Source: The Block
Original title: From Aztec to Zcash: The year 'pragmatic privacy' took root
Compiled and edited by: BitpushNews
Since Satoshi Nakamoto wrote the Bitcoin white paper, the privacy limitations of blockchain have become increasingly apparent. The cryptocurrency pioneer pointed out at the time that despite employing anonymity mechanisms, Bitcoin addresses could still be traced back to real-world identities.
For many years afterward, this "pseudo-anonymity" characteristic was always considered "acceptable," which kept most blockchain privacy projects on the margins for a long time.
However, this year has seen a renewed interest in blockchain privacy, with Zcash becoming one of the best-performing assets of the year, and the Ethereum Foundation launching several end-to-end crypto initiatives. The concept of "pragmatic privacy," which aims to balance personal privacy with compliance considerations, is also gaining traction.
Emerging privacy chain
2025 saw the launch of several new privacy-focused blockchains at different stages of development.
Perhaps the most noteworthy event was the launch of Aztec Network 's Ignition chain on its mainnet in November. This is not only because it is "the first fully decentralized L2 on Ethereum," with numerous innovations in consensus and ZK technology, but also because it overcame many obstacles since the project's inception in 2017.
Earlier this month, Ignition also raised 19,476 ETH (approximately $61 million) from 16,741 participants using a new “Continuous Clearing Auction” mechanism developed in collaboration with Uniswap Labs.
Nillion is another blockchain project that plans to launch mainnet in 2025. This so-called "blind computer" is designed to perform computations on encrypted data and has already been integrated with multiple networks, including Layer 1 Near and Layer 2 Arbitrum, to enhance application-layer privacy.
Namada, based on Cosmos , also launched its Layer 1 mainnet in June, focusing on "composable privacy" and supporting multiple blockchain ecosystems, including Bitcoin L2 (such as Lombard and Babylon), Ethereum, and Solana, through cross-chain bridges.
Miden, which has been under development since at least 2022, is preparing to launch mainnet next year. Even so, the project took a big step toward independence this year: it spun off from Polygon and raised $25 million to build the privacy-focused blockchain Edge .
Similarly, Umbra, a privacy protocol powered by Arcium, raised $154.9 million in its initial coin offering (ICO) on MetaDAO in October. Umbra plans to launch simultaneously with Arcium's mainnet alpha, becoming one of the first privacy protocols built on Solana using its infrastructure.
Horizen, one of the oldest crypto privacy projects, also underwent a major transformation this year: shutting down its proprietary Layer 1 and L2 incubators and relaunching as a Layer 3 privacy solution on the Base network, incubated by Coinbase.
Grayscale , which manages the ZEN token fund, has also filed a registration statement with the U.S. Securities and Exchange Commission (SEC) planning to convert its Grayscale Zcash Trust into the first ZEC ETF. Zcash, which launched the Zebra 3.1 upgrade, has been one of the best-performing tokens in the second half of this year.
Institutional Privacy Initiative
Coinbase has signaled multiple times this year that privacy is far from optional for Base. Earlier this year, the company announced the hiring of a development team from Iron Fish (a long-established PoW privacy project) to provide Base with "privacy-preserving primitives".
Circle, the largest stablecoin issuer in the United States, also made headlines by announcing that it is testing a privacy-preserving wrapper for USDC called USDCx on the Aleo testnet.
USDCx appears to be focused on "configurable compliance," designed to support enterprise-level use cases such as payroll management and e-commerce.
Meanwhile, Canton Network , backed by Goldman Sachs and BNY Mellon, and Nightfall, an Ethereum L2 blockchain incubated by EY, focus on enterprise blockchain solutions that require extremely high levels of confidentiality. Nightfall has already announced support for two blockchains: the Real-World Asset (RWA) network Plume and CELO.
The Ethereum Foundation launched several privacy initiatives this year, marking the shift of the topic from a niche research area to a core concern for Ethereum developers. In October, the Foundation formed the so-called "Privacy Cluster," a dedicated team of dozens of engineers aimed at solidifying its privacy efforts, including a roadmap for achieving native end-to-end encryption. The Foundation also launched the "Institutional Privacy Working Group," designed to guide institutions and enterprises into Ethereum.
Vitalik's Vitalik Buterin also launched Kohaku, an open-source privacy-centralized wallet framework designed to foster "default and compliant" privacy features.
Practical Privacy
The concept of "practical privacy" is perhaps most thoroughly embodied at the application layer. This year, 0xbow launched Privacy Pools , a tool that allows ordinary blockchain users to erase transaction records without getting into legal trouble.
Privacy Pools, based on research on "association lists" published by Buterin and several other senior cryptographers, aims to prevent malicious actors from profiting from crypto mixers. The 0xbow team recently raised $3.5 million in seed funding to expand support for Sky's USDS stablecoin and provide Tornado Cash users with a way to remain anonymous without aiding hackers. It is also part of the Ethereum Foundation's Kahaku software framework.
Similarly, Railgun is also listed in Kahaku's GitHub repository as a means of shielding funds. Railgun achieves blockchain privacy through a "proof of innocence" system, where users generate ZK proofs showing that their funds/transactions do not belong to a pre-defined list of flagged/malicious addresses.
Finally, it's worth noting that Zcash, a leading advocate for crypto privacy, has seen its anonymity pool supply grow to nearly 25%, marking a steady increase in online privacy adoption. Zcash provides users with functional privacy and the ability to achieve compliance through selective information disclosure.
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