, ring signatures, secure multi-party computation (sMPC), differential privacy, and zero-knowledge proofs (ZKPs), etc., to ensure that users' data remains confidential and secure from unauthorized access.

Encryption: The First Line of Defense

Encryption acts as the cornerstone of privacy-preserving technologies. By converting data into a coded format that is unreadable without the correct decryption key, encryption ensures that sensitive information remains secure in transit and at rest. For instance, end-to-end encryption (E2EE) is a secure communication process that secures data transferred from one endpoint to another and does not allow third parties to access this communication process. Even if the servers get hacked, you are still safe because your messages and other information cannot be read without the correct encryption keys. Another encryption method called homomorphic encryption generates only one single set of encrypted data and provides the user with only one key for decryption. This form of encryption allows users to perform mathematical operations on encrypted data without revealing the data itself. Recent statistics indicate that encryption adoption has seen a significant uptick, with over 80% of web traffic now encrypted, compared to just 50% five years ago. This surge underscores the critical role of encryption in protecting data privacy in decentralized networks.

Zero-Knowledge Proofs: Enhancing Privacy Without Compromise

Zero-knowledge proofs (ZKPs) offer a revolutionary way to verify transactions or data without revealing any underlying information. This cryptographic method allows for the validation of data accuracy without exposing the data itself, providing a powerful tool for privacy in decentralized networks. There are several types of ZKPs, including interactive proofs, non-interactive proofs, succinct non-interactive arguments of knowledge (SNARKs), proofs of knowledge, and scalable transparent arguments of knowledge (STARKs). The most basic types of ZKPs are interactive proofs that involve the prover and verifier who both interact with each other and prove the prover’s knowledge. The adoption of ZKPs is on the rise, with several blockchain projects integrating this technology to enhance user privacy and security.

Decentralized VPNs: A Nod to Enhanced Privacy

Within the realm of decentralized networks, decentralized Virtual Private Networks (dVPNs) have gained attention as a means of enhancing online privacy and security. Solutions like PortalsVPN and Orchid offer decentralized alternatives to traditional VPN services, leveraging the power of blockchain technology to provide secure and private internet access.

A decentralized VPN does not have a single entity to maintain and perform centralized control of the server. Instead of a single service provider in charge, volunteers operate their nodes in the network. In other words, any user of a decentralized VPN can become a service provider and operate with their node in the decentralized VPN network. A decentralized VPN encrypts your internet traffic and mixes it with the encrypted internet traffic of other volunteers, making your internet traffic more difficult for third parties to trace. Moreover, dVPNs often do not store user data. It should be mentioned that without a central service provider, it is complicated for government authorities to censor decentralized VPNs. For this reason, decentralized VPNs can be used in regions with restricted internet access. Moreover, users of decentralized VPNs can earn rewards for operating their nodes. Therefore, this reward system motivates users to strengthen the decentralized VPN network.

Other Tools and Technologies

Beyond dVPNs, ZKPs, E2EE, and homomorphic encryption, the landscape of privacy-preserving technologies in decentralized networks is rich and diverse. Technologies such as secure multi-party computation (sMPC) or ring signatures are pushing the boundaries of what's possible, enabling secure data processing and analysis without exposing the actual data. The other privacy-preserving technologies are presented in the table below.

It is assumed that privacy-preserving technologies will likely become increasingly popular in the future and the number of privacy-preserving technologies will grow.

The Challenges Ahead

Despite the promise of privacy-preserving technologies in decentralized networks, it is known that several challenges remain in decentralized networks. First of all, decentralized networks face scalability issues or struggle to operate under increased workload. Secondly, many decentralized networks lack seamless integration which is common in centralized networks. Thirdly, for beginners who do not have experience with blockchain concepts, the decentralized networks can be complex. It should be also mentioned that the ongoing battle against regulatory and legal hurdles is another obstacle related to the use and implementation of decentralized networks. The operational and maintenance cost of decentralized networks is higher than the cost of use of centralized networks. Moreover, security is one the most important issues in the development of decentralized networks, especially for small decentralized networks, which are the main potential target of cyber-attacks.