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This is The Web3 + AI Newsletter, your definitive guide to the world of Decentralized AI (DeAI/dAI)! As we're approaching the time of year when the news cycle is getting quieter and everyone starts sharing their annual retrospective, I'm excited to shed some light on a rather hot topic: privacy.
Crypto is finally experiencing a privacy renaissance - a return to its cypherpunk roots. Over the past few months alone, the price of Zcash, a privacy-protecting digital currency, grew by over 600%, Ethereum Foundation made a major commitment to improving privacy across the Ethereum ecosystem, and privacy-focused projects like Zama and Aztec announced token launches.
In a series of articles, I'll go through all you need to know about the state of privacy tech in crypto and how it may affect Web3 + AI. Today, I'll answer two burning questions: why privacy and why now, along with breaking down Ethereum's strategy for supercharging confidentiality.
As many of you know, blockchains come with inherent transparency. Each transaction, smart contract and wallet balance are open for everyone on the Internet to see. While this feature has been quite useful historically, even indispensable, it's becoming a liability for an industry striving to attract legacy financial actors and capital. Here's what I mean exactly.
Public blockchains expose data because public verifiability require it. Blockchains create a transparent, tamper-proof record that's constantly validated by network nodes, enabling instant, reliable checks to ensure data integrity and fraud prevention. To make that possible, anyone willing to verify needs to be able to recompute the state of the chain. Additionally, when early blockchain protocols were created, the technology to keep data private while still allowing public verification simply didn’t exist.
However, personal and corporate finances are a delicate piece of information that few of us would voluntarily share with the world. For an industry fighting to offer a viable alternative to the traditional financial system, a lack of privacy is simply pernicious.
The crypto industry needs fresh influx of capital to grow and develop. Up until recently, the lack of clear regulation and the threat of state prosecution kept big financial and banking institutions at bay. Now that major markets like the US and the EU started adoption clearer regulatory regimes, privacy emerges as the next frontier crypto has to cross.
What's more, now the stakes are higher — 2025 was a key year for real assets integration and institutional involvement in crypto. With crypto and TradFi getting ever more intertwined, privacy starts to play an even greater role.
The idea of introducing privacy to crypto isn't new - it's been a part of the space since its inception. In fact, early cypherpunks envisioned digital money as a tool for financial freedom and self-sovereignty, of one having ultimate control over one's wealth, data, and identity. Privacy-centered projects have been around for years - Zcash, for example, was founded in 2016. Yet, none of them has been backed by particularly strong demand by users.
The truth is, regular customers rarely care about privacy. Only when faced with the consequences of their personal data getting leaked or exposed do people start taking notice. And that is not specific to financial use cases, but concerns any digital service in existence.
In reality, demand emerges and norms quickly shift when the lack of privacy cause actual damages. One prominent example is messaging: none of us cared about our online communication being encrypted before witnessing major data leaks that sent people to prison. Then, tools like Telegram Messenger and Signal Messenger appeared and made people realize they can have privacy without compromising functionality or ease of use.
The same will happen with crypto.
In October, the Ethereum Foundation published a blog post with which it positioned privacy as a key principle for the future of the Ethereum ecosystem.
Ethereum was created to be the foundation of digital trust, one that is worthy of civilizational scale. For that trust to remain credible, privacy must be part of its core, the EF, along with dozens of Ethereum teams focused on privacy, are proud to support this cause.
The post defines privacy as “the freedom to choose what you share, when you share it, and who you share it with,” and formalizes Ethereum's strategy to achieve those. The goal? Turning privacy into a first-class property:
Privacy deserves to be a first-class property of the Ethereum ecosystem, and we are committed to working alongside the ecosystem to make that a reality for individuals and institutions alike.
Privacy is for everyone
Many privacy-focused crypto projects (~700+) already exist, as between 200 and 300 teams are building privacy on Ethereum on all layers of the stack. The long-standing PSE (Privacy Stewards of Ethereum) has developed 50+ open-source R&D privacy projects, including:
Semaphore: anonymous signaling.
MACI: private voting.
zkEmail, TLSNotary (zkTLS), and Anon Aadhaar (private ID/identity).
PSE started as a separate organization years ago, although it's always been supported by the EF. As part of EF's renewed efforts this year, PSE now focus exclusively on Ethereum and is led by Andy G..
The EF expands privacy efforts via a newly created Privacy Cluster, coordinated by cryptographer Igor Barinov. The cluster brings together 47 researchers, engineers, and cryptographers across the blockchain industry. New initiatives under the cluster include:
Private Reads & Writes: enabling private payments, votes, interactions on-chain without metadata leaks.
Private Proving: portable, efficient proofs to verify identity, eligibility, or assets without oversharing.
Private Identities / zkID: selective disclosure of identity data for on-chain use.
Privacy Experience (UX): improving usability, so privacy feels normal and accessible.
Kohaku: a privacy-preserving wallet and open-source SDK aimed at making strong cryptography usable by default.
Another key team within PSE and the cluster is the Institutional Privacy Task Force (IPTF), a multidisciplinary group to translate regulatory and operational needs of institutions into privacy specs and real-world use cases. IPTF is led by Oskar Thorén and functions in close collaboration with Ethereum's enterprise team.
Andy and Oscar commented that so many teams in the ecosystem are working on privacy, that it's now mainly a matter of adoption. Check out their conversation with Laura Shin to learn more.
In 6 to 12 months, Ethereum will have the private transaction problem solved for Layer-1 transactions.
As Vitalik Buterin emphasized during his Ethereum Roadmap talk at Devconnect, as useful as blockchains are, they're not good for privacy on their own. Gladly, they can be combined with other tech and gadgets to achieve privacy.
When people hear about privacy, the first thing they think about is protecting data on-chain, but the real picture is much bigger and complex. It may include protecting your data from RPC nodes you're getting your data from, network-level privacy, privacy for voting, privacy in DeFi, and more.
Accordingly, different technologies and tools will go into guaranteeing each one of these. What's more, given that the EF envisions privacy at every layer of the stack, including protocol, application, and institutional layer, it's to be expected that such a push will require many cryptography and hardware solutions working together. This slide from Vitalik's presentation speaks volumes.
What concrete privacy-preserving technologies I'm talking about? Zero-Knowledge Proofs (ZKPs), Multi-Party Computation (MPC), and Fully Homomorphic Encryption (FHE), to mention just the main ones. I'll dedicate the next article from this series to explaining each one in more detail, so stay tuned.
The building blocks for privacy on Ethereum are already in place. Now, the focus is on scaling and deploying them at ecosystem scale (developers, apps, institutions).
The Ethereum Foundation’s commitment to privacy rests on a simple principle: credible neutrality, security, and openness are much more valuable to humanity when paired with privacy.
With privacy becoming normal, Ethereum aims to unlock new use cases — private payments, identity verification, governance, enterprise adoption, while preserving trust, neutrality, and openness.
Thank you for reading! If you haven't done so yet, I invite you to subscribe to stay in the loop on the hottest dAI developments.
I'm looking forward to connecting with fellow Crypto x AI enthusiasts, so don't hesitate to reach out to me on social media.
Disclaimer: None of this should or could be considered financial advice. You should not take my words for granted, rather, do your own research (DYOR) and share your thoughts to create a fruitful discussion.
This is The Web3 + AI Newsletter, your definitive guide to the world of Decentralized AI (DeAI/dAI)! As we're approaching the time of year when the news cycle is getting quieter and everyone starts sharing their annual retrospective, I'm excited to shed some light on a rather hot topic: privacy.
Crypto is finally experiencing a privacy renaissance - a return to its cypherpunk roots. Over the past few months alone, the price of Zcash, a privacy-protecting digital currency, grew by over 600%, Ethereum Foundation made a major commitment to improving privacy across the Ethereum ecosystem, and privacy-focused projects like Zama and Aztec announced token launches.
In a series of articles, I'll go through all you need to know about the state of privacy tech in crypto and how it may affect Web3 + AI. Today, I'll answer two burning questions: why privacy and why now, along with breaking down Ethereum's strategy for supercharging confidentiality.
As many of you know, blockchains come with inherent transparency. Each transaction, smart contract and wallet balance are open for everyone on the Internet to see. While this feature has been quite useful historically, even indispensable, it's becoming a liability for an industry striving to attract legacy financial actors and capital. Here's what I mean exactly.
Public blockchains expose data because public verifiability require it. Blockchains create a transparent, tamper-proof record that's constantly validated by network nodes, enabling instant, reliable checks to ensure data integrity and fraud prevention. To make that possible, anyone willing to verify needs to be able to recompute the state of the chain. Additionally, when early blockchain protocols were created, the technology to keep data private while still allowing public verification simply didn’t exist.
However, personal and corporate finances are a delicate piece of information that few of us would voluntarily share with the world. For an industry fighting to offer a viable alternative to the traditional financial system, a lack of privacy is simply pernicious.
The crypto industry needs fresh influx of capital to grow and develop. Up until recently, the lack of clear regulation and the threat of state prosecution kept big financial and banking institutions at bay. Now that major markets like the US and the EU started adoption clearer regulatory regimes, privacy emerges as the next frontier crypto has to cross.
What's more, now the stakes are higher — 2025 was a key year for real assets integration and institutional involvement in crypto. With crypto and TradFi getting ever more intertwined, privacy starts to play an even greater role.
The idea of introducing privacy to crypto isn't new - it's been a part of the space since its inception. In fact, early cypherpunks envisioned digital money as a tool for financial freedom and self-sovereignty, of one having ultimate control over one's wealth, data, and identity. Privacy-centered projects have been around for years - Zcash, for example, was founded in 2016. Yet, none of them has been backed by particularly strong demand by users.
The truth is, regular customers rarely care about privacy. Only when faced with the consequences of their personal data getting leaked or exposed do people start taking notice. And that is not specific to financial use cases, but concerns any digital service in existence.
In reality, demand emerges and norms quickly shift when the lack of privacy cause actual damages. One prominent example is messaging: none of us cared about our online communication being encrypted before witnessing major data leaks that sent people to prison. Then, tools like Telegram Messenger and Signal Messenger appeared and made people realize they can have privacy without compromising functionality or ease of use.
The same will happen with crypto.
In October, the Ethereum Foundation published a blog post with which it positioned privacy as a key principle for the future of the Ethereum ecosystem.
Ethereum was created to be the foundation of digital trust, one that is worthy of civilizational scale. For that trust to remain credible, privacy must be part of its core, the EF, along with dozens of Ethereum teams focused on privacy, are proud to support this cause.
The post defines privacy as “the freedom to choose what you share, when you share it, and who you share it with,” and formalizes Ethereum's strategy to achieve those. The goal? Turning privacy into a first-class property:
Privacy deserves to be a first-class property of the Ethereum ecosystem, and we are committed to working alongside the ecosystem to make that a reality for individuals and institutions alike.
Privacy is for everyone
Many privacy-focused crypto projects (~700+) already exist, as between 200 and 300 teams are building privacy on Ethereum on all layers of the stack. The long-standing PSE (Privacy Stewards of Ethereum) has developed 50+ open-source R&D privacy projects, including:
Semaphore: anonymous signaling.
MACI: private voting.
zkEmail, TLSNotary (zkTLS), and Anon Aadhaar (private ID/identity).
PSE started as a separate organization years ago, although it's always been supported by the EF. As part of EF's renewed efforts this year, PSE now focus exclusively on Ethereum and is led by Andy G..
The EF expands privacy efforts via a newly created Privacy Cluster, coordinated by cryptographer Igor Barinov. The cluster brings together 47 researchers, engineers, and cryptographers across the blockchain industry. New initiatives under the cluster include:
Private Reads & Writes: enabling private payments, votes, interactions on-chain without metadata leaks.
Private Proving: portable, efficient proofs to verify identity, eligibility, or assets without oversharing.
Private Identities / zkID: selective disclosure of identity data for on-chain use.
Privacy Experience (UX): improving usability, so privacy feels normal and accessible.
Kohaku: a privacy-preserving wallet and open-source SDK aimed at making strong cryptography usable by default.
Another key team within PSE and the cluster is the Institutional Privacy Task Force (IPTF), a multidisciplinary group to translate regulatory and operational needs of institutions into privacy specs and real-world use cases. IPTF is led by Oskar Thorén and functions in close collaboration with Ethereum's enterprise team.
Andy and Oscar commented that so many teams in the ecosystem are working on privacy, that it's now mainly a matter of adoption. Check out their conversation with Laura Shin to learn more.
In 6 to 12 months, Ethereum will have the private transaction problem solved for Layer-1 transactions.
As Vitalik Buterin emphasized during his Ethereum Roadmap talk at Devconnect, as useful as blockchains are, they're not good for privacy on their own. Gladly, they can be combined with other tech and gadgets to achieve privacy.
When people hear about privacy, the first thing they think about is protecting data on-chain, but the real picture is much bigger and complex. It may include protecting your data from RPC nodes you're getting your data from, network-level privacy, privacy for voting, privacy in DeFi, and more.
Accordingly, different technologies and tools will go into guaranteeing each one of these. What's more, given that the EF envisions privacy at every layer of the stack, including protocol, application, and institutional layer, it's to be expected that such a push will require many cryptography and hardware solutions working together. This slide from Vitalik's presentation speaks volumes.
What concrete privacy-preserving technologies I'm talking about? Zero-Knowledge Proofs (ZKPs), Multi-Party Computation (MPC), and Fully Homomorphic Encryption (FHE), to mention just the main ones. I'll dedicate the next article from this series to explaining each one in more detail, so stay tuned.
The building blocks for privacy on Ethereum are already in place. Now, the focus is on scaling and deploying them at ecosystem scale (developers, apps, institutions).
The Ethereum Foundation’s commitment to privacy rests on a simple principle: credible neutrality, security, and openness are much more valuable to humanity when paired with privacy.
With privacy becoming normal, Ethereum aims to unlock new use cases — private payments, identity verification, governance, enterprise adoption, while preserving trust, neutrality, and openness.
Thank you for reading! If you haven't done so yet, I invite you to subscribe to stay in the loop on the hottest dAI developments.
I'm looking forward to connecting with fellow Crypto x AI enthusiasts, so don't hesitate to reach out to me on social media.
Disclaimer: None of this should or could be considered financial advice. You should not take my words for granted, rather, do your own research (DYOR) and share your thoughts to create a fruitful discussion.
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Albena Kostova-Nikolova
Albena Kostova-Nikolova
2 comments
Now that the news cycle is getting quieter, it's time to explore one of the hottest narratives in crypto at the moment, and how it may impact Web3 + AI. 🔐 Privacy is a big topic right now. In fact, crypto is finally experiencing a privacy renaissance - a return to its cypherpunk roots. Over the past few months alone, the price of @zcash grew by over 600%, @ethereumfndn made a major commitment to improving privacy across the Ethereum ecosystem, and privacy-focused projects like @zama and @aztecnetwork announced token launches. With today's article, I'm answering two burning question: why privacy and why now. I'm also breaking down Ethereum's privacy strategy 👇 https://paragraph.com/@web3plusai/privacy-ethereum
In the coming days and weeks, I plan to expand this privacy exploration into a series, examining the various privacy approaches and technologies and the main crypto projects working in the field. I'll make sure to shed light on private and verifiable AI, and on private machine-to-machine payments. So, keep an eye out, and be sure to subscribe to be among the first to receive updates 🫠