From "Comprehensive Privacy" to "Selective Transparency": Why the blockchain industry needs a privacy renaissance

When Bitcoin was created, blockchain was built on a core philosophy: absolute transparency. A public, immutable ledger that anyone can verify — this is the foundation for building “trust through verification, rather than relying on organizational reputation.”

However, after nearly 15 years of development, the industry is facing an undeniable reality: transparency alone is not enough. As blockchain applications expand into cross-border payments, tokenized assets, and enterprise-scale financial activities, user and organizational dissatisfaction with “full exposure” has become increasingly evident.

Pantera Capital — one of the leading VC funds in the industry — recognized this trend early on. In 2015, they invested in Zcash, a pioneering project in bringing privacy protection to blockchain. Nearly a decade later, this view has not only been confirmed but has become an inevitable reality: the blockchain industry cannot scale organizationally without addressing privacy needs.

The world demands a new standard: Privacy protection is not optional

This shift stems from three levels: culture, organization, and technology.

At the cultural level, years of large-scale surveillance, tracking via algorithms, and mass data leaks have changed the general perception of personal data. “Privacy” is no longer a concern of a minority but is a “privacy renaissance” — a core cultural need of this decade.

Every transaction on the blockchain reveals not only the amount but also identity, assets, location, and even personal network relationships through metadata analysis. Small-scale users are increasingly dissatisfied with “public chains with high surveillance” — where simple tools can reconstruct their entire transaction graph.

At the organizational level, entering the blockchain ecosystem is no longer a choice but a necessary decision. Banks, payment platforms, enterprises, fintech companies — all are preparing to handle real transaction volumes in tokenized assets, cross-border payments, and global payment networks.

But they cannot operate on a “completely transparent public ledger.” Corporate cash flows, supply chain networks, foreign exchange risks, contract terms, customer transaction histories — this information must not be publicly disclosed to competitors or the public. What organizations need is “selective secrecy sharing”, not “full exposure”.

This is a lesson Pantera Capital learned from their investment in Zcash: privacy protection is not a ideological preference, but a necessary condition for real economic activity.

Game-changing technologies

Awareness of privacy needs is not new, but the technologies to realize it — that is the breakthrough.

Zama and FHE: Elevating encryption to an unprecedented level

Zama’s fully homomorphic encryption (FHE) technology is regarded by Pantera Capital as a “golden key” for the upcoming wave of blockchain applications. FHE allows computations directly on encrypted data without decrypting.

What does this mean? It means that entire smart contracts — from input, state, to output — can remain encrypted, while still being verifiable on the public blockchain.

Unlike “Layer 1 public chains prioritizing privacy,” which require transforming the entire ecosystem, Zama is compatible with EVM (Ethereum Virtual Machine) — meaning developers and organizations do not need to abandon their current environment, just integrate security functions into it.

Zama’s FHE technology also has the ability to resist future quantum computer threats. Moreover, its applications are not limited to blockchain — this technology can also extend to AI, cloud computing, and many other verticals.

StarkWare: Zero-knowledge proofs for compliance

Another notable Pantera Capital investment is StarkWare — the inventor of zk-STARKs technology and the Validium solution, providing a “hybrid solution” for privacy protection and scalability.

Unlike FHE focused on secure computation, StarkWare offers “zero-knowledge proofs” — enabling verification of a transaction’s validity without revealing details. StarkWare’s encryption technology is also quantum-resistant, and its latest “S-Two prover” solution enhances practicality.

Zcash and the lesson from Tornado Cash: Why privacy must be designed from the ground up

Zcash, a project invested in by Pantera Capital since 2015, demonstrated a fundamental principle: privacy protection cannot be added afterward; it must be integrated into the core protocol.

When Zcash launched in 2016, its zk-SNARKs technology could both hide transaction details and ensure full verifiability — a groundbreaking achievement.

However, Tornado Cash offers a costly lesson on the importance of “selective disclosure”. Despite handling large volumes of real user activity, Tornado Cash has a structural flaw: it emphasizes absolute privacy protection but lacks “selective disclosure mechanisms” for regulators. As a result, government authorities took prominent legal actions, forcing the project to suspend.

This lesson confirms: privacy protection cannot be completely separated from auditability and compliance. This is where Zama’s FHE technology demonstrates its strength — it supports “verification and selective disclosure” that Tornado Cash lacked from the start.

Expanding application scenarios

The demand for privacy is driven not by small-scale speculation but by practical application scenarios:

• Cross-border payments: Businesses and banks cannot disclose all payment routes but still need to verify transactions on the blockchain.

• RWA (Real World Assets): Projects tokenizing real assets need to keep holding status and investor identities confidential.

• Global supply chain finance: Parties need to verify events like (shipping, invoices, payments) without revealing trade secrets.

• Enterprise transaction networks: Some organizations prefer a “view only by auditors and regulators, hidden from the public” model.

Canton, Zama, and the future of privacy protection

Canton — a new protocol — highlights the increasing demand from enterprises for “enforcing private transactions on a shared payment layer”. This system allows participants to conduct confidential transactions while enjoying the benefits of “global state synchronization” and “shared infrastructure”.

However, Zama emerges as the most promising leader in this “privacy supercycle.” Not only deploying privacy at the protocol level, Zama is building “security layers” that are broadly compatible with existing ecosystems, especially EVM.

Zama’s architecture represents the next evolutionary step: not just hiding transactions but enabling “large-scale private smart contracts”. This will unlock entirely new application scenarios — private DeFi, encrypted order books, issuance of security tokens, organizational-level clearing and settlement processes — all without sacrificing decentralization.

Currently, organizations are actively evaluating this “security layer” technology, developers aim to realize privacy-preserving computations without off-chain latency, and regulators are beginning to develop frameworks to distinguish “legitimate security tools” from “illegal obfuscation methods”.

Looking to the future

The story of blockchain privacy is no longer “transparency vs. secrecy”, but an understanding that: both are essential for the next era of DeFi.

Zcash demonstrates the necessity at the protocol level; Canton shows the organizational need for private transaction networks; while Zama is building infrastructure to integrate these needs into “multi-chain privacy layers”.

The synergy of cultural attitude, organizational demand, and technological breakthroughs is reshaping blockchain over the next decade. As privacy protection becomes a core theme of this market cycle, protocols capable of providing “practical, scalable, compliant security solutions” will define the future of digital currency operations.

From tokenized assets to cross-border payments, to enterprise payments — the key to the next wave of blockchain applications is realizing the experience of “secure, seamless, private” technology. In this privacy protection era, blockchains that cannot offer security will be structurally limited — and this is the opportunity that technologies like FHE, zk-STARKs, and next-generation protocols are seizing.