From Aztec to Zcash: The year ‘pragmatic privacy’ took root

The privacy limitations of blockchains have been apparent since Satoshi Nakamoto wrote the white paper, when the first cryptocurrency’s creator noted that, although pseudonymous, Bitcoin addresses can be linked back to real-world identities.

Ever since, this type of crypto pseudonymity has largely continued to be treated as “good enough,” with most blockchain privacy projects being put in the backseat. 

This year, however, saw renewed interest in blockchain privacy, with Zcash becoming one of the year’s best-performing assets, and the Ethereum Foundation launching several end-to-end encryption initiatives.

The idea of “pragmatic privacy,” which balances personal privacy with compliance considerations, has also taken root. 

New privacy chains 

2025 saw the launch of several new privacy-focused blockchains in various stages of development. 

Perhaps the most notable was the mainnet launch of the Aztec Network’s Ignition Chain in November, which was significant not only for its many consensus-level and ZK-tech innovations as the “first fully decentralized L2 on Ethereum,” but also for overcoming previous hurdles since the project kicked off in 2017.  

Ignition also raised 19,476 ETH (~$61 million) from 16,741 participants using a novel Continuous Clearing Auction mechanism developed jointly with Uniswap Labs earlier this month. 

Nillion is another blockchain project to mainnet in 2025. The so-called “blind computer,” designed to perform calculations on encrypted data, is integrated with several networks like the Layer 1 Near and Layer 2 Arbitrum to boost dapp-level privacy. 

Cosmos-based Namad also rolled out its mainnet Layer 1 in June, focusing on “composable privacy” to support several blockchain ecosystems, like the Bitcoin L2s Lombard and Babylon, as well as Ethereum and Solana, through cross-chain bridges.

Under development since at least 2022, Miden is gearing up for a mainnet launch next year. That said, the project took a massive step towards independence this year by spinning out of Polygon and raising $25 million to build Edge, a privacy-focused blockchain.

Likewise, Umbra, a privacy protocol powered by Arcium, has raised $154.9 million in an initial coin offering on MetaDAO in October. Umbra plans to launch alongside Arcium’s Mainnet Alpha, becoming one of the first privacy protocols on Solana to use its infrastructure.

Horizen, one of the oldest crypto privacy projects, also completed a major transition this year after sunsetting its dedicated Layer 1 and L2 incubator in lieu of relaunching as a Layer 3 privacy solution on the Coinbase-incubated Base network. 

Grayscale, which manages a ZEN token fund, also filed a registration statement with the Securities and Exchange Commission to convert its Grayscale Zcash Trust into the first ZEC ETF. Zcash, which rolled out its Zebra 3.1 upgrade, has been a top-performing token in the latter half of the year.

Corporate privacy initiatives

Coinbase has signaled several times this year that privacy isn’t just an afterthought for Base. Earlier this year, the company announced it had hired the development team at Iron Fish, an old proof-of-work privacy initiative, to provide “privacy-preserving primitives” for Base.

The largest U.S.-based stablecoin issuer, Circle, also made waves when it announced it is testing a privacy-preserving wrapped version of USDC, called USDCx, using the Aleo testnet. USDCx appears to be focused on “configurable compliance” for supporting corporate use cases like payroll management and e-commerce.

Meanwhile, networks like the Goldman Sachs and BNY Mellon-backed Canton Network and EY-incubated Nightfall Ethereum Layer 2 are focused on enterprise blockchain solutions, which require a high degree of confidentiality. Nightfall has already announced support for two blockchains, the Plume RWA network and CELO.

The Ethereum Foundation has launched several privacy initiatives this year, signaling that the topic has emerged as a niche research area to become a primary focus for Ethereum developers. In October, the foundation formed the so-called “Privacy Cluster,” a dedicated team of dozens of engineers, to consolidate its privacy efforts, including a roadmap to achieve end-to-end native encryption. The foundation launched the Institutional Privacy Task Force to onboard institutions and enterprises onto Ethereum.

Vitalik Buterin also debuted Kohaku, an open-source privacy-centric wallet framework that aims to foster “default but compliant” privacy features. 

Pragmatic privacy

The idea of pragmatic privacy has perhaps been taken furthest at the app-level. This year, 0xbow launched Privacy Pools, a tool for everyday blockchain users to wipe their blockchain transaction history without running into legal issues. 

Privacy Pools is based on research published by Buterin and several other high-level cryptographers on “association lists,” which are designed to prevent bad actors from benefiting from crypto mixers. The 0xbow team recently raised a $3.5 million seed round, extended support for Sky’s USDS stablecoin, and rolled out a way for Tornado Cash users to maintain anonymity without “helping the hackers.” It is also part of the Ethereum Foundation’s Kahaku software package. 

Likewise, Railgun is also listed on Kahaku’s GitHub repo to be used as a way to shield funds. Railgun enables blockchain privacy through a “proof of innocence” system where users generate ZK proofs showing their funds/transactions are not part of a pre-set list of flagged/bad addresses. 

Finally, it’s worth noting that Zcash, perhaps the flagbearer for crypto privacy, has seen its shielded supply grow to nearly 25%, marking a steady progression in network privacy adoption. Zcash provides users with functional privacy, with the ability to achieve compliance by selectively revealing information. 

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