Overview of privacy protection in blockchain transaction

Abstract

Blockchain technology has transformed digital transactions by enhancing security and trust through decentralization and cryptography. However, this technology also poses significant privacy challenges in transactions. Specifically, the transparency inherent in blockchain can lead to privacy concerns where sensitive transaction data and user identities are potentially exposed. This paper explores the dichotomy of data privacy and identity privacy within blockchain transactions, using Ethereum as a primary example. It delves into various privacy protection technologies currently in use, such as homomorphic encryption and zero-knowledge proofs, and evaluates their effectiveness and limitations. The paper further discusses the balance between privacy protection and regulatory compliance, which remains a critical challenge. Additionally, it considers future directions for enhancing privacy without compromising the security and functionality of blockchain systems. This exploration is vital for developing blockchain applications that maintain user confidentiality while benefiting from the transparency and security that blockchain provides.