The Turning Point of Privacy Narratives: The Future of Infrastructure Building as Demonstrated by Ethereum

What the Market is Overlooking

Recently, the surge in privacy-related assets has led funds and communities to flock to tokens tagged with “privacy.” Focusing solely on the numbers on the chart may cause us to overlook more fundamental technological shifts. At the 2025 Ethereum Developers Conference held in Argentina, Vitalik Buterin presented a roadmap for about 30 minutes, redefining privacy as a core infrastructure of Ethereum. Unlike previous cycles, market focus is shifting from “betting on specific privacy chains” to “who is building true privacy infrastructure.”

The True Nature of “Privacy” on-Chain

Privacy in daily life and privacy on blockchain are entirely different. On-chain, once information is recorded, it is visible to everyone by default.

The concept of privacy here mainly consists of four layers:

First, Asset and Transaction Traceability: Which addresses hold what assets, and how much and how frequently they send and receive funds can be fully traced using blockchain explorers.

Second, Identity-Related: It is quite possible to infer that multiple addresses belong to the same user based on transaction patterns and timelines. This reveals an “on-chain social circle.”

Third, Behavioral Patterns and Preferences: Data such as transaction times, protocols used, and airdrop participation history are accumulated.

Fourth, Network Layer: IP addresses, location data, and device fingerprints are collected. When linked to on-chain addresses, anonymity rapidly diminishes.

From “Don’t Be Evil” to “Evil Cannot Happen”

The early internet companies’ slogan “Don’t be evil” assumed that companies would refrain from malicious acts based on morality. However, the ultimate goal of blockchain is fundamentally different.

Ethereum aims for a state where “Evil Cannot Happen.” By combining cryptography and consensus mechanisms, it designs systems where malicious actions are inherently difficult to execute, regardless of participants’ intentions.

However, a contradiction arises here. Complete transparency can prevent asset misappropriation. But when all information is visible, data handed over to entities with advanced analytical capabilities can transform into “overwhelming informational advantage,” becoming a new basis for profiling, segmentation, censorship, and surveillance.

Achieving true “Don’t Be Evil” requires restrictions on both sides. Preventing asset tampering and avoiding centralized control of information and authority are both necessary. Privacy, in this context, functions not as a counter to transparency but as a means to set boundaries for transparency. That is, only disclose necessary information, keeping everything else within the principle of “minimum disclosure.”

Structural Limitations of Ethereum and Vitalik’s Diagnosis

Vitalik clearly categorized Ethereum’s strengths and weaknesses.

Strengths: Payment and financial applications, DAOs and governance, decentralized identity, censorship-resistant content publishing, proof of scarcity and authenticity.

Weaknesses: Privacy, ultra-high throughput and ultra-low latency computing, direct recognition of real-world information.

Importantly, the privacy issue is understood not as a “defect at the DApp level” but as a “restriction explicitly embedded in the architecture.” This means that simply adding sidechains cannot solve the problem; a combination of multi-layered cryptographic tools and protocols is necessary.

Designing Multi-Layered Privacy Infrastructure

Components like Swarm and Waku, mentioned in the roadmap, provide decentralized storage and messaging functions, enhanced by “programmable cryptography” such as zero-knowledge proofs and homomorphic encryption. These are not tailored for specific projects but are unified toolboxes for all developers.

The goal is to enable more sophisticated privacy designs without compromising the “public nature of the mainnet.” Future Ethereum will converge toward a combination of “transparent payment layers” and “programmable privacy layers,” rather than a binary choice between “full transparency” and “complete black box.”

Lean Ethereum: The Foundation of “Provable and Confidential”

Proposed as a long-term vision, “Lean Ethereum” aims to optimize each component of Ethereum, focusing on virtual machines and hash functions suitable for zero-knowledge proofs.

Currently, running complex ZK systems on Ethereum is costly because the foundational design does not assume “ease of proof.” Lean Ethereum will optimize instruction sets, state data structures, and hash algorithms to enable “the ability to prove legality without revealing everything,” transforming this capability from a few high-level functions into cost-effective everyday operations.

Additionally, quantum-resistant cryptography and formal verification are emphasized. Privacy breaches are inherently difficult to recover from once they occur. By designing with quantum threats in mind, future privacy contracts and rollups can proactively secure security boundaries.

The Hidden Dangers of User Layer: The Blind Signature Problem

Alongside protocol layer reforms, user experience and security are emphasized. Users encounter incomprehensible hexadecimal strings and contract addresses during wallet signing windows. They cannot judge what permissions they are granting or what information might leak, leaving them no choice but to click “Confirm.”

This creates dual risks. From a security perspective, users may unknowingly grant “full asset withdrawal rights.” From a privacy perspective, behavioral data exposed through signatures could be collected, analyzed, and used for profiling or phishing, without users realizing it.

Raising “security awareness” alone is insufficient. Instead, reforms at the standardization level are necessary. Unifying wallet specifications, readable transaction formats, and encapsulating complex data exchanges within proofs and encrypted channels. Coupled with advancements in lightweight clients, account abstraction, and RPC layer privacy protections, on-chain operations could avoid “full exposure” while maintaining auditability and traceability.

Power Dynamics of Privacy Infrastructure: Chain or Ecosystem?

Market cycle changes indicate increasing diversity of options. On one side are dedicated privacy networks and assets based on zero-knowledge proofs, pursuing “complete privacy at the chain level.” On the other side are full-stack privacy infrastructures built within the Ethereum ecosystem, including ZKRollups, privacy middleware, privacy-compatible wallets, and secure contract interaction frontends.

Vitalik’s roadmap suggests Ethereum favors “controlled transparency” and “minimal necessary disclosure” rather than “untraceable black-boxing.” Payment layers remain open, verification logic is protected by cryptography and smart contracts, and business data is secured through zero-knowledge proofs, encrypted communication, and access control, creating layered protections tailored to use cases.

In the next privacy cycle, investment decisions will shift from simply betting on “privacy chains” to evaluating which protocols can implement “controllable and verifiable” privacy infrastructure.