Data Security and Privacy Protection in Distributed Digital Economy: Economic Impacts and Governance Mechanisms

INTRODUCTION:The distributed digital economy, characterized by decentralization and cross-entity data flow, improves factor allocation efficiency but increasingly raises concerns over data security and privacy abuse. OBJECTIVES: Unlike the conventional digital economy, which often centers on centralized platforms (e.g., e-commerce, cloud computing), the distributed digital economy in this paper specifically refers to an economic system where data—as a production factor—is stored, computed, and circulated across multiple independent nodes without a central coordinating authority, relying on technologies such as blockchain, distributed ledger, edge computing, and peer-to-peer networks. Its core governance features include decentralized data control, consensus-based verification, and peer-to-peer economic activities. METHODS: This paper studies data security and privacy protection in the distributed digital economy from two aspects: economic impact and governance mechanism. Based on panel data from 30 provinces in China from 2018 to 2023, this paper uses the entropy weight-TOPSIS method, a two-way fixed effects model, a mediation effect model, and a spatiotemporal heterogeneity model to empirically test the economic impact and transmission mechanism of data security and privacy protection on the distributed digital economy. RESULTS: The empirical analysis results show that the level of data security and privacy protection significantly and positively promotes the development of the distributed digital economy, with each unit increase leading to a 0.412 unit increase in the development index. Blockchain smart contracts, privacy computing standards, and cross-border data flow rules play significant mediating roles, accounting for 93.7% of the total mediating effect. This positive economic effect exhibits significant spatiotemporal differences, increasing year by year, and is significantly higher in the eastern region than in the central and western regions. CONCLUSION: Based on empirical analysis results, optimization paths are proposed from four levels: collaborative governance, technology empowerment, regional balance, and institutional improvement, in order to improve the level of data security and privacy protection in the distributed digital economy.