Author: @BlazingKevin_, the Researcher at Movemaker

In 2026, the crypto industry stands at a new crossroads. With deep institutional capital involvement, the settling 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 technologies have often been misunderstood as tools for money laundering or havens for hackers. This early form of "indiscriminate anonymity" has repeatedly faced setbacks due to its inherent opposition to the global financial regulatory system. However, a Privacy 2.0 paradigm centered around "programmable compliance" has emerged and is becoming the cornerstone of the next generation of Web3 infrastructure.

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

1.1 The Fallacy of Indiscriminate Anonymity

Looking back over the past decade (2014-2024), the development of the blockchain privacy track has been filled with idealism, but it has also fallen into the quagmire of commercial implementation. Early privacy projects, such as Monero and early Zcash, were heavily influenced by the Cypherpunk spirit, with a core design philosophy of "adversarial privacy." This mindset believes that privacy should be absolute and indiscriminate, and any form of regulatory backdoor or audit interface is a betrayal of the spirit of privacy.

However, this technical path has proven to be a fallacy in practice. The core contradiction lies in: it attempts to build a completely black-box value transfer network in 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 transaction graphs." For example, mixers disrupt the flow of funds to sever the connection between sender and receiver. This "privacy for the sake of privacy" technical approach, while mathematically achieving anonymity, creates significant obstacles at the compliance level.
• Deadlock in Business Expansion: Due to a 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 that privacy assets lost their liquidity entry, becoming 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 referred to as the "lost decade" for the privacy track because the industry invested too many resources in the wrong direction. By overly emphasizing "permissionless anonymity," most technological innovations (such as early ring signatures and 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: Aside from transfers and speculation, privacy coins have hardly built a rich ecosystem similar to DeFi, NFTs, or DAOs. This is because building complex financial applications on privacy chains that do not support programmability is extremely difficult.
• Failure of Regulatory Arbitrage: Attempts to evade regulation through decentralized architecture have completely failed. Regulatory agencies easily curtailed the expansion of these protocols by cracking down on deposit and withdrawal channels and infrastructure service providers.

1.3 Defining "Programmable Compliance"

Entering 2025, the privacy track has welcomed a structural revival. This is not because the market's demand for "anonymity" has increased, but because the connotation of privacy technology has undergone a qualitative change. A new generation of privacy projects is building what is called Privacy 2.0, characterized by "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 prove the legality of their actions to specific regulators or counterparties while keeping data confidential from the public.

This paradigm shift is reflected in three aspects:

1. Optional Privacy: The system may default to transparency 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," which they can voluntarily share with tax authorities, allowing them to decrypt and verify specific account transaction histories without exposing them to the entire network.
3. Rule Embedding: Compliance rules can be enforced at the protocol level. For example, a privacy stablecoin contract can stipulate: "Only addresses holding compliant DIDs (Decentralized Identities) can receive transfers," or "Transfers over $10,000 require additional compliance proof."

1.4 The Urgent Need for Tokenization of Real-World Assets (RWA)

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

• Institutional Pain Points: Financial giants like BlackRock and Goldman Sachs would never conduct transactions on a completely public ledger like Ethereum. Not only would it leak trade secrets, but it could also lead to market front-running and targeted short/long squeezes.
• Regulatory Contradictions: Regulatory agencies (such as the SEC and ESMA) require that financial transactions must be traceable and monitorable (to meet AML requirements), but at the same time, data protection regulations (such as the EU's GDPR) strictly prohibit the public disclosure of sensitive personal data on immutable blockchains.

Privacy 2.0 is the only solution. Only through "programmable compliance" privacy technology can we achieve "publicly confidential, transparently regulatory."

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

2026 is considered the inaugural year of the "AI Agent Economy." Thousands of autonomous AI Agents will engage in trading, arbitrage, and resource scheduling on-chain. For these AI Agents, privacy is no longer an option but the foundation of survival.

1. Strategy Protection: The core competitiveness of AI Agents lies in their algorithms and trading strategies. If executed on a public ledger, their intentions and patterns can be instantly recognized and targeted by MEV bots (sandwich attacks). Only in a privacy environment (such as Anoma's encrypted intent pool) can Agents safely publish trading intentions without exposing their strategies.
2. Model Privacy: Future AI Agents may carry proprietary model weights or inference logic. Through zkVM (such as the service provided by Boundless), Agents can generate "proof of inference," demonstrating that their outputs are derived from specific model calculations without revealing the model itself. This is known as zkML and is key to the assetization of AI models.

1.6 Shift in Regulatory Attitudes: From Suppression to Regulation

The attitude of regulatory agencies has also undergone subtle but significant changes from 2025 to 2026. Represented by the EU's AMLR and MiCA, major jurisdictions worldwide are beginning to differentiate between "anonymity-enhancing tools" and "privacy-enhancing technologies" (PETs).

• The former is viewed as a money laundering tool and faces ongoing crackdowns.
• The latter is seen as a compliance infrastructure and is encouraged. Discussions by institutions such as the U.S. Treasury indicate that regulators are beginning to realize that the data leak risks posed by completely public ledgers are also a form of systemic risk. Therefore, technologies supporting "selective disclosure" are gradually gaining recognition.

2. Three Sub-Directions of the Privacy Track

Thus, the explosion of the privacy track is no longer a past hype concept but an inevitable result of industry evolution. Following this line of thought, let’s look at the strategic positioning of the following three projects:

2.1 Infrastructure/Computing Layer: Zama

Source: Zama

In the landscape of Privacy 2.0, Zama occupies the core position at the lowest layer—the computing layer. ZK solves the "verification" problem, while fully homomorphic encryption (FHE) addresses the "computation" problem.

FHE allows applications to run business logic (such as lending, exchange matching, voting) in a fully encrypted state, where node validators have no idea what transactions they are processing, thus completely resolving MEV and data leakage issues.

Zama's strategy is to create a "privacy plugin" for the entire industry rather than launching a new chain. 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 speeds and high costs. If this hardware solution can be realized, the operational efficiency of FHE will see a qualitative leap, allowing this technology to be genuinely used by the public rather than remaining confined to laboratories.

Zama is no longer just a theoretical exercise. The recent auction was essentially a "live-fire exercise" of FHE—utilizing an encrypted sealed bidding mechanism to allow all bids to be matched "blindly" on-chain, directly addressing the front-running and MEV chaos seen in traditional auctions. With the TGE scheduled and mainnet staking initiated, Zama has officially completed its leap from "academic jargon" to "financial infrastructure."

Additionally, following the acquisition of KKRT Labs, Zama is attempting to bridge ZK and FHE, and once this "privacy + computation + verification" closed loop is operational, it will no longer be just a crypto project.

2.2 Transaction Matching Layer: Anoma

Source: Anoma

If Zama addresses the confidentiality of data, then Anoma focuses on solving the discovery and matching mechanism of transactions.

Traditional DeFi users' transactions often run naked in the Mempool, with intentions fully exposed to MEV bots. Anoma introduces privacy in counterparty discovery, allowing users to publish encrypted intents, with Solvers matching transactions without decrypting (in conjunction with FHE or TEE).

It is evident that this solution merely scratches the surface of privacy issues; it also addresses the fragmentation of multi-chain interactions and complexity.

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

Anoma recently completed integration with the Base mainnet, extending its intent settlement layer to the EVM ecosystem, thus accessing a broader liquidity market. 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 completion of the network's functional closed loop—at which point, $XAN will transition from a mere governance token to a utility token for paying network settlement fees, and its ability to effectively support multi-chain transaction matching will be worth watching.

2.3 Verification Layer: Boundless

Source: Boundless

With the explosive growth of ZK Rollups and various privacy applications, the "proving" phase, which is computationally intensive, has become the biggest roadblock. Boundless has emerged to specialize in the large-scale production of "general privacy proofs."

Boundless transforms the capability of generating ZK proofs into a tradeable computational commodity, modularly embedding it into all scenarios that are thirsty for ZK verification.

• Operational Mechanism: This is a free market for computational power. Developers throw out computational demands (such as verifying privacy ledgers or running AI models), and Provers in the network bring GPU/FPGA computational power to bid, generating proofs and ultimately putting them on-chain.
• Unified Interface: It acts like Chainlink in the ZK computing field, providing a standardized proof service layer for all blockchains. Any chain can "outsource" the heavy ZK load simply by calling an API.

As the demand for ZK-Rollups and ZK Coprocessors experiences exponential growth, Boundless will become the decentralized engine capable of processing massive amounts of ZK proofs. It completely opens up the imaginative ceiling for privacy applications: whether it's on-chain identity, credit assessment, compliance review, or strategy verification for AI Agents, zkVM can equip them with privacy protection armor.

Boundless utilizes BitVM to upgrade Bitcoin to the ultimate settlement layer for ZK proofs. This is not just a technical upgrade but a strategic elevation: it is no longer limited to the Ethereum ecosystem's co-processors. Once this decentralized Prover Market is operational, Boundless will anchor high-load AI reasoning and complex financial model calculations on the absolute security of Bitcoin.

3. If the Privacy Track is Renamed, the Moat Effect May Be Doubled

Having understood the layouts of Zama, Anoma, and Boundless, we need to examine the ultimate outcome 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 costs for users and assets are extremely low. Since all data is publicly transparent, cross-chain bridges can easily verify states and transfer assets. This leads to competition between public chains other than Ethereum, Solana, and BNB becoming purely a competition of performance and fees, with shallow moats. Users are "mercenaries," going wherever the profits are high.

But on privacy chains, the situation is entirely different.

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

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

When users accumulate a large amount of encrypted state (such as encrypted credit records, private transaction histories, undisclosed holding strategies) in a privacy ecosystem (like a chain based on Zama's fhEVM), it becomes very difficult for them to migrate these "secrets" to another chain.

1. Metadata Leakage Risks: Even if technically possible to cross-chain, the migration process itself generates metadata. Monitors can infer users' real identities by analyzing the timing, amount, and frequency of fund inflows and outflows. This is known as the "de-anonymization risk of deposits and withdrawals."
2. Non-portability of State: Encrypted data often relies on specific chain key management systems (like Zama's threshold decryption network). To migrate data, it must first be decrypted (exposing risks) and then re-encrypted on another chain. This high-risk cost constitutes a significant barrier to conversion.

This characteristic of "easy to enter, hard to exit" (or "afraid to exit") creates strong user stickiness.

• Stronger Network Effects: In privacy networks, 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 strong network effects, the privacy track is unlikely to see a "blooming of a hundred flowers" scenario, but is very likely to evolve into a "winner takes all" situation. A few leading privacy infrastructures will capture the vast majority of the value.

The privacy track in 2026 is an essential path for Web3 to mature into a financial system. Rising from the ashes of Tornado Cash is a new generation of Privacy 2.0 legion equipped with FHE (computation), Intents (intent), and zkVM (proofs). The core driving force behind this transformation is "programmable compliance," which aligns with the era's demands for RWA asset on-chain integration and the explosion of AI Agents.

About Movemaker

Movemaker is the first official community organization authorized by the Aptos Foundation, jointly initiated by Ankaa and BlockBooster, focusing on promoting the construction and development of the Aptos ecosystem in the Chinese-speaking region. As the official representative of Aptos in the Chinese-speaking area, Movemaker is committed to building a diverse, open, and prosperous Aptos ecosystem by connecting developers, users, capital, and numerous ecological partners.

Disclaimer:

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