Blockchains are Privacy Preserving, Can Smart Contracts achieve the same Feat.

“Blockchains have been known for their privacy preserving capabilities even though they use a public ledger, but the smart contracts require data to be executed and preserving privacy in a data extensive environment is a challenging task and we will here explore whether the smart contracts can achieve the privacy preserving task”. 

The Importance of Preserving Privacy

The internet of today has completely breached the privacy of an individual as every information stored on the internet is vulnerable to be exploited by the authorities holding the information or the attackers that can compromise the entire system. Blockchain being highly secured and compromising a large blockchain is almost impossible thus making it a secure option for the users. Also, using a blockchain shifts the control towards the users and they can manage the privacy of their information. But with the advent of the smart contracts on the blockchains which require external data to be executed, preserving privacy will be a challenge. We will here try to explore if it is possible for the smart contracts to become privacy preserving.

Can Smart Contracts Preserve Privacy?

There are various technologies under development that will help in making smart contract execution privacy preserving. Below are a few such technologies:

Privacy Blockchains

There are a number of blockchains being developed that help in providing the programmability of Ethereum and privacy of Monero. A number of blockchains such as Secret and Oasis are blockchains that allow developing smart contracts that keeps the data and information private during the contract execution thus preserving privacy and at the same time prevents reuse of the information without permission. This ensures that even when the data on the blockchains are open to the public, the confidential data required by the smart contracts remains hidden from the public and cannot be used unless the information provider allows making it public.

Layer 2 Solutions

The Layer 1 blockchains such as Ethereum, Polkadot etc. that do not have inbuilt privacy preserving mechanisms can use layer 2 solutions that can help them create a privacy preserving environment. Phala and Automata are two such layer 2 solutions for preserving privacy. They provide Web3 Analytics which is a decentralized version of Google Analytics where the user owns their data and has the capability of sharing it privately with others.

These solutions provide various applications such as privacy preserving decentralized exchanges (DEXs), secret wallets and cross chain bridges that secure the data privacy while interacting between the multiple blockchains.

Closing Thoughts

Thus, the new technologies and innovations that are being built will help in preserving privacy even if the smart contracts require external data from the multiple blockchains to execute. This will ensure that the blockchain technology achieves full privacy preserving feat.


Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.

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