Pantera Partners: In the era of privacy revival, these technologies are changing the game.

Written by: Paul Veradittakit, Partner at Pantera Capital

Compiled by: Saoirse, Foresight News

Since the birth of Bitcoin, the core concept 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 enables decentralized systems to operate normally based on integrity and accountability mechanisms.

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

We believe that the industry is entering an era of “Privacy Renaissance”: this era deeply integrates the concept of open blockchain with the actual needs of global finance. Against this backdrop, privacy protocols built on the core principle of “confidentiality” (such as Zama, which is about to launch its mainnet) are ushering in development opportunities. Zama's Fully Homomorphic Encryption (FHE) technology is the “absolute fortress” for promoting blockchain to achieve mainstream applications, and it can also withstand the threats posed by quantum computing in the coming years. Blockchain applications are just one area of implementation for Zama's Fully Homomorphic Encryption technology, which can also be extended to other vertical fields such as artificial intelligence (like Zama's Concrete platform) and cloud computing.

Another investment target worth paying attention to is StarkWare - 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 has quantum resistance characteristics and focuses on blockchain application scenarios, especially its latest 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 transformation. Years of mass surveillance, algorithmic tracking, and data breaches have made “privacy” one of the core cultural issues of the past decade. Nowadays, users are gradually realizing that not only information and transaction records but also metadata can leak personal details such as identity, wealth, location, 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” rather than “full traceability.” In such an environment, privacy is no longer a niche demand but an important component driving the development of “digital sovereignty.”

Institutional Transformation: Transparency without Privacy Cannot Support Scalable Applications

More and more institutions are beginning to enter the blockchain ecosystem: banks, remittance platforms, payment processors, enterprises, and fintech companies are launching pilot projects, 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 flow, supplier networks, foreign exchange risk exposure, contract terms, and customer transaction records must never be disclosed to competitors or the public. What businesses need is “selectively transparent confidentiality,” not “complete exposure.”

This is exactly the foundation laid by early pioneer projects like Zcash. When Pantera Capital invested in Zcash in 2015, we realized that privacy is not merely an ideological preference, but a necessary condition for actual economic activities. 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 that hides transaction details while ensuring complete verifiability of transactions. Additionally, the mixing protocol Tornado Cash is also an important milestone in on-chain privacy development: as people seek ways to break the linkability of public chain transactions, the protocol saw a large amount of actual user activity.

The change in USD inflow of Tornado Cash 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 to high-profile legal actions initiated by government agencies — despite the project being autonomously running code, it was still effectively forced to suspend operations. This outcome reinforces a key lesson: privacy protection should not come at the expense of “auditability” or “compliance pathways.”

This is precisely 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 information disclosure”—a feature that mixing protocols like Tornado Cash have not possessed since their inception.

The importance of fully homomorphic encryption can be seen from the布局 of tech giants: companies like Apple and Microsoft are investing resources to build fully homomorphic encryption frameworks. Their investment conveys a clear consensus: for consumers and institutions, “scalable, compliant, end-to-end encryption technology” is the future of digital privacy.

Privacy demands are accelerating.

Data confirms this trend: encryption assets focused on privacy protection are gaining more attention from users and investors. However, the real shift is not driven by retail speculation, but stems from the practical application scenario where “privacy and transparency must coexist”:

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

RWA needs to keep the “holding status” and “investor identity” confidential;

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

Enterprise-level trading networks require a model where “auditing institutions and regulatory bodies are visible, but the public is not.”

At the same time, retail users are increasingly dissatisfied with “high-monitoring public chains”—on these public chains, simple tools can easily reconstruct the transaction relationship map. Nowadays, “privacy protection” has become one of the core expectations of users regarding 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

With the arrival of the era of privacy revival, a new generation of protocols is emerging to meet institutional demands.

Taking 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 demonstrates 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 within the privacy technology stack. Zama is building a “confidential layer” based on Fully Homomorphic Encryption (FHE), which supports direct computation on encrypted data. This means that the entire smart contract (including inputs, state, and outputs) can remain in an encrypted state 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 that developers and institutions do not need to migrate to a new chain, but can simply integrate privacy features within their existing development environment.

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

The architecture of Zama represents the next evolutionary direction in 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, institutional-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 assessing confidentiality layer technologies, developers hope to achieve privacy computing under the premise of “no on-chain system delays and complexities”, and regulatory agencies are also beginning to establish frameworks to distinguish between “legal confidentiality tools” and “illegal obfuscation methods.”

Looking to the future

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

Zcash has demonstrated the necessity of privacy protection from a protocol level; protocols like Canton reflect institutions' demand for “confidential transaction networks”; meanwhile, Zama is building infrastructure that aims to integrate these demands into a “cross-chain universally 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 view has become increasingly prominent — from tokenized assets to cross-border payments, to corporate 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, protocols that can provide “practical, scalable, and compliant confidentiality solutions” will define the future landscape of the industry. Among them, Zama, as a leading figure with great potential and timeliness in the “privacy super cycle,” is standing out.