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In the blockchain, the two parties to the data exchange can be anonymous, and each node in the system can exchange data without knowing each other's identity and personal information.
When we talk about privacy, we usually mean privacy in a broad sense: people don't know who you are or what you do. In fact, Privacy contains two concepts: privacy in the narrow sense and Anonymity. The narrow sense of privacy is that others know who you are, but do not know what you do; Anonymity is when people know what you're doing, but they don't know who you are. Although transactions on the blockchain use Pseudonym (Address), since all transactions and states are in plain text, anyone can analyze all aliases and construct a User Profile. Some studies have pointed out that some methods can resolve the mapping relationship between the alias and IP, once the IP and the alias are associated, each behavior of the user is as exposed to the sun.
In systems with cryptographic currencies such as Bitcoin and Ethereum, transactions are not based on real-world identities, but on wallet addresses generated by cryptography. However, they are not anonymous systems, and the anonymity of digital currencies mentioned in many articles and books is actually a pseudonym. In the general system, we do not make a clear distinction between pseudonyms and anonymity. But when discussing privacy specifically, a distinction is made between pseudonyms and anonymity. Because the information generated by the alias can be queried in the blockchain system, especially in the public chain, the characteristics of all transactions that can be publicly queried will make the alias completely anonymous under the analysis of big data. But true anonymity, such as Dash, Monero, Zcash and other privacy currencies use privacy technology is truly anonymous.
Anonymity is different from a pseudonym. In computer science, anonymity is a pseudonym with Unlinkability. Irrelevant means that no one else in the network can correlate any two interactions (sending transactions, queries, etc.) between the user and the system. In Bitcoin or Ethereum, because the user repeatedly uses the public key hash as transaction identification, it is obvious that transactions can be linked. So Bitcoin or Ethereum are not anonymous. These data, which do not have anonymity, will cause the disclosure of business information and affect the popularization of blockchain technology.
The blockchain system is open, its data is open to everyone, anyone can query the blockchain data and develop related applications through the open interface, so the information of the entire system is highly transparent. Although the anonymity of the blockchain allows the private information of the parties to the transaction to be encrypted, it does not affect the openness of the blockchain, and encryption is only a protection for open information. In the open blockchain system, in order to protect some private information, some blockchain systems use privacy protection technology, so that people can view all information, but not some private information.
Blockchain uses a time-stamped block chain storage structure, which is conducive to tracing the entire process of a transaction from its source state to its most recent state. Time stamps serve as proof of the existence of block data, helping to apply blockchain to time-sensitive areas such as notarization and intellectual property registration.
In contrast to user anonymity, the transactions and history of Bitcoin and blockchain systems are transparent. Because in the blockchain, the ledger is distributed to all participants in the entire network, the proofreading and historical information of the ledger are transparent and public for the holders of the ledger.
Every transaction of Bitcoin is recorded on the blockchain, and unlike the transaction model dominated by the central authority, which can modify the transaction information of any user on its own, Bitcoin is difficult to tamper with.
As a multi-party distributed ledger system, the participants need to agree on rules for data verification, writing and conflict resolution, which is called consensus algorithm. As a public chain, Bitcoin and Ethereum currently use a proof-of-work algorithm (PoW), and the consensus algorithm applied to the field of alliance chain is more flexible and diverse, close to the business needs themselves.