A Hybrid Framework for Enhancing Privacy in Blockchain-Based Personal Data Sharing using Off-Chain Storage and Zero-Knowledge Proofs

Abstract

Blockchain technology presents transformative opportunities for secure personal data sharing, particularly in healthcare, finance, and identity management. However, its widespread adoption is constrained by challenges such as limited scalability, privacy concerns, and conflicts with regulatory frameworks like the General Data Protection Regulation (GDPR). This study introduces a novel hybrid framework that integrates the InterPlanetary File System (IPFS) for off-chain storage with Zero-Knowledge Proofs (ZKPs) to enhance privacy, ensure regulatory compliance, and reduce on-chain storage demands. Employing a Design Science Research (DSR) methodology, the framework was developed and validated using Ethereum and Hyperledger Fabric, guided by insights from a systematic review of 180 studies from 2018 to 2023. Empirical evaluations revealed a 75% reduction in blockchain storage, 98% GDPR compliance, and zk-SNARK proof verification times below one second. The framework also enables GDPR-compliant erasure by removing encrypted off-chain data while preserving on-chain auditability. Despite challenges such as IPFS latency and trusted setup complexities, the solution offers a scalable and privacy-preserving architecture applicable to real-world domains, especially in privacy-critical environments like healthcare and finance by resolving blockchain’s GDPR compliance paradox.