Private and confidential transactions with Hyperledger Fabric

How this open source blockchain framework ensures custom levels of
privacy and confidentiality

In industries of every stripe, news of significant data breaches seems to
surface on a weekly basis. This vulnerability has elevated awareness of
how critical it is to preserve the privacy of user data. Privacy
is defined as the right of each individual or legal entity to control the
degree to which they will share their personal or business information
with their environment.

In transaction systems, such as blockchain networks,
privacy is frequently achieved by mechanisms that enforce the
confidentiality of data and the anonymity of transaction

Data confidentiality mechanisms ensure that individuals or
organizations are prevented from accessing data that they are not
authorized to access, such as classified information of other
organizations’ transactions. Anonymity requires that participants
of transactions are concealed.

Blockchain technology has inspired novel techniques to help address privacy
concerns in a decentralized setting. However, as different blockchain
systems come with different privacy features and models, each use case
will dictate the best approach or blockchain technology required.

Privacy in public vs. private blockchain systems

Public (in other words, permissionless) blockchain systems like Bitcoin
were the first to face privacy challenges. Participation in these systems
is open to anyone and, as such, user behavior is shielded behind virtual
pseudonyms (or “addresses”) that users generate to represent themselves in
their transactions. On the other hand, transaction details are in the
clear, and available on the public ledger of the system.

In certain enterprise use cases, government regulations require
understanding who is involved in the transactions, thus preventing the use
of public blockchain systems (such as Bitcoin) where identities are
pseudonymous. Further, the public availability of the content of
transactions in such systems can be problematic for numerous business use
cases. Why? Imagine a business obtaining computer parts from a vendor. 
Given the large volume of computer parts purchased, the supplier provides
a discount to the business when trading the asset for currency. For the
supplier, the actual discount is sensitive business information, as the
supplier may not want to provide the same discount to businesses who
purchase lower volumes.

As a response to these challenges, a couple of blockchain systems have been
introduced, built on top of Bitcoin.
Confidential Transactions and Assets
is a prominent example. It
allows pseudonymous transfer of coins and assets without leaking the
actual value of the coins or type of assets that are being exchanged. ZeroCash
is another example. It’s an open network that offers stronger privacy
where — in addition to concealing the value of the assets exchanged
— it conceals the owner of the coins as well as the actual
transaction graph. However, as all these systems target open networks,
they offer unconditional privacy.

Permissioned blockchains have emerged as an alternative to public ones to
address enterprise needs for having known and identifiable participants.
They’ve achieved the scale, confidentiality, and privacy necessary to
enable enterprise applications.

3 privacy mechanisms in Hyperledger Fabric

Hyperledger Fabric is a permissioned blockchain, which means it
is equipped with a membership infrastructure that enables participants of
the network to both strongly authenticate themselves in transactions, and
prove authorization to perform a variety of system operations, such as
reconfiguration. Starting from its permissioned nature, Hyperledger Fabric
offers mechanisms to accommodate multiple flavors of privacy, depending on
the use case.

Channels in Hyperledger

Hyperledger Fabric’s channel architecture can offer privacy in certain

A channel is like a virtual blockchain network that sits
on top of a physical blockchain network with its own access rules.
Channels employ their own transaction ordering mechanism and thus
provide scalability, ultimately allowing for effective ordering and
partition of huge amounts of data.

Channels in Hyperledger Fabric are configured with access policies that
govern access to the channel’s resources (chaincodes, transactions, and
ledger state), thus preserving the privacy and confidentiality of
information exclusively within the nodes that are in the channel. Channels
achieve better quality of robustness when a node is down given alternate
paths to get to the destination, while also providing scalability allowing
for effective sharing of huge amounts of data.

From a privacy perspective, channels are useful in cases where a subgroup
of the blockchain network’s participants have a lot of transactions in
common (enough to justify the creation of a new broadcast order channel),
and these transactions can be processed with no dependency on state
controlled by entities outside this group.

Bilateral business relationships with a heavy volume of transactions can
meet their privacy requirements via channels. Take the example of the
computer parts supplier. The supplier could establish a different channel
with each business partner to serve their bilateral business relationship.
Of course, the rate of transactions should be high enough and the number
of business partners (and resulting channels) should be low enough for
this use case to also preserve the scalability advantages of the network’s
channel architecture. The channel access configurability allows for
preserving both the privacy of the supplier and each of its partners
through shielding the entire transactions of theirs from parties outside
this channel.

Channels can be further used in combination with private
and zero-knowledge proof
as described below to strengthen privacy and

Private transactions in Hyperledger Fabric

Private transactions offer transaction privacy at a more fine-grained level
than channels.

Verified.Me by SecureKey Technologies relies on strong
privacy and confidentiality requirements. The solution depends on
minimizing data disclosure and retention to appropriate parties, while
still retaining the evidence of actions taken in the network. This
balance is fundamental, and the foundation is provided in Hyperledger
Fabric with the combination of Channels and Private Transactions.
Watch the video to understand the real business value at work
utilizing Hyperledger Fabric technology.

Greg Wolfond, CEO, SecureKey

The database storing the private data is updated alongside the public
ledger as transactions containing references to private data are
committed. In fact, the hashes on the public ledger serve as verifiable
proof of the data. Private transactions can be combined with anonymous
client authentication (see next section) to avoid leaking the connection
between the identity of the transaction’s creator and the ledger stored
(hashed) data.

This feature is especially useful in cases where, for regulatory or legal
reasons, private data is not allowed to reside off the premise of the
parties involved in the transaction. Consider an example in the healthcare
sector where a patient’s health information should be released only for a
specified amount of time. For example, a patient’s prescription history
may be made available to a specialist for a period of time before a
specific surgery occurs. Private transactions would ensure data
confidentiality in only allowing the patient and the specialist to see the
information for a specified amount of time while also recording the hash
of the data as evidence that the transaction occurred.  Privacy is
achieved in that there is control over who can access the actual sensitive
data. If anonymous client authentication is used in addition to this (see
the next section), stronger privacy would be offered as the identity of
the entity that introduced or updated the (hashed) record will also be

Private transactions should be used with care in cases where the pattern of
private data updates is also sensitive information and could be used to
derive the actual private data. Although Hyperledger Fabric architecture
prevents unauthorized access to the actual private data, shared ledger
participants can still see when a private data (hashed) entry is modified.
In the previous example, if a private data entry represents the number of
visits by a specific patient to a hospital (assuming the patient has
regular weekly meetings with his or her doctor), then patterns of updates
to this entry could provide information about the reason for that
patient’s visit to the doctor (for example, that the patient suffers from
chronic disease).

While private transactions protect the actual private data from being
directly accessed by unauthorized parties, they do not prevent public
ledger participants from detecting when this private data is being
modified. Private data hashes occupy key-value entries in the ledger
state, whose changes are publicly available.

Also, private transactions do not conceal the
parties who are allowed access to the private data. This information is
available on the ledger for private data dissemination to take place

Finally, private transactions would need to be accompanied with anonymous
client authentication mechanisms (described in the next section) to avoid
leaking the connection between the identity of the transaction’s creator
and the ledger stored (hashed) data.

Zero-knowledge proof
(ZKP) technologies in Hyperledger Fabric

Zero-knowledge proof

primitives enable a party who possesses a secret (the prover) to prove to
another party (the verifier) that its secret satisfies a certain set of
properties (knowledge) without revealing the actual secret

A zero-knowledge proof (ZKP) allows a “prover” to assure a
“verifier” that they have knowledge of a secret without revealing the
secret itself. It’s a way to show you know something that satisfies a
statement without showing what you know.

Here’s a basic example to demonstrate the power of ZKP. If you show your ID
to the bouncer at a bar, you end up revealing your name, address, and
age. If you used ZKP, you would be able to transform your ID into another
form that would preserve the fact that it is a valid ID and the fact that
you meet the bar’s age requirements, while concealing your name, address,
and exact age.

Two privacy aspects of Hyperledger Fabric will be achieved using ZKPs:
Anonymous client authentication with Identity Mixer, and
privacy-preserving exchange of assets with Zero-Knowledge Asset Transfer
(ZKAT). We’ll cover both in the next sections.

Anonymous client authentication with Identity

Identity Mixer is available in the Hyperledger Fabric 1.1 tech
preview (and coming as a release feature in Hyperledger Fabric 1.2). It
leverages ZKP to offer anonymous authentication for clients in their
transactions. ZKP protocols take place between the Fabric client whose
secret is its actual identity — and any attributes associated with
it — and the rest of network entities, such as its peers. These
entities wish to verify that the creator of a transaction is a member of a
particular organization (known as a “membership proof”), or that it is in
possession of a specific set of attributes (known as “selective disclosure
of attributes”).

In both cases, the protocols guarantee that nothing is revealed about the
client’s identity beyond whether the corresponding statement is true.

Privacy-preserving exchange of assets with Zero-Knowledge
Asset Transfer (ZKAT)

In an upcoming
release, Hyperledger Fabric will integrate ZKP into a wider range of
applications targeting asset management. Demonstrated at Consensus
, the Hyperledger Fabric community showed the next evolution
and use of ZKP to accommodate privacy-preserving asset management with
audit support (also known as Zero-Knowledge Asset Transfer, or ZKAT). It
allows transactors to issue assets and request transfer of their assets
without revealing anything to the public ledger for the assets being
exchanged beyond the fact that the transfer complies with the asset
management rules (that each asset is transferred at its owner’s request,
and there is no new value created through the transfer). ZKAT is built on
top of anonymous authentication mechanisms offered by Identity Mixer.

Unlike other privacy-preserving asset management systems for blockchain,
ZKAT is tailored to the needs of enterprise networks. In particular,
auditability of the privacy-preserving transactions is a crucial
differentiator from other schemes available. Each user is assigned a
specific auditor who is entitled unlimited access to all the transactions
of that user. The auditors are passive; they may come in afterwards and
extract the confidential information of all transactions the audited user
is involved in, but they cannot access the data for any other party.

Three privacy asset management models (based on unspent transaction output
model exclusively) are currently adopted by existing blockchain systems.
You can see them illustrated in the next figure, where three banks (Bank
A, Bank B, and Bank C) trade three types of assets on the blockchain
(Loyyal points, Water Canary, and MUFG ones).

In the figure, the model on the left has no privacy mechanism. The model in
the middle supports full privacy, concealing the identities of transaction
participants and traded assets details. The model on the right
demonstrates the secure auditing capability of ZKAT the auditor assigned
to a specific Bank is allowed unrestricted access to all transactions
involving this bank.

Audit-enabled privacy is useful particularly in financial use cases. Banks
make money by lending at rates higher than the cost of money they
acquired. As a result, if a bank were to use a blockchain network with
this advanced ZKP capability applied, they would want to be able to
exchange assets (money) and record the corresponding transactions in the
shared ledger without revealing the fact that they are transacting, with
whom they transact, or the amount of the assets they are exchanging in
their transactions. Failure to do so would clearly compromise their
confidentiality regulations, and expose their business models.

With zero-knowledge proof, transactions containing verifiable proof that
the asset (money) is exchanged are available on the ledger, without
revealing the lending rates or the quantity and parties a bank trades,
allowing the bank at any particular time to understand the liquidity of
what they have in cash. The additional advantage with Hyperledger Fabric
is they can now be audited based on ZKAT.

Differences from other blockchain technologies

Zero-knowledge proof protocols for asset management implemented on
Hyperledger Fabric

permissioned blockchains are state of the art. Strong privacy is supported
where not only the anonymity of transaction participants is preserved but
also complete unlinkability of the assets transferred from one party to
the other (that is, UTXO graph concealment).

In addition, these protocols are tailored to the needs of permissioned
systems. The long-term identities of individual users are considered,
providing strong accountability and non-repudiation of user participation
in transactions, and offering strong and secure auditing features on the
privacy-preserving transactions that are announced in the
blockchain. Hyperledger Fabric protocols support an audit
model where auditors are assigned to one or more users in the system but
are not involved in transactions. These protocols guarantee that auditors
will later be able to audit transactions of the users assigned to them,
given only the transactions logs stored in the blockchain.

On a more technical level, protocols in Hyperledger Fabric rely on standard
cryptographic assumptions and exhibit a lightweight setup that can be
easily decentralized. Last but not least, these demonstrate constant
transaction creation and validation times that do not depend on the number
of transactions already submitted to the


Over the past several years, blockchain has become recognized as a
game-changer for many industries. The year 2018 will
continue to bring state-of-the-art
privacy and
confidentiality enhancements, as more permissioned DLTs
move into production. In this article,
we’ve discussed privacy features in existing blockchain systems and the
use cases they’re best suited to, as well as new enhancements soon to be
available in Hyperledger Fabric.

Depending on your network’s needs for
privacy and confidentiality, application developers may
chose to implement Hyperledger Fabric channels, private transactions,
and/or different levels of zero-knowledge
including anonymous client authentication with Identity Mixer and
privacy-preserving asset management with audit support (Zero-Knowledge
Asset Transfer, ZKAT).

Hyperledger Fabric is bringing a new level playing field to permissioned
enterprise blockchains.

Next steps

Downloadable resources


via IBM developerWorks : Cloud computing

May 11, 2018 at 06:45PM