Data Privacy Protection in DeFi Protocols
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With the development of decentralized finance (DeFi), the inherent limitations caused by the blockchain system have come to the surface. Because recorded data on the blockchain is available to system participants, DeFi protocols may not collect the private data of users. Otherwise, the information leakage may result in serious financial losses or cause legal issues. Therefore, DeFi protocols could hardly offer different users customized solutions, and the capital utilization is limited. To address this challenge in DeFi, we propose a solution, which is a trustful protocol that allows users to provide personal private data to DeFi protocols without worrying that such information would be disclosed. By implementing asymmetric encryption, zero-knowledge proof, and homomorphic encryption, we ensure that users' data will not be controlled by any centralized authorities and avoid potential financial losses or legal disputes due to information leakage. We further discuss the application scenarios of financial data privacy protection in public blockchain DeFi ecosystems and cross-border financial applications, such as credit aggregation.
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