Pantera Partners: The Era of Privacy Revival, These Technologies Are Changing the Game

Core Viewpoint

2025-11-23 22:41:55

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A new reality is taking shape: privacy protection is the key to bringing blockchain into the mainstream, and the demand for privacy is accelerating at cultural, institutional, and technological levels.

Original Title: Privacy Renaissance: Blockchain's Next Era

Original Author: Paul Veradittakit, Partner at Pantera Capital

Original Compilation: Saoirse, Foresight News

Since the birth of Bitcoin, the core idea of the blockchain industry has always been rooted in "transparency"—it is an open and immutable ledger that anyone can view; its trust comes from "verification" rather than institutional reputation. It is this transparency that allows decentralized systems to operate normally through integrity and accountability mechanisms.

However, as blockchain technology matures and application scenarios expand, relying solely on "transparency" is no longer sufficient. A new reality is forming: privacy protection is the key to bringing blockchain into the mainstream, and the demand for privacy is accelerating at cultural, institutional, and technological levels. At Pantera Capital, we have believed in this perspective from the very beginning—back in 2015, we invested in Zcash, one of the first projects to attempt to introduce privacy protection to immutable ledgers.

We believe the industry is entering an era of "privacy renaissance": this era will deeply integrate the concept of open blockchains with the practical needs of global finance. Against this backdrop, privacy protocols built around the principle of "confidentiality" (such as the upcoming mainnet of Zama) are seizing development opportunities. Zama's fully homomorphic encryption (FHE) technology is the "absolute fortress" for enabling mainstream applications of blockchain and can also withstand the threats posed by quantum computing in the coming years. Blockchain applications are just one area where Zama's fully homomorphic encryption technology can be applied; this technology can also extend to artificial intelligence (such as Zama's Concrete platform), cloud computing, and other verticals.

Another noteworthy investment target is StarkWare—it is the inventor of zk-STARKs zero-knowledge proof technology and the Validium solution, providing a "hybrid solution" for blockchain privacy protection and scalability. StarkWare's cryptographic technology also possesses quantum-resistant properties and focuses on blockchain application scenarios, especially its recently launched "S-Two prover," which further enhances the practicality of the technology.

Cultural Shift: From "Surveillance Fatigue" to "Digital Sovereignty"

Globally, people's understanding of data has undergone a fundamental shift. Years of mass surveillance, algorithmic tracking, and data breaches have made "privacy" one of the core cultural issues of the past decade. Users are gradually realizing that not only information and transaction records but even metadata can reveal personal identities, wealth, locations, and interpersonal relationships.

"Privacy protection + user ownership of sensitive data" has become the new industry norm—this is also the direction that Pantera Capital is optimistic about, which is why we have invested in projects like Zama, StarkWare, Transcrypts, and World. As public awareness of privacy continues to rise, the blockchain industry must face a fact: digital currencies need "confidentiality," not "full traceability." In such an environment, privacy is no longer a niche demand but an important component driving the development of "digital sovereignty."

Institutional Shift: Transparency Lacking Privacy Cannot Support Scalable Applications

More and more institutions are entering the blockchain ecosystem: banks, remittance platforms, payment processors, enterprises, and fintech companies are all conducting pilots, preparing to handle actual transaction volumes in tokenized assets, cross-border settlements, and multi-jurisdictional payment networks.

However, these institutions cannot operate on a "completely transparent public ledger"—corporate cash flows, supplier networks, foreign exchange risk exposures, contract terms, and customer transaction records must never be disclosed to competitors or the public. What enterprises need is "selectively transparent confidentiality," not "complete exposure."

This is precisely the foundation laid by early pioneering projects like Zcash. When Pantera Capital invested in Zcash in 2015, we realized that privacy is not an ideological preference but a necessary condition for actual economic activity. The core insight of Zcash is that privacy protection cannot be "added later" to the system (especially when using zero-knowledge proof technology) but must be embedded in the core of the protocol—otherwise, subsequent use would become extremely difficult, fragile, and inefficient.

Zcash was launched in 2016 as a Bitcoin fork project, introducing zk-SNARKs technology, which can hide transaction details while ensuring complete verifiability of transactions. Additionally, the mixing protocol Tornado Cash is also an important milestone in the development of on-chain privacy: as people sought ways to break the correlation of public chain transactions, the protocol saw a significant amount of actual user activity.

Tornado Cash's USD inflow changes before and after sanctions (Data Source: TRM Labs)

However, Tornado Cash's model has flaws: it emphasizes strong privacy protection but lacks a "selective disclosure mechanism," ultimately leading government agencies to initiate high-profile legal actions against it—despite the project being self-operating code, it was still effectively forced to pause. This outcome reinforces a key lesson: privacy protection cannot come at the expense of "auditability" or "compliance pathways."

This is also the core value of Zama's fully homomorphic encryption technology: fully homomorphic encryption supports direct computation on "encrypted data" while retaining the ability for "selective verification and disclosure of information"—a functionality that mixing protocols like Tornado Cash have lacked since their design inception.

The importance of fully homomorphic encryption is evident from the investments of tech giants: companies like Apple and Microsoft are investing resources to build fully homomorphic encryption frameworks. Their investments convey a clear consensus: for consumers and institutions, "scalable, compliant, end-to-end encryption technology" is the future of digital privacy.

Privacy Demand is Accelerating

Data supports this trend: privacy-focused crypto assets are gaining more attention from users and investors. However, the real shift is not driven by retail speculation but stems from practical application scenarios where "privacy and transparency must coexist":

• The reliance on blockchain for cross-border payments is increasing, but enterprises and banks cannot publicly disclose every payment path;

• RWA needs to keep "holding situations" and "investor identities" confidential;

• In global supply chain finance, both parties in a transaction need to verify events (such as shipping, invoices, settlements) without disclosing trade secrets;

• Enterprise-level transaction networks require a model where "audit institutions and regulators can see, but the public cannot."

At the same time, retail users are increasingly dissatisfied with "highly surveilled public chains"—on these public chains, simple tools can reconstruct transaction relationship graphs. Today, "privacy protection" has become one of the core expectations users have for digital currencies.

In short, the market is gradually recognizing a fact: blockchains that cannot provide confidentiality will face structural limitations in institutional-scale applications.

Canton, Zama, StarkWare, and the New Generation of Privacy Architecture

As the era of privacy renaissance arrives, a new generation of protocols is emerging to meet institutional needs.

Take the Canton blockchain as an example; it highlights the growing demand from enterprises for "private transaction execution on a shared settlement layer." Such systems allow participants to conduct private transactions while enjoying the benefits of "global state synchronization" and "shared infrastructure"—the development of Canton clearly shows that enterprises want to gain the value of blockchain while avoiding the public exposure of business data.

However, the most transformative breakthrough in the field of private computation may come from Zama—it occupies a unique and more scalable position in the privacy technology stack. Zama is building a "confidential layer" based on fully homomorphic encryption (FHE), supporting direct computation on encrypted data. This means that the entire smart contract (including inputs, states, and outputs) can remain encrypted while still being verifiable on a public blockchain.

Unlike "privacy-first Layer 1 public chains," Zama is compatible with existing ecosystems (especially the Ethereum Virtual Machine, EVM)—this means developers and institutions do not need to migrate to a new chain but can simply integrate privacy features into their existing development environments.

Private smart contracts using fully homomorphic encryption (FHE) (Data Source: Zama)

Zama's architecture represents the next evolutionary direction for blockchain privacy protection: no longer simply hiding transactions, but achieving "scalable private smart contracts." This will unlock new application scenarios—including private DeFi, encrypted order books, confidential real-world asset issuance, enterprise-level settlement and clearing processes, and secure multi-party business logic—all without sacrificing decentralization, with some applications expected to be implemented in the short term.

Currently, privacy assets are gaining more attention: institutions are actively evaluating confidential layer technologies, developers hope to achieve privacy computing without "off-chain system delays and complexities," and regulatory agencies are beginning to establish frameworks to distinguish between "legitimate confidentiality tools" and "illegitimate obfuscation methods."

Looking Ahead

The narrative of privacy in the blockchain industry is no longer a "contradiction between transparency and confidentiality," but rather an acknowledgment that both are necessary conditions for the next era of DeFi. The convergence of cultural attitudes, institutional demands, and breakthroughs in cryptographic technology is reshaping the evolution of blockchain over the next decade.

Zcash has proven the necessity of privacy protection at the protocol level; protocols like Canton reflect institutional demand for "confidential transaction networks"; and Zama is building the infrastructure that is expected to integrate these demands into a "cross-chain universal scalable privacy layer."

Pantera Capital's early investment in Zcash stemmed from a simple belief: privacy protection is not an "option." Nearly a decade later, the relevance of this perspective is becoming increasingly evident—from tokenized assets to cross-border payments to enterprise settlements, the key to the next wave of blockchain applications lies in achieving a "secure, seamless, and private" technological experience.

As privacy protection becomes the core theme of this market cycle, those protocols that can provide "practical, scalable, compliant confidentiality solutions" will define the future landscape of the industry. Among them, Zama stands out as a leader with great potential and timeliness in the "privacy supercycle."