Original Title: Privacy Renaissance: Blockchain's Next Era

Original Author: Paul Veradittakit, Partner at Pantera Capital

Translation: Saoirse, Foresight News

Since the birth of Bitcoin, the core concept of the blockchain industry has always been rooted in "transparency" — an open and immutable ledger that anyone can view; its trust comes from "validation" rather than institutional reputation. It is this transparency that allows decentralized systems to function smoothly based on integrity and accountability mechanisms.

However, as blockchain technology has matured and its use cases have expanded, relying solely on "transparency" is no longer sufficient. A new reality is emerging: privacy protection is a key driver for blockchain going mainstream, and the demand for privacy is accelerating at the cultural, institutional, and technological levels. At Pantera Capital, we have believed in this view from the very beginning — as early as 2015, we invested in Zcash, one of the first projects to introduce privacy protection to an immutable ledger.

We believe that the industry is entering the era of the "Privacy Renaissance": an era that will deeply integrate the concept of open blockchain with the practical needs of global finance. Against this backdrop, privacy protocols built around the core principle of "confidentiality" (such as the upcoming Zama mainnet) are poised for development opportunities. Zama's Fully Homomorphic Encryption (FHE) technology is the "absolute fortress" driving blockchain towards mainstream applications and is capable of resisting the threats posed by quantum computing in the coming years. Blockchain applications are just one area where Zama's Fully Homomorphic Encryption technology can be deployed; this technology can also be extended to other verticals such as artificial intelligence (e.g., Zama's Concrete platform), cloud computing, and more.

Another notable investment target is StarkWare — the inventor of zk-STARKs zero-knowledge proof technology and the Validium solution, providing a "hybrid solution" for blockchain privacy and scalability. StarkWare's encryption technology also exhibits quantum resistance and focuses on blockchain application scenarios, especially with its latest release of the "S-Two Prover," further enhancing the technology's practicality.

Cultural Shift: From "Surveillance Fatigue" to "Digital Sovereignty"

Globally, there has been a fundamental shift in people's perception of data. Years of mass surveillance, algorithm tracking, and data breaches have made "privacy" one of the central cultural issues of the past decade. Today, users are gradually realizing that not only information and transaction records but even metadata can reveal intimate details such as personal identity, wealth, location, and relationships.

「Privacy Protection + User Ownership of Sensitive Data」 has become the new industry norm — a direction that Pantera Capital also sees as promising. For this reason, we have invested in projects such as Zama, StarkWare, Transcrypts, and World. As public awareness of privacy continues to rise, the blockchain industry must confront a fact: digital currency requires "confidentiality" rather than "full traceability." In this environment, privacy is no longer a niche demand but a key part of driving the development of "digital sovereignty."

Institutional Shift: Transparency Without Privacy Cannot Support Scalable Applications

More and more institutions are entering the blockchain ecosystem: banks, remittance platforms, payment processors, enterprises, and fintech companies are conducting pilots, preparing to handle real transaction volumes in tokenized assets, cross-border settlements, and multi-jurisdictional payment networks.

However, these institutions cannot operate on a "fully transparent public ledger" — corporate cash flows, supplier networks, foreign exchange risk exposure, contract terms, and customer transaction records must not be disclosed to competitors or the public. What enterprises need is "selective transparency with confidentiality," not "full exposure."

This is the foundation laid by early pioneer projects like Zcash. When Pantera Capital invested in Zcash in 2015, we realized that privacy is not merely an ideological preference but a necessary condition for actual economic activities. The core insight of Zcash is that privacy protection cannot be "retrofitted" into a system (especially when using zero-knowledge proof technology) but must be embedded in the protocol core — otherwise, subsequent use will become extremely difficult, fragile, and inefficient.

Zcash was launched in 2016 as a Bitcoin fork project, introducing zk-SNARKs technology, which can hide transaction details while ensuring complete transaction verifiability. In addition, the mixer protocol Tornado Cash is also a significant milestone in on-chain privacy development: as people seek ways to break the transaction linkability on public chains, the protocol has seen a significant amount of actual user activity.

Change in USD inflows to Tornado Cash pre- and post-sanctions (Data Source: TRM Labs)

However, Tornado Cash's model has a flaw: it emphasizes strong privacy protection but lacks a "selective disclosure mechanism," ultimately leading to high-profile legal actions by government agencies against it — despite the project being autonomously operated code, it was still forced to effectively pause. This outcome reaffirms a key lesson: privacy protection cannot come at the expense of "auditability" or a "compliance pathway."

This is also the core value of Zama's fully homomorphic encryption technology: fully homomorphic encryption supports direct computation on "encrypted data," while retaining the ability for "selective verification and disclosure of information"—a feature that protocols like Tornado Cash lack from the outset.

The importance of fully homomorphic encryption is evident from the positioning of tech giants: companies like Apple and Microsoft are investing resources in building fully homomorphic encryption frameworks. Their investment conveys a clear consensus: for consumers and institutions alike, "scalable, compliant, end-to-end encryption technology" is the future of digital privacy.

Privacy Needs are Accelerating

Data confirms this trend: privacy-focused cryptographic assets are gaining more attention from users and investors. However, the real shift is not being primarily driven by retail speculation but stems from the practical application scenario where "privacy and transparency must coexist":

• Cross-border payments are increasingly reliant on blockchain, but enterprises and banks cannot publicly disclose every payment path;

• RWAs need to keep "asset holdings" and "investor identities" confidential;

• In global supply chain finance, transaction parties need to verify events (such as shipping, invoicing, settlement) without revealing trade secrets;

• Enterprise transaction networks require a mode where "auditors and regulators can see, but the public cannot."

At the same time, retail users are becoming more dissatisfied with "high-surveillance public blockchains"—on these public blockchains, a simple tool can map transaction relationships. Today, "privacy protection" has become one of the core expectations of users for digital currencies.

In short, the market is gradually acknowledging a fact: blockchains that cannot provide confidentiality will face structural limitations in institutional-scale applications.

Canton, Zama, StarkWare, and the New Era of Privacy Architecture

As the era of privacy revival arrives, a new generation of protocols is emerging to meet institutional needs.

Take Canton Blockchain, for example, which highlights the growing demand from enterprises for "private transaction execution on a shared settlement layer." Such systems allow participants to conduct private transactions while benefiting from the advantages of "global state synchronization" and "shared infrastructure." Canton's development clearly illustrates that enterprises seek to derive value from blockchain while avoiding public exposure of business data.

However, the most revolutionary breakthrough in the field of private computing may come from Zama—it occupies a unique and more scalable position in the privacy technology stack. Zama is building a "confidential layer" based on fully homomorphic encryption (FHE), supporting direct computation on encrypted data. This means that the entire smart contract (including inputs, states, and outputs) can remain encrypted while still being verifiable on a public blockchain.

Unlike a "Privacy-First Layer1 Public Chain," Zama is compatible with the existing ecosystem (especially the Ethereum Virtual Machine EVM) — meaning developers and institutions do not need to migrate to a new chain, but simply need to integrate privacy features into their existing development environment.

Private smart contracts using Fully Homomorphic Encryption (FHE) (Source: Zama)

Zama's architecture represents the next evolution of blockchain privacy protection: no longer just hiding transactions but achieving "scalable private smart contracts." This will unlock new application scenarios — including private DeFi, encrypted order books, confidential real-world asset issuance, institutional-grade settlement processes, and secure multiparty business logic — with all scenarios not sacrificing decentralization and some applications expected to be implemented in the short term.

Currently, privacy assets are receiving more attention: institutions are actively evaluating privacy layer technology, developers are looking to achieve privacy computation without "off-chain system latency and complexity," and regulatory agencies are starting to establish frameworks to differentiate between "legitimate privacy tools" and "illegal obfuscation techniques."

Looking Ahead

The privacy narrative in the blockchain industry is no longer about the "opposition between transparency and confidentiality" but rather a realization that both are necessary conditions for the next era of DeFi. The combination of cultural attitudes, institutional needs, and breakthroughs in encryption technology is reshaping the evolution direction of the blockchain for the next decade.

Zcash has proven the necessity of privacy protection at the protocol level; protocols like Canton reflect institutional demand for a "confidential transaction network"; and Zama is building infrastructure that is expected to integrate these demands into a "cross-chain universal scalable privacy layer."

Pantera Capital's early investment in Zcash stemmed from a simple belief: privacy protection is not an "optional feature." Nearly a decade later, the relevance of this viewpoint has become even more apparent — from tokenized assets to cross-border payments to enterprise settlement, the key to the next wave of blockchain application implementation lies in achieving a "secure, seamless, private" technical experience.

As privacy protection becomes a core theme of this market cycle, protocols that can provide "practical, scalable, compliant privacy solutions" will define the industry's future landscape. Among them, Zama, as a leader with great potential and timeliness in the "privacy supercycle," is standing out.

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