Implementing data minimization—collecting and storing only the data absolutely necessary for blockchain operations—is a fundamental practice to enhance privacy and comply with data protection regulations. This approach reduces the risk of exposing sensitive information and aligns with principles such as GDPR, which mandates that personal data collection be limited to what is necessary for specified purposes. In the context of blockchain technology, data minimization can be achieved by refraining from directly storing personally identifiable information (PII) on-chain and instead utilizing off-chain storage solutions or privacy-enhancing techniques like encryption or pseudonymization. Such strategies ensure that the blockchain maintains its integrity and functionality without compromising individual privacy. For instance, a survey on data minimization techniques in blockchain-based healthcare systems emphasizes the importance of limiting data collection to essential information to protect patient privacy while maintaining operational efficiency. By adhering to data minimization principles, blockchain applications can achieve a balance between transparency and confidentiality, fostering trust among users and stakeholders.

https://www.sciencedirect.com/science/article/pii/S1389128622000044?via%3Dihub