Risks regarding privacy

Blockchains do not inherently respect privacy and confidentiality. Indeed, the two largest Blockchain systems, Bitcoin and Ethereum, are public (permissionless), open, transparent, and pseudonymous. They are open in the sense that there are no restrictions on participation,and they are transparent because all transactions and all transaction information is visible to anyone on the Blockchain. In addition, on the Ethereum Blockchain the code and execution of smart contracts is also visible. In both Blockchains, transacting parties are pseudonymous and identified by public keys generated using mathematically derived algorithms (known as Bitcoin addresses or Ethereum accounts). This provides only a very limited amount of confidentiality, because it is possible toconnect the identity of an individual with their public key. Because transactions made on Blockchainare fully traceable, once a person’s identity has been linked to their public key it is possible to infer and monitor an individual’s spending patterns (such as where they spend, how much they spend, and how often), their wealth and income, and with whom they undertake transactions. It is also important to remember that the data written to the Blockchain is immutable and irreversible, meaning it is permanently accessible andvisible. As such, incursions on one’s privacy or confidentiality cannot be reversed or corrected at a later time.