Privacy technology will become the strongest moat for Web3.

Author: a16z crypto

Translated by: Blockchain in Plain Language

1. Privacy will become the most important "moat" in the cryptocurrency field this year

Privacy is a key feature of the global financial shift to on-chain, and it is a function that almost all blockchains currently lack. In the past, privacy was often seen as an afterthought, but now, privacy itself has enough appeal to make a chain stand out.

Privacy also plays a more important role: creating a "user lock-in" effect for chains, known as the privacy network effect. This is particularly crucial in a time when performance competition alone is no longer sufficient. Thanks to cross-chain protocols, as long as the data is public, transferring from one chain to another is very simple. But once privacy is involved, the situation is completely different: transferring tokens is easy, but transferring secrets is very difficult.

There is always a risk when entering and exiting the "privacy zone"; those monitoring on-chain behavior, the mempool, or network traffic may identify your identity. Crossing the boundaries between privacy chains and public chains, or even between two privacy chains, can leak various metadata such as transaction time and scale correlation, making tracking much easier.

Compared to many homogenized new chains (whose block space has become similar, and fees will drop to zero due to competition), blockchains with privacy features can generate stronger network effects. If a "general-purpose" chain does not have a thriving ecosystem, killer applications, or unfair distribution advantages, users have no reason to remain loyal to it.

On public chains, users can easily interact with any chain; but on privacy chains, which chain a user chooses becomes crucial, as once they join, they are unlikely to leave and risk exposing their privacy. This will lead to a "winner takes all" situation. Since privacy is a necessity for most real-world use cases, a few privacy chains may dominate a large portion of the cryptocurrency market.

2. The core issue for instant messaging applications this year: not only quantum-resistant but also "decentralized"

As the era of quantum computing approaches, many cryptography-based communication applications (such as Apple, Signal, WhatsApp) are in a leading position. But the problem is, all mainstream communication tools rely on trust in privately operated servers run by a single organization. These servers are easy targets for government shutdowns, backdoor implants, or forced data handovers.

If servers can be shut down, or if companies hold private server keys, then what is the point of quantum-resistant encryption? Private servers require "trust me," while a no-server model means "you don't need to trust me." Communication does not need intermediaries. Instant messaging needs open protocols that allow us to trust no one.

The path to realization is network decentralization: no private servers, no single application, fully open-source code, and top-notch quantum-resistant encryption technology. In an open network, no individual, company, or country can strip away our communication capabilities. Even if a certain application is banned, 500 new versions will appear the next day. Shut down one node, and under economic incentives (thanks to technologies like blockchain), new nodes will immediately take its place.

When people own their messages like they own money (controlled by private keys), everything will change. Applications can evolve, but users will always retain ownership of their messages and identities. This goes beyond quantum resistance and encryption; it is about ownership and decentralization. Without these two, we are merely building an "unbreakable encryption system" that can be shut down at any time.

3. "Secrets-as-a-Service" will make privacy a core infrastructure

At the core of every model, agent, and automation system is data. However, the current data pipelines (input or output data for models) are mostly opaque, volatile, and un-auditable.

This may be acceptable for some consumer applications, but industries like finance and healthcare require the confidentiality of sensitive data, which is also the main barrier for institutions to tokenize real-world assets (RWA).

How can we protect privacy while achieving compliance, security, and autonomous innovation? The focus is on data access control: who controls sensitive data? How does data flow? Who has the right to access it? Currently, to keep data confidential, one must either use centralized services or build complex systems independently. This is not only time-consuming but also hinders traditional financial institutions from fully realizing the benefits of on-chain data management. As agent systems begin to make autonomous decisions and transactions, what users and institutions need is cryptographic guarantees, not "best-effort trust."

Therefore, we need "Secrets-as-a-Service": this new technology can provide programmable native data access rules, client-side encryption, and decentralized key management. Who can decrypt, under what conditions, and for how long, will all be enforced on-chain. Combined with verifiable data systems, "secrets" will become the infrastructure of the internet, rather than an afterthought plugin, thus achieving built-in privacy.

4. Security testing will shift from "code is law" to "spec is law"

The hacking attacks on decentralized finance (DeFi) last year even affected mature protocols that had been audited and running for years. This exposed a harsh reality: current standard security practices are largely heuristic and case-by-case.

To mature, DeFi security must shift from focusing on "vulnerability patterns" to focusing on "design layer properties," from "best effort" to "principled approaches":

• In the static/pre-deployment phase (testing, auditing, formal verification): this means systematically proving "global invariants," rather than just verifying local cases. AI-assisted proof tools can now help write specifications (Specs), propose invariance requirements, and alleviate the previously extremely costly engineering burden.

• In the dynamic/post-deployment phase (operational monitoring, enforcement): these invariants can be transformed into live guardrails. They are encoded as runtime assertions, and every transaction must meet these conditions.

Now, we no longer hope to catch every bug, but rather enforce key security properties in the code, automatically reverting any transactions that violate the rules. In practice, almost all past hacking attacks would trigger these checks during execution, potentially intercepting them. Thus, "code is law" evolves into "spec is law": even new types of attacks must meet the security properties of system design, making the remaining attacks either extremely minor or very difficult to implement.

Article link: https://www.hellobtc.com/kp/du/01/6190.html

Source: https://x.com/a16zcrypto/status/2008611265565127086

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