From Zcash to Arcium, 7 high-potential privacy projects

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Author: BitMart Research Institute

1. Current Status of the Privacy Sector: Structural Recovery by 2025

Over the past few years, privacy has been one of the most controversial and easily misunderstood sectors in the crypto market. On one hand, the transparent and open nature of blockchain is seen as its core value. On the other hand, privacy needs have always existed and are increasingly amplified in finance, commerce, and security.

By 2025, with deeper institutional participation, the gradual formation of regulatory frameworks, and the maturity of cryptographic technologies like zero-knowledge proofs, the privacy sector is shifting from early adversarial anonymity to a more systematic, composable, and compliant infrastructure form. Privacy is becoming a key variable that cannot be ignored in crypto finance.

From a market perspective, the second half of 2025 has seen a clear phase of recovery in the privacy sector. Traditional privacy assets like Zcash and Monero outperformed the market, with Zcash’s highest annual increase approaching 1100%, and its market cap once surpassing Monero. This reflects a market re-pricing of optional privacy and compliance flexibility. Unlike earlier privacy coins mainly used as niche hedging assets, this rebound more accurately represents a long-term reassessment of privacy infrastructure value.

Technologically and ecologically, the privacy sector is undergoing a paradigm upgrade. Early privacy projects mainly focused on hiding transaction paths, addressing transfer anonymity issues, with representatives like Monero, early Zcash, Tornado Cash, etc. This stage can be seen as Privacy 1.0, whose core goal was to reduce on-chain traceability but had limited functionality and compliance flexibility, making it unsuitable for complex financial activities. Moving into 2024–2025, privacy is evolving towards Privacy 2.0. The new generation of projects no longer just hide data but attempt to perform computations and collaborations in encrypted states, making privacy a universal capability. For example, Aztec launched Ethereum-native ZK Rollup supporting privacy smart contracts. Nillion proposed a blind computation network emphasizing data use without decryption. Namada explores cross-chain privacy asset transfers within the Cosmos ecosystem. These projects point to a trend: privacy is shifting from an asset attribute to an infrastructure attribute.

2. Why is the Privacy Sector Key: Preconditions for Institutionalization and Complex Applications

Privacy has become a core issue again, not due to ideological shifts but as a result of practical constraints. From a longer-term perspective, privacy also has significant network effects. Once users, assets, and applications gather on a particular privacy infrastructure, migration costs increase substantially, giving privacy protocols a potential “underlying moat” property.

Institutional on-chain activity depends on privacy infrastructure: in any mature financial system, asset allocation, trading strategies, compensation structures, and business relationships cannot be fully public. Fully transparent ledgers have advantages in experimental stages but become obstacles once large-scale institutional participation occurs. Privacy does not weaken regulation but is a technical prerequisite for “selective transparency,” allowing compliance disclosures and trade secret protections to coexist.

On-chain transparency also brings real security risks: as on-chain data analysis tools mature, the cost of linking addresses to real identities continues to decline, leading to increased incidents of extortion, scams, and personal threats related to wealth exposure in recent years. This turns “financial privacy” from an abstract right into a real security need.

The integration of AI and Web3 raises higher privacy requirements: in scenarios involving intelligent agents executing trades, strategies, and cross-chain collaborations, systems need to verify compliance while protecting model parameters, strategy logic, and user preferences. These needs cannot be met by simple address anonymity and require advanced privacy computing technologies like zero-knowledge proofs, MPC, FHE, etc.

3. Path to Compliance in the Privacy Sector: From Adversarial Regulation to Programmable Compliance

The core constraints faced by the privacy sector have shifted from uncertain policy risks to highly defined institutional restrictions. For example, the EU Anti-Money Laundering Regulation (AMLR) explicitly bans financial institutions and crypto asset service providers from handling “anonymity-enhanced assets,” including mixing, ring signatures, stealth addresses, and other techniques that weaken traceability. The regulatory logic is not to deny blockchain technology but to systematically strip its “anonymous payment” attribute and embed KYC, transaction tracing, and travel rules into most crypto transaction scenarios. Under heavy fines, licensing risks, and preemptive enforcement, tolerance for fully anonymous assets in centralized channels has nearly disappeared, fundamentally changing the survival conditions of privacy coins within mainstream finance.

In this context, the privacy sector is shifting from “strong anonymous assets” to “compliant privacy infrastructure.” After the Tornado Cash incident, industry consensus has emerged: completely untraceable anonymous designs are unsustainable under global anti-money laundering frameworks. From 2025 onward, mainstream privacy projects are moving towards three paths: optional privacy, providing compliant interfaces for institutions and exchanges; auditable privacy, enabling selective disclosure via zero-knowledge proofs or viewing keys; and rule-based compliance, embedding regulatory logic directly into protocols to prove compliance cryptographically rather than through post-hoc data tracing. Regulatory attitudes are also becoming more nuanced, shifting from whether privacy is allowed to what types of privacy are permitted. Strong anonymous tools and compliant privacy technologies are being clearly distinguished. This transformation grants privacy infrastructure higher long-term certainty compared to traditional privacy coins, with privacy and regulation evolving from opposition to a next-generation verifiable financial system component.

4. Portrait of High-Potential Privacy Projects

5. Zcash: A Compliance Model in Privacy Sector

Zcash remains one of the most representative projects in the privacy sector, but its positioning has fundamentally changed. Compared to Monero’s “default strong anonymity,” Zcash has adopted an optional privacy architecture from inception, allowing users to switch between transparent addresses (t-addresses) and shielded addresses (z-addresses). Although this design was questioned by some privacy advocates early on, it has become its greatest advantage under current regulatory conditions. Recently, the Zcash Foundation has continued to upgrade its cryptography, such as Halo 2 proof system, significantly reducing zero-knowledge proof computation costs and paving the way for mobile and institutional applications. Meanwhile, wallets, payment tools, and compliance modules around Zcash are continuously improving, gradually transforming it from an “anonymous coin” to a “privacy settlement layer.”

From an industry perspective, Zcash demonstrates that privacy and compliance are not necessarily mutually exclusive. As institutional participation deepens, Zcash is more likely to serve as a regulatory reference in the privacy sector rather than a speculative asset.

2. Aztec Network: The Key Execution Layer for Ethereum Privacy DeFi

Aztec is one of the closest projects to a “core infrastructure” in the current privacy sector. It chooses Ethereum as its security layer and implements privacy smart contracts via ZK Rollup, enabling privacy features to be composable with DeFi. Unlike traditional privacy protocols, Aztec does not pursue extreme anonymity but emphasizes programmable privacy: developers can define which states are private and which are public at the smart contract level. This design allows Aztec to support complex financial structures like privacy lending, privacy trading, and privacy DAOs, not just transfer obfuscation.

From a long-term perspective, Aztec’s potential value lies in whether it can become the default “privacy execution environment” within the Ethereum ecosystem. Once privacy becomes a necessary condition for institutional DeFi, native ZK privacy rollups like Aztec will have a strong path dependence advantage.

3. Railgun: Practical Implementation of Protocol-Level Privacy Relay Layer

Railgun’s uniqueness lies in that it is not an independent blockchain but a protocol layer providing privacy capabilities for existing assets. Users do not need to migrate assets to a new chain but can achieve privacy interactions for ERC-20 tokens, NFTs, etc., through Railgun’s shielded pools. This “relay layer privacy” mode offers lower user migration costs and easier integration with existing wallets and DeFi protocols. The rapid growth of transactions in 2025 reflects strong demand from real users for “privacy without changing ecosystems.” Notably, Railgun is exploring more regulation-compliant interaction methods, such as restricting sanctioned addresses from entering privacy pools, indicating it is not heading toward adversarial anonymity but exploring sustainable models under real-world constraints.

4. Nillion / Zama: Privacy Computing as Next-Generation Infrastructure

If Zcash and Aztec belong to blockchain privacy, Nillion and Zama represent broader privacy computing infrastructure. Nillion’s “blind computation” network emphasizes data storage and computation without decryption, aiming not to replace blockchains but to serve as a privacy collaboration layer between data and applications. Zama focuses on Fully Homomorphic Encryption (FHE), attempting to enable smart contracts to execute logic directly on ciphertexts. The potential markets for these projects extend beyond DeFi to AI inference, enterprise data sharing, RWA disclosures, and larger-scale applications. In the medium to long term, they are closer to Web3’s “HTTPS layer,” and once mature, their impact could surpass traditional privacy coins.

5. Arcium: Privacy Computing “Joint Brain” for AI and Finance

While some privacy projects mainly serve blockchain-native scenarios, Arcium aims at broader data-intensive industries. It is a decentralized parallel privacy computing network striving to become a “joint brain” for AI and high-sensitivity sectors like finance. Its core innovation is integrating Multi-Party Computation (MPC), Fully Homomorphic Encryption (FHE), and Zero-Knowledge Proofs (ZKP) into a unified framework, allowing dynamic scheduling of optimal combinations based on task privacy and performance needs, enabling encrypted collaborative computing throughout. This architecture has attracted NVIDIA’s official attention and inclusion in the Inception program, focusing on privacy AI scenarios. On the application layer, Arcium is building decentralized dark pools for large institutional orders to match under full privacy, avoiding front-running and market manipulation. Arcium exemplifies the frontier of integrating privacy with AI and high-end finance.

6. Umbra: Invisible Cloak for DeFi and a Pioneer in Compliance

Umbra’s clear and pragmatic positioning is to be an easily integrable privacy payment layer within mainstream DeFi ecosystems. Initially gaining attention for its “invisible address” mechanism on Ethereum, it has expanded to high-performance chains like Solana. By generating one-time, unlinked addresses for payees, Umbra makes each transfer difficult to trace back to the main wallet, providing a “cloak of invisibility” for on-chain payments. Unlike schemes emphasizing absolute anonymity, Umbra actively introduces “auditable privacy” concepts into protocol design, leaving room for compliance auditing, which significantly enhances its institutional adoption potential. In October 2025, Umbra raised over $150 million via ICO, confirming market recognition of its approach. Its ecosystem expansion follows a “Lego-style” strategy, simplifying SDKs for low-cost integration into wallets and DApps. Its long-term success depends on whether it can embed into core applications of chains like Solana, becoming an effective standard for privacy payments.

7. MagicBlock: TEE-Based High-Performance Privacy Layer for Solana

MagicBlock is a representative case of transforming from a gaming tool on-chain to a high-performance privacy infrastructure. Its core product is an Ephemeral Rollup based on Trusted Execution Environments (TEE), designed to provide low-latency, high-throughput privacy computation for the Solana ecosystem. Unlike solutions relying on complex zero-knowledge proofs, MagicBlock executes standard Solana transactions directly within hardware secure zones like Intel TDX, ensuring confidentiality through verifiable “black boxes,” approaching native chain performance. This engineering-oriented design allows developers to add privacy features to DeFi or gaming applications with minimal changes, greatly lowering development barriers. MagicBlock fills a structural gap in Solana’s privacy layer and has received investment support from core ecosystem figures. However, its reliance on hardware trust and the upper limit of cryptographic purity mean it will face competition once zero-knowledge tech matures. Overall, MagicBlock exemplifies a pragmatic approach emphasizing usability and deployment efficiency in privacy infrastructure, serving as an important case for how the market balances “ease of use” and “technological idealism.”

5. Outlook for the Privacy Sector in 2026: From Optional Features to System Defaults

Looking ahead to 2026, the privacy sector is unlikely to explode with high volatility and strong narratives but will instead gradually and more surely penetrate the market.

Technologically, the engineering maturity of zero-knowledge proofs, MPC, and FHE will continue to improve, reducing performance bottlenecks and development barriers. Privacy capabilities will no longer exist as “independent protocols” but will be embedded as modules into account abstraction, wallets, Layer2, and cross-chain systems, becoming default options rather than add-ons. On the compliance front, regulatory frameworks in major economies are expected to stabilize. As market structure laws and stablecoin regulations are implemented, institutional participation in on-chain finance is likely to increase significantly, directly amplifying demand for compliant privacy infrastructure. Privacy will shift from a “risk point” to a “necessary condition” for institutional on-chain activity. On the application layer, privacy will gradually become “invisible”: users may not realize they are using privacy protocols, but their assets, strategies, and identities will be protected by default. DeFi, AI agents, RWA settlements, and enterprise on-chain collaboration will all assume privacy as a prerequisite rather than a patch.

From a long-term perspective, the real challenge for the privacy sector is not “whether to be anonymous” but whether it can continuously prove system trustworthiness and compliance without exposing data. This capability is the final infrastructure piece needed for crypto finance to mature from experimental to fully developed.

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