The transparency challenge of blockchain in organizations

Abstract

This position paper discusses the challenges of blockchain applications in businesses and the public sector related to an excessive degree of transparency. We first point out the types of sensitive data involved in different patterns of blockchain use cases. We then argue that the implications of blockchains’ information exposure caused by replicated transaction storage and execution go well beyond the often-mentioned conflicts with the GDPR’s “right to be forgotten” and may be more problematic than anticipated. In particular, we illustrate the trade-off between protecting sensitive information and increasing process efficiency through smart contracts. We also explore to which extent permissioned blockchains and novel applications of cryptographic technologies such as self-sovereign identities and zero-knowledge proofs can help overcome the transparency challenge and thus act as catalysts for blockchain adoption and diffusion in organizations.

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Electronic Markets
https://doi.org/10.1007/s12525-022-00536-0
POSITION PAPER
The transparency challenge ofblockchain inorganizations
JohannesSedlmeir1,2 · JonathanLautenschlager1,2 · GilbertFridgen3 · NilsUrbach4
Received: 14 August 2021 / Accepted: 22 February 2022
© The Author(s) 2022
Abstract
This position paper discusses the challenges of blockchain applications in businesses and the public sector related to an
excessive degree of transparency. We first point out the types of sensitive data involved in different patterns of blockchain
use cases. We then argue that the implications of blockchains’ information exposure caused by replicated transaction stor-
age and execution go well beyond the often-mentioned conflicts with the GDPR’s “right to be forgotten” and may be more
problematic than anticipated. In particular, we illustrate the trade-off between protecting sensitive information and increasing
process efficiency through smart contracts. We also explore to which extent permissioned blockchains and novel applications
of cryptographic technologies such as self-sovereign identities and zero-knowledge proofs can help overcome the transpar-
ency challenge and thus act as catalysts for blockchain adoption and diffusion in organizations.
Keywords Confidentiality· Data protection· Digital wallet· Distributed ledger technology· Privacy· Verifiable
computation
JEL Classification 014
Introduction
In the past decade, Bitcoin, Ethereum, and other crypto-
currencies have swiftly made their way from a few cypher-
punks’ revolutionary vision to a now almost mainstream
family of financial assets and decentralized applications.
For instance, the investment bank Morgan Stanley recently
announced that it now offers their wealthy clients Bitcoin
or other crypto exposure, while the investment power-
houses Goldman Sachs and JP Morgan have even started
working on the full provisioning of cryptocurrency invest-
ments opportunities to their clients (Mason, 2021; Ponciano,
2021). Moreover, many blockchain-based digital assets or
tokens with, for instance, the purpose of low volatility (sta-
blecoins) and access to services (utility) (Oliveira etal.,
2018) are booming in what has become popular under the
term decentralized finance (DeFi) (Zetzsche etal., 2020).
In general, the opportunities related to blockchain-based
financial markets and tokenization are now regarded as a
key trend for the economy (Alt, 2020; Sunyaev etal., 2021).
IS researchers have early also investigated the opportuni-
ties of adopting blockchain technology beyond the finan-
cial sector and expected substantial improvements, e.g., in
terms of data immutability, interoperability, and traceabil-
ity (Beck etal., 2018; Ferdous etal., 2019). Moreover, the
opportunity to enforce rules between business parties on a
blockchain can facilitate a new level of trust and, to some
extent, make blockchains a substitute for intermediaries (Alt,
2020; Beck etal., 2017; Bons etal., 2020). Researchers and
Responsible Editor: Christian Matt
* Johannes Sedlmeir
johannes.sedlmeir@fit.fraunhofer.de
Jonathan Lautenschlager
jonathan.lautenschlager@fim-rc.de
Gilbert Fridgen
gilbert.fridgen@uni.lu
Nils Urbach
nils.urbach@fb3.fra-uas.de
1 Project Group Business & Information Systems
Engineering oftheFraunhofer FIT, Wittelsbacherring 10,
95447Bayreuth, Germany
2 FIM Research Center, University ofBayreuth,
Wittelsbacherring 10, 95447Bayreuth, Germany
3 Interdisciplinary Center forSecurity, Reliability andTrust,
University ofLuxembourg, LuxembourgCity, Luxembourg
4 Frankfurt University ofApplied Sciences, Frankfurt,
Germany

J.Sedlmeir et al.
1 3
practitioners have explored blockchains in numerous publi-
cations and prototypes within, among others, supply chain
management (Gonczol etal., 2020; Queiroz etal., 2019)
and the energy, health, mobility, and public sector (Andoni
etal., 2019; Fridgen etal., 2019; Shi etal., 2020; Warkentin
& Orgeron, 2020).
However, compared to the momentum of blockchain
applications in cryptocurrencies and DeFi, adoption in
industry and the public sector seems to move considerably
slower. For instance, besides a few successful, productive
solutions (Lacity & Van Hoek, 2021), we have not yet
observed the anticipated widespread disruption of digital
supply chain management. Considering the large number of
publications and businesses’ significant efforts to develop
blockchain-based solutions beyond the financial sector
(International Data Corporation, 2021), the visibility
of successful blockchain applications seems relatively
limited. During the Covid-19 pandemic, we also saw many
blockchain-related projects being placed on hold or quit,
possibly owing to a lack of success and the shift in priorities
toward other projects that promise short-term savings or
that open new business opportunities. Insights from large
consultancies support this observation. For instance,
Deloitte recently found that the mortality rate of blockchain
projects pursued by organizations is around 85%, and even
92% when taking into account all blockchain projects
on GitHub (Deloitte, 2021). Further, large technology
companies such as IBM and Microsoft have announced a
reduction in their blockchain engagements (Allison, 2021).
A high failure rate for large and complex IT projects is not
surprising per se (Whitney & Daniels, 2013), and an even
higher failure rate may be expected owing to a certain level
of blockchain hype associated with financial speculation in
the context of cryptocurrencies and DeFi. Nonetheless, the
observation of unexpectedly slow developments regarding
blockchain adoption beyond concepts and prototypes
has already led to disillusionment and nascent research
on why blockchain technology has to date failed to meet
the high initial expectations in the context of supply
chains (Sternberg etal., 2020). Given that particularly
the connecting of today’s fragmented information silos in
supply chains was regarded as one of the very promising use
cases for blockchains (Azzi etal., 2019; Queiroz & Wamba,
2019; Roeck etal., 2019; Saberi etal., 2018), the lack of
productive solutions there is particularly surprising.
Table1 features a summary of challenges that organiza-
tions face in blockchain adoption. In this paper, we argue
why we consider excessive transparency one of the key
reasons for the observable lack of blockchain adoption.
Building on previous work, we discuss why the repli-
cated processing of data inblockchains often conflicts
with organizations’ policies and regulations associated
with sensitive business and customer information (Kan-
nengiesser etal., 2021; Pedersen etal., 2019; Toufaily
etal., 2021). The impracticality of deleting data ex-post
from a close to immutable ledger further aggravates these
issues (Rieger etal., 2019). Initial calls for research into
the privacy implications of blockchains have pointed out
that researchers should explicitly consider issues associ-
ated with the exposure of sensitive information (Rossi
etal., 2019). In this context, Kannengießer etal. (2020),
for instance, have already contributed to a more detailed
understanding of the related trade-offs from a technical
perspective. Yet, we found that transparency-related dis-
cussions are often restricted to personal information and
the GDPR’s right to be forgotten (Schellinger etal., 2021)
or not considered a substantial challenge (e.g., Lacity &
Van Hoek, 2021). Some researchers even consider block-
chain as a suitable technology to increase privacy (e.g.,
see the overview in Karger, 2020). During our involve-
ment in more than 10 projects in the mobility, energy, and
public sector in the last three years in which we designed,
implemented, and evaluated blockchain-based solutions,
we initially encountered similar perspectives among stake-
holders, which also aligns with the findings by Platt etal.
(2021). In these projects, the exposure of sensitive infor-
mation often made scaling blockchain-based applications
from initial proofs of concept to larger ecosystems very
Table 1 Organizational challenges of blockchain adoption as pointed out by extant research
Challenges for blockchain adoption Example references
Alignment with business models and services Heines etal. (2021), Janssen etal. (2020), Toufaily etal. (2021)
Integration into organizations’ legacy systems Alt (2020), Babich and Hilary (2020), Sedlmeir etal. (2022)
Heterogeneous levels of digitalization Fridgen etal. (2018), Jensen etal. (2019)
Compliance with legal frameworks and institutional processes Janssen etal. (2020), Lacity (2018)
Governing collaboration among stakeholders Beck etal. (2018), Lacity and Van Hoek (2021)
Closing communication gapsregarding energy consumption Sedlmeir etal. (2020)
Scalability and performance Kannengießer etal. (2020), Sedlmeir etal. (2022), Toufaily etal. (2021)
Correctness and updatebility of code Kannengiesser etal. (2021), Köhler and Pizzol (2020)
Visibility of sensitive data Kannengiesser etal. (2021), Pedersen etal. (2019), Toufaily etal. (2021)

The transparency challenge ofblockchain inorganizations
1 3
difficult, required substantial architectural changes, and
caused increased complexity or restricted the originally
intended scope.
To provide a shared understanding of the application
areas of blockchain technology that we use to illustrate the
consequences of excessive transparency, we first introduce
some background on blockchain technology, derive common
use case patterns, and list examples for the sensitive infor-
mation involved. We then point out the fundamental trans-
parency challenge affecting many of these patterns and the
corresponding difficulties developers and decision-makers
face in businesses and institutions when conceptualizing or
scaling corporate blockchain applications. We also illustrate
to which extent permissioned blockchains and some recent
developments in the practical use of cryptographic tools
may help mitigate the transparency challenge. We close by
summarizing our main results and identifying avenues for
future research.
Background
A blockchain is a specific distributed ledger type that builds
on a peer-to-peer network where all data are replicated
across multiple servers (nodes) in a fault-tolerant way
(Butijn etal., 2020). Blockchains’ physically distributed and
organizationally decentralized yet logically synchronized
data management is achieved through an append-only
structure in which batches of transactions (blocks) are linearly
connected through hash-pointers (chain) (Beck etal., 2017).
Nodes decide which blocks to append and how to order the
transactions within a block through a consensus mechanism
(Wüst & Gervais, 2018). Provided a majority of the network
in a specific metric such as hash rate (proof of work), the share
of cryptocurrency (proof of stake), or the number or reputation
of nodes (voting-based or proof of authority consensus) is
honest, this guarantees the correct execution of transactions
and the practical immutability of the ledger. Transactions can
represent a simple payment or the execution of a program
(smart contract) whose code is specified through a previous
transaction (Butijn etal., 2020). The confidence that the
execution of a transaction has the intended consequences
and cannot retrospectively be altered without the need to rely
on the availability and honesty of a specific entity is often
referred to as digital trust (Nofer etal., 2017).
A common categorization distinguishes between permis-
sionless blockchains, where any entity can participate in con-
sensus, and permissioned blockchains, where only selected
entities can take this role, for instance, within a consortium
from industry or the public sector (Beck etal., 2018; Wüst &
Gervais, 2018). Permissionless blockchains are public, i.e.,
any entity can download and read the corresponding state of
the ledger. By contrast, permissioned blockchains are often
– but not always – private, i.e., only authorized entities have
read access (Rossi etal., 2019). As active participation in
consensus typically involves receiving, reading, storing, and
executing transactions and updating the local ledger accord-
ingly, the nodes participating in consensus are a subset of
the entities with read access. It is also important to note that
in this sense, many blockchains used in the public sector are
private and permissioned, as they are run by and accessible
to selected entities only (Rieger etal., 2019).
The enforcement of business logic through smart con-
tracts technically prevents misconduct by individual partici-
pants and creates trust in the correct handling of processes
(Bons etal., 2020). For instance, the Ethereum blockchain
can even be considered a platform of platforms, specifically
for financial applications (Buterin, 2013) but intended for
more general purposes. Blockchain-based information sys-
tems for use in organizations can also be seen as an alterna-
tive to a trusted third party – for instance, if stakeholders
cannot agree on a potential platform owner because they fear
its corresponding market power. Blockchains and smart con-
tracts hence provide the opportunity to implement a variety
of applications that involve multiple organizations on the
same neutral platform with strong guarantees on the cor-
rectness and non-repudiability of transactions (Bons etal.,
2020; Fridgen etal., 2019). Yet, it is unlikely that block-
chains represent a purely technical substitute for all services
established trusted intermediaries provide today (Fridgen
etal., 2021).
Beyond this commonality, blockchain applications are
very heterogeneous and can be associated with many differ-
ent use cases. While research has already provided differ-
ent classifications, often with a fairly technical focus (e.g.,
see Xu etal., 2018), so far there has been no focus on the
types of sensitive data involved. We hence present some
use case patterns (payment, tamper-resistant documenta-
tion, cross-organizational workflow management, ubiqui-
tous services, digital identities, tokenization, and machine
economy) to illustrate what kind of sensitive information
they can involve. We will repeatedly use these use case pat-
terns, which we summarize in Table2, to illustrate related
transparency challenges and solution approaches in the sub-
sequent sections.
1. Payment
Likely the best-known application of blockchain
technology is digital payments. In this context, the
cryptocurrency Bitcoin is a popular and arguably the
foundational example (Nakamoto, 2008). Many stake-
holders also consider smart contract-enabled conditional
payments to be an appealing application. Blockchain
technology has also been tested to improve traditional
payment systems’ efficiency, for instance, by easing
inter-bank settlement, or for digital currencies directly

J.Sedlmeir et al.
1 3
issued by the central bank (Dashkevich etal., 2020).
These examples can involve sensitive information such
as individuals’ and businesses’ revenues, expenses, bal-
ances, turnover, or metadata that reveals the frequency
of interactions between businesses and individuals.
2. Tamper-resistant documentation
Trust plays a key role in payment transactions and is
facilitated through the practical immutability of infor-
mation stored on blockchains. However, tamper-resistant
data storage can enable applications beyond payments to
prevent – or at least make evident – the ex-post manipu-
lation of processed information. For instance, one of the
four core use cases for the European Blockchain Ser-
vices Infrastructure is notarization, seeking to provide a
service for creating trusted digital audit trails that allow
one to prove the integrity of diplomas or administra-
tive documents (European Commission, 2021). Another
application area for tamper-proof documentation is Car-
dossier, which allows one to collect and sell verifiable
data about used cars, thus reducing information asym-
metries in markets (Zavolokina etal., 2020) and increas-
ing consumer trust (Bauer etal., 2020). Therefore, the
recorded data can be personally identifiable or have
business value.
3. Cross-organizational workflow management
The availability of an infrastructure for tamper-
resistant documentation and the timely distribution
of information to many parties also enable the cross-
organizational coordination of business processes. Smart
contracts can enable event handling, facilitating process
control, and, in the long term, the automation of selected
process steps within cross-organizational business rela-
tionships (Fridgen etal., 2018; Sturm etal., 2019). The
coordination of such processes requires the visibility of
information such as the time, frequency, and utilization
of services or processes, to third-party organizations
to enable cross-organizational workflow management
(Kannengiesser etal., 2021). One prominent example in
the logistics sector is TradeLens, a blockchain-enabled
platform that aims to improve the scheduling along the
maritime logistics chain by communicating shipping
events while tracking shipping containers and digitizing
the related documentation (Jensen etal., 2019). Another
example of a permissioned blockchain is MediLedger,
which prevents the injection of fake medicals in phar-
maceutical supply chains through improved information
exchange between various stakeholders and preventing
the double-spending of authentic medicals (Mattke
etal., 2019).
4. Ubiquitous services
Many services on blockchain-based platforms are
available even without the need to interact with a busi-
ness or another organization. These ubiquitous services
are provided through smart contracts. Once published,
smart contracts typically remain available without fur-
ther maintenance by the original developer as long as the
underlying blockchain continues to be operated; thus,
they can offer services without service providers. One
prominent example is automated market makers that
facilitate decentralized exchanges through providing
a pricing mechanism in a smart contract, for instance,
Uniswap, or managing investment portfolios in DeFi
Table 2 Blockchain application patterns and examples for the sensitive information involved
# Pattern Example use cases References Types of sensitive information
1 Payment Bitcoin, central bank digital cur-
rencies
Nakamoto (2008), Dashkevich
etal. (2020)
Individuals’ and businesses’
revenues, expenses, balances,
turnover and business partners
2 Tamper-proof documentation Notarization, Cardossier EC (2021), Zavolokina etal.
(2020)
Content and validity status of docu-
ments, information that could be
sold on a market
3 Cross-organizational work-
flow management
Tradelens, MediLedger Jensen etal. (2019), Mattke etal.
(2019)
Frequency and type of processes,
relationships between organiza-
tions involved
4 Ubiquitous services Oracles (Chainlink), DeFi
(Uniswap)
Al-Breiki etal. (2020), Wang etal.
(2019), Werner etal. (2021)
Risk exposure associated with
financial investments
5 Digital identities Namecoin, German asylum case Kalodner etal. (2015), Amend
etal. (2021)
Individuals’ names, addresses,
health information, permissions
and achievements
6 Tokenization Ticketing (GUTs), investments and
fractional ownership
Regner etal. (2019), Sunyaev etal.
(2021), Whitaker and Kräussl
(2020)
Individuals’ and organizations’
investment decisions and voting
behaviour
7 Machine economy Micropayments, economically
autonomous robots
Jöhnk etal. (2021), Schweizer
etal. (2020)
All of the above; machines are typi-
cally associated with organiza-
tions or individuals

The transparency challenge ofblockchain inorganizations
1 3
(Grigo etal., 2020; Werner etal., 2021). Another popu-
lar kind of ubiquitous services are oracles, which pro-
vide information from the external world, such as stock
prices, meteorological data, or flight delays, on-chain.
Oracles are also implemented via smart contracts and
often employ truth discovery methods that compare dif-
ferent inputs and involve combinations of incentives and
penalties to make the provided data reliable (Al-Breiki
etal., 2020).
5. Digital identities
The provision of digital identities can be regarded
as a particularly impactful application for ubiquitous
services. In many applications, digital representations
of physical entities are needed (Dietz & Pernul, 2019).
Blockchains’ transparency and tamper resistance have
been used early on to link entities to public keys (Kalod-
ner etal., 2015). On the other hand, blockchain technol-
ogy has also popularized the concept of a digital wallet
that organizations, users, and smart things can maintain
to claim not only the ownership of cryptocurrencies but
also of digital identities that verifiably attest their attrib-
utes and authorizations. Germany’s Federal Office for
Migration and Refugees is already active in this area and
is investigating the possibility of creating a unique digi-
tal identity for refugees that is suitable for administra-
tive purposes across organizational boundaries (Amend
etal., 2021).
6. Tokenization
Besides unique identities for persons, organizations,
and machines, blockchains can also create digital
representations of scarce physical and digital assets.
However, in this context, the emphasis is not on
allowing these objects to maintain their own identity
but rather to make them tradable with a global pool
of potential buyers. While fungible tokens, such as
units of a cryptocurrency, are interchangeable, non-
fungible tokens (NFTs) are digital representations of
unique physical or digital objects, such as collectibles,
artworks, or virtual gaming assets. The change of
ownership relationships and attributes of such tokens
are recorded on blockchains. NFTs can represent
tickets (Regner etal., 2019), real estate, services,
artwork, or other creative work. An illustrative example
is GUTS, an event ticketing system empowering
visitors to exercise full control over their tickets,
including reselling them, while giving the event
organizer secondary market control in terms of prices.
Tokenization also enables fractional ownership, thereby
potentially increasing previously illiquid markets’
liquidity (Whitaker & Kräussl, 2020) and allowing
investors to vote on how the underlying asset should
be managed.
7. Machine economy
Ultimately, machines can maintain their own iden-
tity and exchange value through tokens. Micropayments
can improve processes between various machine entities.
Owing to rapid developments in artificial intelligence
and the Internet of Things, it is likely only a matter of
time before machines can interact autonomously with
one another (Jöhnk etal., 2021). With the absence of
centralized monitoring and decision-making, a block-
chain can serve as a trust-based technology and infra-
structure to enable the exchange of master data, dynamic
data but also digital assets between such autonomous
agents (Schweizer etal., 2020).
The transparency challenge
a) Problem statement
In public permissionless blockchains, every block,
including all transactions to be operated, is generally
disseminated to every node. Nodes then store and check
each transaction and compute the corresponding updates
to the world state – a running aggregate representation
of all previously executed transactions that is maintained
for efficiency reasons.1 This inherent redundancy of
data processing and storage in blockchains facilitates
fault-tolerance through cross-checking and forms the
backbone of blockchains’ promise of providing digital
trust. On the other hand, replication by a large number
of nodes, some of which may not be trustworthy, is a
double-edged sword: it inevitably leads to challenges
associated with the exposure of sensitive information
such as critical business data or personally identifiable
user data (Platt etal., 2021; Zhang etal., 2019).
So far, transparency concerns seem to play only a
minor role in cryptocurrencies and related financial
applications of blockchain. As it is known that users’
pseudonymous blockchain addresses can often easily be
mapped to natural persons or organizations (Biryukov &
Tikhomirov, 2019), essentially, today individual users or
companies are deciding wittingly to reveal their transac-
tions and, thus, their payments, investments, strategies,
and risk exposure. Nonetheless, excessive transparency
is currently a major challenge for DeFi from another
perspective: block-producing nodes can not only decide
which transactions to include in the next block but also
1 Replication is also typical of many other kinds of distributed ledg-
ers with alternative data structures, like, for example, directed acyclic
graphs, and many aspects of our discussion hence extend to these,
too. However, for simplicity, we will stick to blockchains for the
remainder of this paper.

J.Sedlmeir et al.
1 3
in which order. Hence, they can make additional profit
by observing the transaction proposals that have not yet
been included in a block (the mempool) and selecting
and ordering them in their favour or even sandwiching
them between own transactions that are only conducted
for this reason to make arbitrage (Daian etal., 2020).
This is not only problematic from a regulatory per-
spective and typically forbidden in regulated markets
(McCann, 2000), it can also lead to misaligned incen-
tives in consensus that reduce the security of the under-
lying blockchain infrastructure.
In many applications, the disclosure of data to other
blockchain nodes by default often conflicts with com-
panies’ data policies, customers’ expectations, and anti-
trust and data protection regulations, and specifically
with the GDPR’s “right to be forgotten” (Schellinger
etal., 2021). While individuals can agree with the pro-
cessing and sharing of their data, they can demand dele-
tion at a later stage according to the GDPR. As organi-
zations expected benefits from the sharing of verifiable
personal information via digital identities to streamline
processes, this dilemma has resulted, for instance, in the
development of workarounds that allow one to remove
data retroactively despite the presumed immutability of
blockchains (e.g., Ateniese etal., 2017; Deuber etal.,
2019). Nonetheless, enforcing the deletion of all cop-
ies that nodes may have made is technically impossible.
Further, if it is necessary to undertake major efforts to
delete supposedly confidential data on a blockchain, it
may not have been a good idea to replicate them among
multiple nodes in the first place. On the other hand, the
GDPR also lists requirements such as purpose limitation
and privacy by default (Haque etal., 2021; Schellinger
etal., 2021) that makes already the initial replication
of data by multiple organizations – many of which are
unlikely involved in the associated process – question-
able. Thus, although Bélanger and Crossler (2011) gen-
erally advise that one study information privacy issues at
the “organization level,” it seems justified to specifically
consider the implications of using blockchain technol-
ogy on data visibility.
Similar considerations apply for sensitive business
information: Enterprises that wish to lever a blockchain
for use case patterns such as cross-organizational work-
flow management to share data or to improve the coor-
dination of fragmented, multi-lateral business processes
hence need to think through the potential consequences
of exposing business-critical data on a blockchain in
detail. For instance, consider a cross-organizational
workflow process. If information such as a part ID asso-
ciated with this workflow is stored on a blockchain, at
least all participants that run a node will have access to
these data and often will be able to infer which entity
was involved in manufacturing steps related to this part
ID because transactions are digitally signed, and repeti-
tive patterns can help with the de-pseudonymization of
accounts. On the other hand, if data like part IDs are
not stored on-chain, the process cannot be coordinated
seamlessly through a smart contract owing to the lack
of information that each of the parties would need for
an end-to-end verification of provenance (Bader etal.,
2021). This includes qualitative proofs of provenance
that show that all the suppliers who contributed to a
composite part were certified, which relates to organiza-
tions’ digital identities. On the other hand – and arguably
even more complicated – there are quantitative proofs
of provenance, for instance, to demonstrate that a busi-
ness only uses ethically sourced precious metals or green
energy for a specific product. This topic is increasingly
relevant in the context of regulation like the novel Euro-
pean supply chain law, which was, for instance, recently
followed by the German Supply Chain Act (German
Federal Government, 2021), and the increasing demand
for holistically tracking carbon emissions that a specific
product has caused across its supply chain (Sundara-
kani etal., 2010). Research has already suggested to
use blockchain technology to monitor resource usage
in production and logistics (Manupati etal., 2019), and
representing resources by tokens seems to be a viable
approach to prevent double-usage. However, in both
cases, stakeholders will see a lot of information about
other entities and their actions in the supply chain who
are not their direct business partners.
b) Encryption and hashing only helps in limited scenarios
Many blockchain projects have decided to mitigate
privacy issues by putting the data on a blockchain only
in encrypted or hashed form. By this method, consen-
sus can be found on obfuscated data that can still be
used to prove the integrity of the original data with-
out the need to replicate it directly on the blockchain
(Schellinger etal., 2021). Yet, it is also risky to publish
specifically encrypted data on a blockchain: While con-
ventional software and databases can regularly update
their encryption algorithms to keep up with new devel-
opments and threat scenarios and also periodically
re-encrypt it with a new, more secure algorithm, the
immutability of a blockchain’s ledger implies that his-
toric encrypted data is exposed to all nodes without such
modifications. Consequently, blockchains may pose a
tempting target for future decryption attacks with brute
force (Xu etal., 2021) or quantum computers (Lindsay,
2020). Even hashed identity information on a blockchain
can be problematic, specifically if referred to repeatedly
(Finck, 2018; Marx etal., 2018).
Both encryption and hashing also make data largely
useless as inputs for smart contracts since checking

The transparency challenge ofblockchain inorganizations
1 3
conditions or performing other computations typically
conducted by smart contracts is generally not possible
on obfuscated data.2 To utilize the proclaimed benefits
of smart contracts, the code itself, input, and output
data need to be accessible to the other blockchain nodes
(Kannengiesser etal., 2021). For instance, looking at the
use case patterns of payment and cross-organizational
workflows, the approach to handle business logic such as
conditional payments or auctions using smart contracts
implies that the data that underlies these operations
(e.g., the variables on which conditional checks are per-
formed, or ownership relationships) need to be available
on-chain because otherwise, the nodes cannot validate
a new transaction by computing its impact on the world
state and cannot update their local ledger accordingly.
However, this data sharing with other nodes by default
may not be in the interest of a party writing the code or
holding the input data (Platt etal., 2021). Thus, while
tamper-resistant documentation can be achieved with-
out major privacy challenges and trade-offs, it is unclear
how coordinating or automating processes that require
the provision of multiple parties’ inputs in smart con-
tracts should be achieved without excessive transpar-
ency.
c) The fundamental tradeoff between restricted visibility
and efficiency
This dilemma inhibits many use cases in which the
information that is necessary to automate processes
on a blockchain may not be revealed to other parties
for corporate secret (need to know) or antitrust regula-
tion reasons. It also makes businesses such as suppliers
whose business model is based on information asym-
metries reluctant to join a blockchain-based platform
that would reveal their business relationships and pro-
cesses to upstream and downstream entities and com-
petitors. This issue is particularly unfortunate since the
collaboration between many potentially competing busi-
nesses on a neutral platform was thought to be one of
the areas where blockchain technology has the highest
economic potential. While reducing information asym-
metries can be beneficial, revealing potentially sensitive
business and customer information to competitors and
other third parties is often so problematic that it inhibits
uploading business-related data to a blockchain entirely.
Compared to other often-mentioned challenges of
blockchain diffusion, there is also an interesting abstract
argument why the transparency challenge seemsfunda-
mental: issues such as integration with legacy systems,
governance, or performance canarguably be solved
incrementally by gradually increasing the scope of pro-
cesses and the number of participants in the system, by
optimizing protocols and code, or by improving compute
power and bandwidth over time (Sedlmeir etal., 2021a).
In contrast, datashared on a blockchain have another
quality: either a piece of information is written to the
blockchain and therefore available to the other nodes, or
it is not. Beyond a few special cases of statistical infor-
mation disclosure techniques such as differential privacy
in big data (Dwork, 2006), it seems an open question
how data can be made incrementally less sensitive while
at the same time being useful as inputs of a smart con-
tract that, for instance, conducts a conditional check.
Thus, we observe a seemingly fundamental trade-off
between efficiency gains and excessive data visibility
issues (see Fig.1). A focus on the operation of business
logic and the automation of processes via smart con-
tracts requires storing related input and output data for
the smart contract on-chain, which causes issues with
the compliant handling of sensitive data. On the other
hand, reducing the amount of information that is avail-
able on-chain means that there is less information to
use in smart contracts and thus reduced utility from the
blockchain. This main privacy challenge can be regarded
as an economically oriented version of the trade-off
One of blockchains‘ core
characteristicsis replicated
storage and execution.
Data stored on-chain (e.g.,
inputs and outputsofa smart
contract) are visible to all
other blockchain nodes.
If data are stored off-chain, then smart
contractscannotaccess the data and
the scope of efficiency increaseas
promised by blockchainsisreduced.
If data are stored on-chain, then
in many applications this means
excessive visibility.
Fig. 1 The core argument why there is a transparency challenge for blockchains
2 We do not discuss homomorphic encryption(HE) here because at
the moment, we consider it too specific (partial HE) or too computa-
tionally intensive (fully HE) to be practical on blockchains as of today
beyond a few special cases.

J.Sedlmeir et al.
1 3
Turing-complete smart contracts versus data confiden-
tiality as presented in Kannengießer etal. (2020), and
has been acknowledged – albeit often with less emphasis
– by many research articles on blockchain technology
(e.g., Toufaily etal., 2021).
Solution approaches
In this Section, we illustrate three approaches – permis-
sioned blockchains, self-sovereign identities for individuals
and organizations, and verifiable computation focusing on
zero-knowledge proofs – that can help avoid excessive infor-
mation exposure on blockchains.
Permissioned blockchains
One natural reaction of businesses to challenges relating to
public permissionless blockchains, which besides excessive
data visibility include low throughput, relatively high con-
firmation latencies, and high and often volatile transaction
costs (Sedlmeir etal., 2022), is moving to private permis-
sioned blockchains that restrict read access and participation
in consensus and therefore provide better control of infor-
mation exposure. This approach has, therefore, often been
advised as a satisfactory solution to privacy issues (e.g. see
Lacity & Van Hoek, 2021). However, permissioned block-
chains can only partially mitigate the fundamental transpar-
ency challenge since exposing sensitive information only to
a few other stakeholders can still be an inhibiting problem.
For instance, Trade-Lens even levers multiple blockchains
(channels) to separate the large and competing shipment car-
riers from one another and to avoid that a large carrier can
count the events associated with another carrier and learn
about how its business is going. Nonetheless, within one
channel, there are still many potentially competing stake-
holders such as ports and logistics service providers, and
information that is sensitive from the perspective of clients
– such as the Bill of Lading – needs to be stored off-chain
(Jensen etal., 2019). Thus, for instance, the information reg-
istered in the Bill of Lading cannot be used for managing
escrows or market activity on the blockchain-based solution.
To further mitigate the negative consequences of exces-
sive transparency, popular permissioned blockchains such as
Hyperledger Fabric and Quorum support private transactions
(Consensys/GoQuorum, 2021; Guggenberger etal., 2021).
In these private transactions, hashed or encrypted data are
distributed to all nodes, and only selected nodes specified on
the smart contract or transaction level perform the execution
based on the original data that they can request through a
peer-to-peer messaging layer or read from the blockchain and
decrypt. Similar approaches can be made on permissionless
blockchains by specifying that for valid updates to a smart
contract state, only the signatures of selected parties on the
updated state or a commitment onto it are required. Involving
all parties affected by a specific transaction reduces infor-
mation exposure without a trade-off in trust. However, the
restricted access to information on-chain again implies that
a smart contract can only offer considerably less functional-
ity or that another communication layer needs to be added
to distribute the underlying data between the involved enti-
ties. For instance, if a blockchain is meant to be used for the
traceability of components in the automotive supply chain
such that all cars containing one part from a problematic
delivery of a Tier n supplier can be determined, this means
that all information about the fabrication of sub-components
and their provenance needs to be visible at least upstream.
Since information asymmetries in supply chains are essential
for most suppliers’ business models, it is not surprising that
blockchains have a tough time in such use cases where the
splitting and merging of components along the supply chain
are more complex than tracking the route of a container or
a charge of largely unprocessed groceries or products, as in
IBM’s seemingly successful Food Trust (Kamath, 2018).
Essentially, the core transparency challenge hence remains
also in the private permissioned setting: the more utility
smart contracts are supposed to offer, the more daunting the
challenges related to the disclosure of sensitive information.
Besides, switching to a permissioned blockchain also comes
at additional disadvantages, as setting up and maintaining nodes
for a domain-specific permissioned ledger requires skilled
employees, much coordination effort, and a sophisticated
governance mechanism that enterprises need to invest in.
Moreover, different permissioned blockchains are difficult to
connect, so using many fragmented permissioned blockchains
can substantially decrease the network effects that proponents
of blockchain technology have expected (Brody, 2019).
Indeed, the results of a recent study by Toufaily etal. (2021)
indicate that organizations tend to switch from permissioned
to permissionless blockchains. Consequently, permissioned
blockchains are not a general solution to the transparency
challenge.
Digital identities
a) Self-sovereign identities for individuals
As previously discussed, the replicated storage of
personal information does not comply with privacy
regulation like the GDPR and hence makes storing
digital identity information directly on a blockchain
practically impossible for organizations. Fortunately, the
immutability of identity-related information as one of the
core value propositions expected from blockchains can be
provided in many cases by third parties’ digital signatures
(Sedlmeir etal., 2021b). For instance, federal printers that
issue digital ID cards or universities that provide digital

The transparency challenge ofblockchain inorganizations
1 3
diplomas are typically trusted in their specific, limited
domain. Immutability alone is also often not sufficient
for identity documents, because also the authenticity
of the information at the time of writing is relevant; for
instance, that a Covid-19 vaccination credential was issued
by a certified doctor (Rieger etal., 2021). On this basis,
many projects that focus on privacy and user-oriented
identity management or the bilateral exchange ofverifiable
information don’t use a blockchain for the storage of
identity-related information or hashes thereof. Rather, they
only involve a distributed ledger as a substitute for specific,
ecosystem-related services that have so far been provided
by certificate authorities and that involve information that
is meant to be public (Schlatt etal., 2021). Early examples
of this approach are Canada’s Verifiable Organizations
Network and Germany’s IDunion consortium. This
decentralized or self-sovereign identity (SSI) paradigm
was largely motivated by the digital wallets that became
popular through blockchains and is also often affiliated
with blockchains (Čučko & Turkanovic, 2021; Soltani
etal., 2021). In this sense, despite the high sensitivity of
involved personal data, digital identities may be one of
the few blockchain application patterns with no significant
privacy challenges because the main data exchange
happens in bilateral communication in the form of digital
certificates, and the blockchain only provides a tamper-
resistant ledger for public data such as issuers’ signing
keys and implementing technical governance mechanisms.
The availability of digital and verifiable data for
users and institutions is not only a promising applica-
tion of blockchain that does not exhibit privacy issues
to the extent of other patterns, but also allows one to
transfer information and corresponding existing real-
world trust frameworks to blockchains in a verifiable
way. Many business-related use cases will require the
feed-in of verifiable off-chain data, such as a proof of
legal age or of accomplished tax payments, in the future.
Another application area is the verifiability of sensor
data utilizing a certificate that confirms the sensor’s
provenance and proper calibration. Here, digital iden-
tity management may offer an alternative approach to
oracles (Caldarelli, 2020) and replace truth discovery
mechanisms through the verifiability of cryptographic
proofs of provenance. Moreover, this also provides the
opportunity to selectively disclose information from a
larger, verifiable dataset: The privacy capabilities used
in many SSI implementations for the selective disclo-
sure of attributes can even provide the data minimiza-
tion or anonymization required for natural persons to
directly interact with smart contracts while complying
with regulation (Platt etal., 2021). Thus, approaches to
decentralized identity management where blockchain
technology only plays a moderate role can likely become
the key building block in many applications that were
thought to be a core blockchain case but may also help
to connect blockchains with real-world identity and trust
frameworks, extending their capabilities.
b) Self-sovereign identities for organizations
The availability of digital identities for organizations
also enables efficient cross-organizational identifica-
tion and, thus, authenticated bilateral data exchange.
This may improve the exchange of both master data and
dynamic data between enterprises (Hyperledger-Labs,
2021). Based on such solutions, organizations can man-
age other organizations’ permissions in a fine-grained
way, facilitating an access management for bilateral
(non-blockchain based) operational data exchange that
satisfies data sovereignty and interoperability require-
ments. For this reason, digital identities for organiza-
tions will likely play an important role in the European
cloud initiative GAIA-X.
The bilateral exchange of authentic information
between organizations should be considered as a pre-
requisite for blockchains rather than a consequence: it
allows stakeholders to communicate sensitive data that
are not suitable to store on a blockchain but that may be
necessary to make sense of otherwise obfuscated, block-
chain-based transactions and events (e.g., in the form of
hashes). Once there is a solid foundation for bilateral
communication, data related to relevant processes or the
need to interact with other stake-holders can selectively
be taken to higher transparency so as to add further util-
ity. An all-or-nothing approach can hardly be regarded as
suitable in a system in which the degree of transparency
needs to be well-balanced. Moreover, the anonymization
and selective disclosure features of SSI could also help
organizations coordinate workflows on-chain without
leaving a trace of sensitive information.
The situation that current SSI initiatives lever
cryptographic methods such as public key cryptography
that is also incorporated in blockchains and that require
sophisticated cryptographic key management, and
that most of them even build on a blockchain instead
of certificate authorities, may also allow enterprises to
become familiar with technical and organizational best
practices for wallet usability and the development and
governance of decentralized applications in production.
Further, if designed as discussed, the use cases of digital
identities on the one side and payment and tokenization
on the other side may be complementary: Blockchain
technology’s supposed initial core value proposition
was the transfer of value in the form of cryptocurrencies
or tokens across multiple stakeholders without an
intermediary. This transfer of value cannot be solved by
the digital certificates employed in SSI, since they can
be copied and used repeatedly. On the other hand, digital

J.Sedlmeir et al.
1 3
certificates allow stakeholders to exchange verifiable
data bilaterally and, thus, avoid the storage of sensitive
information on a blockchain. Yet, while SSI can provide
an additional, standardized information exchange
layer without intrinsic transparency issues and allows
persons and entities to selectively and verifiably reveal
authorizations and attributes as attested by third parties
also on-chain, many limitations do not make it a general
solution for the transparency challenge. For instance,
SSI cannot help in many scenarios where a third-party
attestation is not available or – as common in blockchain
applications – not trusted by all relevant stakeholders.
Verifiable computation
a) Validation is possible without full knowledge
In many use cases, blockchain nodes only need to
know selective information about what is being pro-
cessed in payments or smart contract operations to
verify a transaction’s validity. A simple example of a
cross-organizational workflow management case is
a logistics supply chain in which transactions should
be visible to only a small subset of nodes or clients.
This can be achieved, for instance, through attribute-
based encryption that offers a convenient way to allow
decryption only to a specific subset of participants on
the blockchain, based on their digital identities (Bader
etal., 2021). In permissioned blockchains, the previ-
ously discussed private transactions provide similar fea-
tures. However, if a transaction changes a variable that
may affect manyother parties, pure visibility restriction
through encryption-based access control becomes less
useful, and more complex privacy-enhancing technolo-
gies need to be applied. For instance, in a simple pay-
ment, if entity B wants to receive a payment from entity
A, entity B needs to be able to verify that it received the
intended amount, while all other stakeholders indirectly
affected by this transfer (i.e., owners of units of the same
kind of tokens) only need to be sure that entity A’s bal-
ance is high enough to cover the transaction and that
the total supply of token units is unchanged, since oth-
erwise, the value of their own assets may decrease as a
result. The transaction amount and A’s and B’s identities
are likelyirrelevant to the other stakeholders (excluding
the regulator in this simple example).
Similar patterns are present in industry, where stake-
holders or regulators want to be convinced that business
partners comply with specific rules, while many other
details are not relevant. A thriving cross-organizational
workflow example from supply chain management is
MediLedger, where pharmaceutical businesses (and
ultimately, the regulator) require a proof that a delivery
of medicals is authentic. If the sender can convince all
blockchain nodes that this is the case, no further infor-
mation is needed (Mattke etal., 2019). For proving
the invariance of a global variable (e.g., the number of
authentic medicals) under a transaction, it is sufficient to
prove local invariance in a transaction that only changes
local states. Consequently, a company that records all
the transactions it was involved in could demonstrate
to an auditor that more units of a specific good were
not sold than previously received at any time. Yet, as
there is typically no auditor that all participants on the
blockchain trust, SSI is not a viable solution, and purely
cryptographic technologies are often used in this con-
text.
b) Zero-knowledge proofs
One approach that has matured significantly over
the last years are zero-knowledge proofs (ZKPs). ZKPs
allow a prover to convince a verifier of the knowledge of
data with specific properties (Goldwasser etal., 1989).
One example could be that the prover proves to the veri-
fier that he or she knows the solution to a Sudoku puzzle,
without revealing any information that would make it
easier for the verifier to solve the Sudoku puzzle him−/
herself. A frequent type of proof that is relevant in the
context of blockchains is a proof of knowledge of a pre-
image of a hash (where the hash is public but the pre-
image remains private), and a proof of knowledge of
a digital signature that authorizes a transaction. More
generally, ZKPs can be used to prove that some public
data – which could itself be a hash – is the correct result
of the execution of an algorithm on private data, with-
out revealing any additional information (Ben-Sasson
etal., 2014). ZKPs hence allow to replace the replicated
execution of a transaction to ensure its integrity by the
replicated execution of a proof verification algorithm
that attests to the correctness of the result that was
computed only by one entity. ZKPs can thus decouple
the verifiability of data from their on-chain visibility
(Platt etal., 2021). In the cryptocurrency Zcash, fully
private (shielded) transactions are implemented with
ZKPs (Ben-Sasson etal., 2014); and since ZKPs have
also been used in many other blockchain-related pro-
jects to address data visibility challenges. For example,
MediLedger took large parts of the Zcash implemen-
tation and adapted the codebase to prove the authen-
ticity of pharmaceuticals (Mattke etal., 2019). Thus,
ZKPs can mitigate issues related to the confidentiality
versus integrity trade-off discussed by Kannengießer
etal., 2020 because they enable the replicated verifi-
cation of transactions and, thus, trust in their integrity
despite not disclosing sensitive information. Generally,
it may not be a coincidence that the early adoption of
new cryptographic technologies that were previously
successfully tested in a cryptocurrency may be adopted

The transparency challenge ofblockchain inorganizations
1 3
by businesses that pursue blockchain activitieswithout
requiring exceptionally high R&D expenditures.
c) Further verifiable computation technologies
However, caution is required: First, the practical adop-
tion of ZKPs is still in its infancy and has limitations.
To date, levering ZKP causes additional complexity and
requires experts from cryptography to translate business
logic into corresponding code. While the proof verifica-
tion conducted by every node is typically succinct, i.e., it
requires very little computational resources, the prover
still needs to provide expensive hardware (Bootle etal.,
2020). Second, ZKPs’ scope is naturally limited because
the prover locally needs all the information to perform
the original computation and to derive the associated
proof. Thus, ZKPs cannot be used generically for pri-
vacy in smart contracts if their execution is supposed to
compute on or modify private data from multiple enti-
ties, so other techniques are needed (Buterin, 2014).
One approach is to use trusted execution environments
(TEEs) like Intel’s Software Guard Extensions (SGX),
which ensures transactions can only be decrypted within
a secure domain within the CPU and generates attesta-
tions for the computation’s correctness. This approach
is already quite flexible and offers good performance.
However, in the past, researchers have frequently found
vulnerabilities of TEEs; and there is a single point of
failure (the manufacturer of the TEE), which can be par-
ticularly problematic for blockchains not only in terms
of trust but also considering lock-in effects. For example,
several projects that aim to establish privacy in block-
chains based on SGX (Bao etal., 2020), but recently,
Intel announced that they would not integrate SGX in
their new generation of CPUs (Pezzone, 2022). A pop-
ular trustless cryptographic alternative is multi-party
computation (MPC) which allows the joint evaluation
of a function of many variables, where each party only
knows their private variables and learns the result. MPC
has also been intensively researched but to date still
seems challenging from a complexity and performance
perspective to adopt in general settings (Šimuníc etal.,
2021), specifically if they need to be complemented,
for instance, by ZKPs to prove the result’s correctness
on-chain. Nonetheless, there have been some promising
explorations in selected blockchain applications already.
Thus, among the privacy-enhancing cryptographic
technologies at hand, verifiable computation with ZKPs
is often regarded as the currently most mature technol-
ogy to offer solutions to blockchains’ privacy challenges.
The Ethereum ecosystem has been particularly innova-
tive, and related projects should be closely observed by
enterprises that wish to be at the forefront of integrat-
ing innovative solutions. As the research progresses, in
the long run, all the aforementioned privacy-enhancing
technologies may contribute (and be required) to solve
the trade-off between privacy and efficiency in smart
contracts.
Summary
In sum, we found three main approaches to how organiza-
tional blockchain solutions can address the transparency
challenge, which we represent in Fig.2. In our view, all
three alternatives are valuable in practice. While the first
and second options seem quite easy to implement, they also
have a relatively restricted scope. On the other hand, the
third approach is still very complex to implement today, and
there is not yet a generic solution that allows organizations to
integrate verifiable computation as easily as other software
Process dataoff-chain with
privacy-enhancingtechnologies
and provide proofs of computa-
tional integrityon-chain.
Exchange sensitive information
off-chain with digital wallets
and coordinate workflows
on-chain.
Limit visibility (and scope) by
restricting participation on the
blockchain to selected entities.
Fig. 2 Main approaches to address the transparency challenge

J.Sedlmeir et al.
1 3
components. From a more abstract perspective, we learn that
– while consensus provides the backbone for stakeholders’
trust in blockchains – the replication of the underlying sensi-
tive information on all nodes is often more related to avail-
ability guarantees. Permissioned blockchains and, within
them, specifically private transactions, can customize the
entities that need to agree for consensus on the validity and
implications of a transaction, and verifiable computation can
allow for a separation between consensus on the correctness
of the transaction and the underlying transaction data.
Conclusion
Initially, blockchain technology was regarded as a promising
and disruptive solution beyond the financial sector, aiming
at facilitating the digitalization in business networks where
multiple potentially competing stakeholders need to operate
on a joint digital infrastructure and streamline workflows
(e.g. Alt, 2020; Frizzo-Barker etal., 2020). While public
blockchains in cryptocurrencies and the rich ecosystem of
smart contract-based solutions in DeFi have already been
remarkably successful, large-scale blockchain applications
in industry and the public sector are still rare. We consider
the privacy challenge a considerable reason for this. Block-
chains’ inherent degree of transparency often conflicts with
corporate confidentiality policies and data protection regu-
lation. Mitigating these privacy issues by moving data off-
the-chain comes with reduced functionality and increased
complexity since smart contracts can generally only operate
on availabledata to all parties affected by their implications.
Cryptographic solutions that address those main challenges
are not one-size-fits-all and are often not yet practical or
come with significantly increased complexity. This trade-
off can be difficult to detect in an initially successful, often
internal proof-of-concept that has disregarded privacy issues
but becomes painfully apparent when scaling the use case to
more business partners.
Consequently, the use of smart contracts – while appeal-
ing from a functional perspective – must be carefully con-
sidered owing to the trade-off between increased efficiency
on the one hand and confidentiality issues on the other.
Opportunities and risks associated with moving from a
permissionless to a permissioned blockchain must also be
pondered since permissioned blockchains can only partially
address privacy challenges while at the same time carrying
disadvantages in terms of additional efforts and a lack of
interoperability with other blockchain-based projects. The
need for increased global transparency may be the exception
rather than the default for organizations, being desirable only
where it complies with regulation or if its value outweighs
the negative implications of revealing potentially compe-
tition-relevant information. Thus, we emphasize the need
for a base layer for trustworthy and verifiable information
exchange. Decentralized digital identities can help with this
in two crucial ways: First, they can facilitate users’ or smart
devices’ direct interaction with a smart contract through
selective disclosure and make real-world trust frameworks
available for the verification on blockchain solutions, which
also provides verifiable data for a blockchain to address the
Oracle problem. Second, building on standardized, cross-
organizational identity management for businesses and
institutions allows one to implement fine-grained yet effi-
cient authentication and authorization policies and, there-
fore, to move the trustworthy exchange of sensitive data to
another layer. Blockchains can become a beneficial tool in
particular cases where bilateral data exchange needs to be
supplemented by multi-stakeholder coordination, transpar-
ency, or auditability. Thus, SSI can play a central role in
enabling blockchain adoption and its diffusion into practice.
Ultimately, privacy-enhancing and verifiable computation
technologies such as ZKPs that allow one to selectively
disclose properties of transactions or processes while keep-
ing data private could becomeil a keybuilding block of
many blockchain applications, and we recommend closely
following the progress made in DeFi in these areas and to
adopt mature approaches and implementation frameworks
in organizations.
The present discourse reflects the multidisciplinarity
that characterizes research into blockchain adoption in
practice. There are multiple challenges and opportunities,
and studying them provides many avenues for future IS
research. Scholars and practitioners in the field need to be
aware of developments in privacy-enhancing technologies
in cryptography and assess new solutions’ legal foundations
and their compliance with antitrust and data protection
regulations. The GDPR was often criticized as an inhibitor
to innovation by the blockchain community. Yet, the case
of identity management may suggest that strict privacy
regulationmay not only reflect practical requirements
regarding the processing of sensitive information but can
even contribute to finding a more appropriate technical
role for blockchain in applications than initially foreseen.
Nonetheless, the business perspective will ultimately
decide which projects potential savings and new business
opportunities justify investments in R&D and complex
implementations. Deciding where to use centralized and
decentralized components and how to complement them with
privacy-enhancing technologies hence seems considerably
more complex than what the early blockchain decision trees
(e.g., Pedersen etal., 2019; Wüst & Gervais, 2018) have
suggested; and designing guidelines is a promising avenue
for IS researchers. In our view, blockchain research that
considers technical, legal, and economic aspects is needed
now more than ever, and there are rich opportunities for
future work on blockchain diffusion.

The transparency challenge ofblockchain inorganizations
1 3
Acknowledgements We gratefully acknowledge the Luxembourg
National Research Fund (FNR) and PayPal for their support of the
PEARL Project P17/IS/13342933/PayPal-FNR/Chair in DFS/
Gilbert Fridgen and the Bavarian Ministry of Economic Affairs,
RegionalDevelopment and Energy for their funding of the project
Fraunhofer Blockchain Center (20-3066-2-6-14) that made thispaper
possible. We also thank the editor and the anonymous reviewers for
their highly valuable and constructive feedback.
Funding Open Access funding enabled and organized by Projekt
DEAL.
Declarations
Conflict of interest The authors declare that they have no conflict of
interest.
Open Access This article is licensed under a Creative Commons Attri-
bution 4.0 International License, which permits use, sharing, adapta-
tion, distribution and reproduction in any medium or format, as long
as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons licence, and indicate if changes
were made. The images or other third party material in this article are
included in the article's Creative Commons licence, unless indicated
otherwise in a credit line to the material. If material is not included in
the article's Creative Commons licence and your intended use is not
permitted by statutory regulation or exceeds the permitted use, you will
need to obtain permission directly from the copyright holder. To view a
copy of this licence, visit http:// creat iveco mmons. org/ licen ses/ by/4. 0/.
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