Can the Privacy Track Finally Prove Its Worth This Time? Three Promising Directions to Watch

Original Author: @BlazingKevin_, Researcher at Movemaker

In 2026, the crypto industry stands at a new crossroads. With the deep involvement of institutional capital, the finalization of regulatory frameworks, and the growth of AI in the on-chain economy, the privacy track is undergoing an unprecedented paradigm shift. Over the past decade, blockchain privacy technology has often been misunderstood as a tool for money laundering or a haven for hackers. This early form based on "indiscriminate anonymity" has repeatedly faced setbacks due to its inherent antagonism with the global financial regulatory system. However, the Privacy 2.0 paradigm, centered on "programmable compliance," has taken shape and is becoming the cornerstone of the next generation of Web3 infrastructure.

1. The "Lost Decade" of Privacy and the Logic of Its Potential Explosion

1.1 The Misconception of Indiscriminate Anonymity

Looking back over the past decade (2014-2024), the development of the blockchain privacy track has been filled with idealism, yet it has also become mired in the difficulties of commercial implementation. Early privacy projects, such as Monero and early Zcash, were deeply influenced by the Cypherpunk spirit, with their core design philosophy being "adversarial privacy." This mindset held that privacy should be absolute and indiscriminate, and that any form of regulatory backdoor or audit interface was a betrayal of the spirit of privacy.

However, this technical path has proven to be a false proposition in practice. Its core contradiction lies in: it attempts to build a completely black-box value transfer network within a system that needs to interact with the real-world financial system.

• Deviation in Technical Path: Most Privacy 1.0 projects equated privacy with "hiding the transaction graph." For example, mixers disrupt fund flows to sever the link between sender and receiver. This technical approach of "privacy for privacy's sake," while achieving anonymity mathematically, created huge obstacles at the compliance level.
• Deadlock in Business Expansion: Due to the lack of compliance boundaries, early privacy coins struggled to be accepted by mainstream exchanges and payment gateways. Under anti-money laundering compliance pressure, leading exchanges like Coinbase and Binance delisted privacy coins in multiple jurisdictions. This meant privacy assets lost their liquidity on-ramps, relegated to niche speculative tools or black market mediums, unable to support large-scale commercial activities.

1.2 The Lost Decade: Mismatch Between Technology and Market

The past decade is called the "lost decade" for the privacy track because the industry invested too many resources in the wrong direction. By overemphasizing "permissionless anonymity," most technological innovations (like early ring signatures, simple zk-SNARKs transfers) focused on how to hide data more deeply, rather than how to manage data more flexibly.

This mismatch led to two outcomes:

• Lack of Application Scenarios: Beyond transfers and speculation, privacy coins hardly built rich ecosystems similar to DeFi, NFTs, or DAOs. Because building complex financial applications on privacy chains that don't support programmability is extremely difficult.
• Failure of Regulatory Arbitrage: Attempts to evade regulation through decentralized architecture completely failed. Regulators easily contained the expansion of these protocols by cracking down on on/off-ramp channels and infrastructure service providers.

1.3 Defining "Programmable Compliance"

Entering 2025, the privacy track has seen a structural recovery. This is not because market demand for "anonymity" has increased, but because the essence of privacy technology has undergone a qualitative change. The new generation of privacy projects is building what is called Privacy 2.0, whose core feature is "programmable compliance."

"Programmable compliance" refers to embedding compliance logic (such as identity verification, blacklist screening, transaction limits, audit report generation) directly into the underlying code or smart contracts of privacy protocols. It allows users to keep their data confidential from the public while being able to prove the legality of their actions to specific regulators or counterparties.

This paradigm shift is reflected at three levels:

1. Optional Privacy: The system may be transparent by default, or allow users to selectively enable privacy protection, moving away from a "one-size-fits-all" mandatory anonymity.
2. Auditability: Users possess a "view key" that they can proactively share with tax authorities, allowing them to decrypt and verify the transaction history of a specific account without exposing it to the entire network.
3. Rule Embedding: Compliance rules can be enforced at the protocol level. For example, a privacy stablecoin contract could stipulate: "Only addresses holding a compliant DID (decentralized identity) can receive transfers," or "Transfers exceeding $10,000 require generating additional compliance proof."

1.4 The Hard Demand of RWA Asset Tokenization

The tokenization of real-world assets (RWA) is one of the biggest growth points in the Crypto industry in 2026. However, the large-scale on-chain migration of RWAs faces an irreconcilable "paradox."

• Institutional Pain Point: Financial giants like BlackRock and Goldman Sachs would never conduct transactions on a completely public ledger like Ethereum. It would not only leak business secrets but also lead to market front-running and targeted short/long squeezes.
• Regulatory Contradiction: Regulators (like the SEC, ESMA) require financial transactions to be traceable and monitorable (meeting AML requirements), but simultaneously, data protection regulations (like the EU's GDPR) strictly prohibit publishing customers' sensitive personal data on an immutable blockchain.

Privacy 2.0 is the only solution. Only through "programmable compliance" privacy technology can "confidential to the public, transparent to regulators" be achieved.

1.5 The Underlying Architecture of the AI Agent Era: Protecting Algorithms and Strategies

2026 is considered the first year of the "AI Agent economy." Thousands of autonomous AI Agents will trade, arbitrage, and allocate resources on-chain. For these AI Agents, privacy is no longer an option but a foundation for survival.

1. Strategy Protection: The core competitiveness of an AI Agent lies in its algorithm and trading strategy. If executed on a public ledger, its intent and patterns would be instantly identified and targeted by MEV bots (sandwich attacks). Only in a privacy environment (like Anoma's encrypted intent pool) can an Agent safely publish transaction intent without exposing its strategy.
2. Model Privacy: Future AI Agents may carry proprietary model weights or inference logic. Through zkVM (like services provided by Boundless), an Agent can generate an "inference proof," demonstrating that its output is based on a specific model calculation without revealing the model itself. This is called zkML and is key to the assetization of AI models.

1.6 Shift in Regulatory Attitude: From Ban to Regulation

The attitude of regulators has also undergone a subtle but important shift in 2025-2026. Represented by the EU's AMLR and MiCA, major global jurisdictions have begun to distinguish between "Anonymity-Enhancing Tools" and "Privacy-Enhancing Technologies (PETs)."

• The former is seen as a money laundering tool and faces continued crackdowns.
• The latter is seen as compliance infrastructure and is encouraged. Discussions by bodies like the U.S. Treasury Department also indicate that regulators are beginning to realize that the data leakage risks brought by completely public ledgers themselves constitute a systemic risk. Therefore, technical paths supporting "selective disclosure" are gradually gaining acceptance.

2. Representatives of Three Sub-Directions in the Privacy Track

Therefore, the explosion of the privacy track is no longer the hype of the past but an inevitable result of industry evolution. Following this line of thought, let's examine the strategic positioning of the following three projects:

2.1 Infrastructure/Computation Layer: Zama

Source: Zama

In the landscape of Privacy 2.0, Zama occupies the most foundational core position—the computation layer. ZK solves the "verification" problem, while Fully Homomorphic Encryption (FHE) solves the "computation" problem.

FHE allows applications to run business logic (like lending, exchange matching, voting) on completely encrypted data. Node validators have no idea what transactions they are processing, thereby completely solving MEV and data leakage problems.

Zama's approach is to be a "privacy plugin" for the entire industry, rather than launching a new chain itself. It aims to enable major public chains like ETH and Solana to directly handle encrypted data.

Currently, their biggest bet is on hardware, collaborating with Fabric Cryptography to develop acceleration chips to solve the issues of slow speed and high cost. If this hardware solution materializes, the operational efficiency of FHE will see a qualitative leap, making this technology truly usable for mass applications, not just confined to the lab.

And the current Zama is no longer just theoretical. The recently concluded auction was essentially a "live-fire exercise" for FHE—using an encrypted sealed-bid mechanism to allow all bids to be matched on-chain "blindly," directly disrupting the front-running and MEV chaos seen in traditional auctions. With the TGE scheduled and mainnet staking launched, Zama has officially completed the leap from "academic primitive" to "financial infrastructure."

Coupled with the earlier acquisition of KKRT Labs, Zama is attempting to connect the meridians of ZK and FHE. Once this closed loop of "privacy + computation + verification" is established, it will no longer be just a crypto project.

2.2 Transaction Matching Layer: Anoma

Source: Anoma

If Zama solves the confidentiality of data, then Anoma is dedicated to solving the discovery and matching mechanism for transactions.

Traditional DeFi users' transactions often run naked in the Mempool, with their intent fully exposed to MEV bots. Anoma focuses on counterparty discovery privacy. Users publish encrypted intents, and Solvers match transactions without decrypting them (combining FHE or TEE).

It's clear that solving the privacy problem is just the entry-level benefit of this solution; it also addresses multi-chain fragmentation and interaction complexity.

Once a user's transaction intent is public in the Mempool, it becomes prey for MEV bots. Anoma introduces an "intent-centric" architecture. Users no longer sign transactions but sign "intents." Intents can be encrypted. They are only decrypted and executed when specific conditions are met. This means MEV bots cannot peek at the user's cards, thus preventing front-running attacks.

Anoma recently completed integration with the Base mainnet, extending its intent settlement layer to the EVM ecosystem to access broader liquidity markets. The current technical focus is on the final activation of the "protocol adapter." As the core component connecting user intents with Solver execution, the launch of this adapter will mark the complete functional closure of the network—at that point, $XAN will transform from a mere governance token into a utility token used to pay network settlement fees. Its ability to effectively handle the matching demands of multi-chain transactions is worth watching.

2.3 Verification Layer: Boundless

Source: Boundless

With the explosion of ZK Rollups and various privacy applications, the "Proving" phase—a computationally intensive step—has become the biggest bottleneck. Boundless emerged to specialize in the scaled production of "universal privacy proofs."

Boundless transforms ZK proof generation capability into a tradable computational power commodity, modularly embedded into all scenarios hungry for ZK verification.

• Operation Mechanism: This is a free market for computational power. Developers submit computation demands (e.g., verifying a privacy ledger or running an AI model), Provers in the network with GPU/FPGA power bid for the tasks, generate proofs, and finally submit them on-chain.
• Unified Interface: It is like the Chainlink of the ZK computation field, providing a standardized proof service layer for all blockchains. Any chain can simply outsource heavy ZK loads via API calls.

When the demand for ZK-Rollups and ZK Coprocessors experiences exponential growth, Boundless will become that decentralized engine processing massive volumes of ZK proofs. It completely unlocks the imagination ceiling for privacy applications: whether it's on-chain identity, credit assessment, compliance review, or AI Agent strategy verification, zkVM can provide them with the armor of privacy protection.

Boundless leverages BitVM to upgrade Bitcoin into the ultimate settlement layer for ZK proofs. This is not just a technical upgrade but a strategic dimensional leap: it is no longer confined to being an Ethereum ecosystem co-processor. Once this decentralized Prover Market is operational, Boundless will anchor high-load AI inference and complex financial model computations onto the absolute security of Bitcoin.

3. If the Privacy Track Gains Legitimacy, Its Moat Effect Could Double

After understanding the layouts of Zama, Anoma, and Boundless, we need to examine the endgame of the privacy track from a higher dimension. Privacy will create the most powerful "chain lock-in" effect.

3.1 Differences in Network Effects Between Public Chains and Privacy Chains

On public chains, the migration cost for users and assets is extremely low. Since all data is public and transparent, cross-chain bridges can easily verify states and transfer assets. This leads to competition among public chains (except Ethereum, Solana, BNB) becoming purely about performance and fees, with shallow moats. Users are "mercenaries," going wherever the yield is highest.

But on privacy chains, the situation is completely different.

3.2 The "Chain Lock-in" Mechanism: Why Privacy is Hard to Cross-Chain

"Cross-chain tokens are easy; cross-chain privacy is hard."

When a user accumulates a large amount of encrypted state (such as encrypted credit history, private transaction records, undisclosed portfolio strategies) within a privacy ecosystem (like a chain based on Zama's fhEVM), it is very difficult for them to migrate these "secrets" to another chain.

1. Metadata Leakage Risk: Even if technically possible, the migration process itself generates metadata. Monitors can infer a user's real identity by analyzing characteristics like the timing, amount, and frequency of fund movements. This is known as the "de-anonymization risk of on/off-ramps."
2. Non-Portability of State: Encrypted data often relies on a specific chain's key management system (like Zama's threshold decryption network). To migrate data, it must first be decrypted (exposing risk) and then re-encrypted on another chain. This high risk cost constitutes a significant switching barrier.

This characteristic of "easy to get in, hard to get out" (or "afraid to get out") creates strong user stickiness.

• Stronger Network Effects: In a privacy network, the more users there are, the larger the anonymity set, and the stronger the privacy protection for each user. This is a positive feedback loop: better privacy -> more users -> even better privacy.
• Winner-Takes-All: Due to the extremely high migration costs and extremely strong network effects, the privacy track is unlikely to see a "blooming of a hundred flowers" scenario. Instead, it is highly likely to evolve into a "winner-takes-all" situation. A few leading privacy infrastructure projects will capture the vast majority of the value.

The privacy track in 2026 is the necessary path for Web3 to mature into a financial system. Rising from the ashes of Tornado Cash is a new generation Privacy 2.0 army equipped with FHE (computation), Intents (intent), and zkVM (proof). The core driver of this transformation is "programmable compliance," which aligns with the era's demands of RWA asset on-chain migration and the AI Agent explosion.

About Movemaker

Movemaker is the first official community organization authorized by the Aptos Foundation and jointly initiated by Ankaa and BlockBooster. It focuses on promoting the construction and development of the Aptos Chinese-speaking ecosystem. As the official representative of Aptos in the Chinese-speaking region, Movemaker is dedicated to building a diverse, open, and prosperous Aptos ecosystem by connecting developers,