Using Blockchain To Significantly Reduce Data Protection Liability

by CoinGecko

The protection of sensitive consumer data collected by organisations is absolutely crucial in this modern, technological age. 

With reports of data security breaches constantly on the rise, companies are now forced to comply with strict data security regulations to ensure that the data they’re collecting from their consumers is completely secured - something that seems to be extremely hard to achieve even for successful, established entities.

Although major advances in cybersecurity technology have been made in recent years, companies are still facing potential liability issues as a lot of sensitive consumer data is stored using legacy systems. 

In this article, we’re going to discuss how businesses can utilise blockchain-based tools to reduce the threats posed by modern-day cybercriminals, and significantly reducing their overall liabilities when it comes to the storage and protection of confidential consumer data.

The Current State Of Database Protection

It's fair to suggest that many of the current measures put in place by organizations to ensure consumer data is well protected are very poor. It almost seems like we hear about a new colossal data breach every few weeks, whether the breach was a result of cybercrime, human error, or a database glitch. 

In the first two months of 2019 alone (Jan, Feb), nearly 2.5 billion records had been leaked due to data breaches. An absolutely shocking statistic considering the increase in awareness of the importance of cybersecurity. 

A study sponsored by IBM found that the average cost of a data breach in 2018 was over $3.8 million, with the average cost of a stolen or misplaced record being around $148. We’ll let you do the maths to estimate the total cost of data breaches in the first two months of this year - it’s needless to say, but the costs incurred by organizations due to unforeseen data breaches are enormous.

It has also been revealed that many companies are not at all equipped to respond to threats posed by potential cyber attacks. Insurance specialists, Hiscox, conducted research on over 4000 businesses across the globe. What they discovered was quite shocking - over 70% of businesses do not possess the necessary resources to respond to data breaches made by cybercriminals. This shows that 7 out of 10 businesses are leaving themselves completely vulnerable to malicious attacks to their databases which contain both sensitive company and consumer data. 

Source: Hiscox Cyber Readiness Report

These statistics prove that not only is the current state of database security extremely poor, but the costs associated with having your databases breached are also immense.

Thankfully, many blockchain-based projects have been initiated with the chief aim of mitigating the consequences posed by data breaches.

How Blockchain Can Improve Database Security

Blockchain is undoubtedly one of the most talked about technologies over the last few years.
The recent Deloittes 2019 Global Blockchain surevy found that most respondents now see blockchain as a top-five strategic priority, a jump of 10% from 2018.

The nascent technology was brought to the world back in 2009 and was originally created to facilitate trustless cryptocurrency (Bitcoin) transactions across an open, decentralized ledger. 

Since its inception, blockchain technology has ignited the imagination of many tech fanatics who wish to exploit the technology to its full potential. Although blockchain is still considered to be in its infancy, the technology has rapidly evolved and is now being used by many developers to create solid solutions to modern day technological issues such as database security. 

Thanks to characteristics such as immutability, transparency, and it's inherently decentralised nature, blockchain is considered to be the perfect solution to help companies prevent the negative consequences of data security breaches. 

Blockchain privacy solutions, such as Tide Foundation, Datawallet and Iovo  will be able to resolve many issues currently faced by organisations who are having trouble with database management and security. Here are a few ways blockchain-based database security protocols can help companies with the management and security of private consumer data.

Data Redundancies 

Firstly, a blockchain database management solution will be able to reduce the instances of data redundancies. This means that organisations won’t suffer the inconvenience of having their databases overloaded with duplicate records, which can often be an issue if customers declare a change of contact information or address to a company. 

Enhanced Security 

Blockchain technology is notoriously difficult for cybercriminals to hack. Thanks to blockchain technology's decentralised and encrypted nature, hackers would have to acquire huge amounts of resources in order to be able to successfully breach any blockchain protocol. 

The cryptography used to construct blockchain protocols will help to keep the records stored on the immutable ledger extremely safe. The transaction of data and records will also be made secure as the network of nodes operating the blockchain must verify transactions before they’re executed, meaning hackers will be stopped in their tracks before gaining access to any sensitive data.

Customers who are participating in the blockchain-based database protocol will be issued the one and only key which enables access to their personal data. The only way a third party or a cybercriminal can gain access to the consumer's personal data is if they have the exact key. This, in turn, reduces the liability held by organisations, as they wouldn't be held personally responsible for the loss or exchange of customer key codes.

Human Error

Blockchain technology will be able to almost eradicate any instances of human error, as trusted nodes will be able to validate records before they’re stored on the blockchain’s ledger. Other issues relating to human error can be easily resolved using blockchain technology, such as the loss of sensitive company and consumer data, as all records will be securely stored on the immutable ledger.

Blockchain & Data Regulation Compliance

It is speculated that blockchain could revolutionise many internal operational processes within organisations, including streamlining how companies remain compliant with the current strict database security regulations, such as GDPR. 

A recent study conducted by IBM titled “Blockchain & GDPR” concluded that although blockchain, as of current, may not provide all the solutions to GDPR challenges, it should most definitely be “considered as a mechanism to help control the use of personal data.”

As we've discussed previously, blockchain has an array of positive characteristics, most notably enhanced security and immutability. This makes the distributed ledger technology an ideal solution for companies that want to securely store sensitive data, significantly reducing the risks of data breaches, whether the cause is a result of technical faults, cybercriminal activity, or human error. 

These reasons, amongst many others, are why blockchain database solutions can significantly reduce an organisation’s liabilities with regards to the storage of private, confidential data, by simplifying how organisations and regulators correspond with one another. Regulators would easily be able to verify if an organisation is remaining compliant, with a potential of AI solutions be able to automatically confirm compliance in the future. 


With cybercrime continuously on the rise, it has never been a more important time for enterprises of all sizes to initiate proper protocols, ensuring that sensitive company and consumer records are stored safely and securely.

Blockchain has the ability to provide a whole host of solutions for many organisations, including the ability to facilitate the secure storage of consumer data. Blockchain database management platforms could prove to be an easy and effective way for all organisations to remain compliant with data security regulations, whilst also considerably reducing their overall liabilities with regards to database protection.

What are your thoughts on the future of blockchain and database protection? Will centralised regulatory data security bodies become a thing of the past as a result of immutable distributed ledger technology? 

Let us know your thoughts in the comments section below! 

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CoinGecko's editorial team comprises writers, editors, research analysts and cryptocurrency industry experts. We produce and update our articles regularly to provide the most complete, accurate and helpful information on all things cryptocurrencies. Follow the author on Twitter @coingecko

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