Confidentiality & Crypto Lending
In a world that full of platforms that allow free ow of information, it becomes important for one to ensure that privacy and confidentiality.
In terms of financial transactions, protecting your passwords and account information is necessary to prevent fraud. The basics of confidentiality are the ability to have protocols that protect the identity and privacy of the borrower from third parties that may use the information to the detriment of the account holder.
Crypto currency provides confidentiality that is unique in several ways. The first unique feature that distinguishes it from conventional currencies is the identifying marks based on crypto, which are computer generated. In crypto lending platforms, the use of networks working on blockchains allows for enhanced security features that improve confidentiality. It makes it easy for assets that are confidential and non-confidential to exist on the same block. Using this model of the blockchain, it allows for validation of the identity of third parties before data is disclosed to them. This ensures that privacy is maintained with regards to the data of the account holders.
The crypto currency lender will make use of some security features in order to improve the privacy of the data it holds. Some lenders will employ one-time keys that are discarded after every transaction. These keys cannot be traced back to the borrower and thus makes their financial data to be safe and confidential. There are also enhanced features developed by most lending platforms that protect the privacy of the amounts and history of the transactions. One feature that is used is the ring signature, which is designed to ensure that anonymity is guaranteed.
One way in which you can ensure privacy when borrowing using crypto currency is to use what is referred to as “secure multi-party computation” which allows for several things. It splits the data on the borrower into different nodes which compute functions together while ensuring that data is not leaked. This protocol ensures that no single party has full access to your data entirely. It is important to begin by asking your lender if they have this confidentiality feature before you borrow against your crypto currency. This significantly improves the confidentiality of the borrower and gives them peace of mind that their financial data is secure.
The second feature you should look out for is the Homomorphic Encryption from your lender. This feature works by creating a dark room for the borrower`s data. Encrypted data is processed without having to decrypt it, which makes it readable only to parties that are relevant and have been validated. Using this feature, the crypto currency lender is able to maintain transactions that are confidential. This at the same time allows public networks to verify that the ledger entries are valid while maintaining the privacy of the lender. This and the above security features ensure that borrowing against crypto currency remains confidential.