Looking at Web3 on a Decade Scale: The Next Form of the Privacy Track

Looking back over the past decade, the narrative surrounding blockchain privacy has been in a constant state of evolution. During the first cycle (2014–2017), privacy was largely understood as anonymity in value transfer, with Monero and Dash becoming synonymous with extreme privacy. In the second cycle (2018–2021), zero-knowledge proofs saw breakthroughs in theory and engineering, but the industry's focus shifted primarily to scalability and performance, with privacy features often existing as auxiliary modules. It wasn't until the third cycle (2022–2025), against a backdrop of enhanced on-chain compliance, significantly improved surveillance capabilities, and the full-scale entry of stablecoins and institutional capital, that privacy was re-recognized as a fundamental condition for financial and commercial operations, rather than a peripheral need. The issue of privacy never disappeared; it was merely obscured by different narratives at different stages.

The resurgence of privacy in 2025 is not driven by a resurgence of ideology but is directly triggered by real-world friction. As stablecoins, DeFi, perpetual contracts, and RWA gradually move towards scale, the fully transparent public ledger has begun to expose structural risks in practical operations: trading strategies are easily analyzed in advance, fund movements can leak competitive signals, and the on-chain behavior of enterprises and institutions is continuously profiled. In this context, the advancement of global regulatory frameworks has, on one hand, compressed the space for "completely untraceable assets," and on the other hand, objectively strengthened the demand for financial infrastructure that is verifiable but does not disclose details, private by default but compliantly disclosable. This dual push constitutes the practical basis for the gradual divergence in the performance of privacy assets and highly transparent assets in 2025.

However, it must be emphasized that the privacy sector itself faces multiple unresolved challenges. Technically, solutions like ZK, FHE, and MPC still involve significant trade-offs between performance, development complexity, and composability; stronger privacy often leads to higher system complexity and user barriers. Architecturally, privacy mechanisms can easily lead to liquidity fragmentation and insufficient observability, increasing the difficulty of risk management and system governance. From a compliance perspective, different jurisdictions have significantly varying definitions of "anonymity-enhancing features," and long-term policy uncertainty persists. This means privacy is not a unidirectional, linearly evolving competitive track but a complex path requiring continuous calibration between engineering, economics, and regulation.

The key to this round of change lies not in a specific privacy chain or a particular cryptographic technology, but in the functional migration of privacy: from "certain assets having privacy features" to "whether the system supports private states." Whether it's hidden orders and batch execution, auditable stealth addresses, or selectively disclosable liquidity pools, privacy is beginning to be embedded into trading, settlement, governance, and strategy execution itself. With technological development, privacy is no longer a selling point for isolated networks but a foundational constraint for the proper functioning of various Web3 systems.

Therefore, the real question we must discuss is whether Web3 can rebuild privacy capabilities while maintaining composability and compliance. In the short term, privacy will likely continue to exist in the form of value-added services, specialized tools, and premium features. However, on a ten-year scale, mainstream systems are bound to evolve towards a structure of "privacy by default + regulatory compliance," much like HTTPS for the internet. Privacy will not revert to its early, simplistic conception, nor will it disappear from mainstream systems. Instead, it is more likely to evolve into an initial and foundational property within Web3 infrastructure. 2025 is not the endpoint for privacy but a historical inflection point where it moves from the periphery to the foundation.

This content is excerpted from the research report "A 26,000-Word Report on the Privacy Infrastructure Sector: How is Privacy Reshaping Web3's Foundational Paradigm Under the Global Wave of Compliance? Examining the Evolution of Privacy Technology Across Four Generations, the Divergence of ZK / FHE / TEE Paths, Choices in Compliance Architecture, Ecosystem Status, and Trends for the Next Decade" published by Web3Caff Research.

This report was authored by Web3Caff Research analyst Jesse. It systematically outlines the evolutionary path of privacy technology within the Web3 system, focusing on the differences in system architecture, verifiability, and scenario adaptation among various privacy technology approaches against the backdrop of expanding on-chain finance and increasing application complexity. Its key points include:

Changes in the Industry Landscape: High observability of on-chain activities is making privacy a structural, system-level issue.

Divergence of Technical Paths: Evolution from anonymity and obfuscation schemes to trade-offs between different privacy architectures like ZK, FHE, and TEE.

Differences in Core Capabilities: Trade-offs in regulatory compliance, verifiability, performance cost, and engineering complexity across different approaches.

Key Areas for Future Observation: The validation process of privacy infrastructure in actual deployment, ecosystem adoption, and long-term evolution.