Author: a16z crypto
Compiled by: Plain Language Blockchain
It is often said that users don't truly care about privacy, and in the age of social media, this might be true. But in the financial sector, the rules are completely different. A16Z Crypto partner Ali Yahya has made a significant prediction: privacy will become the most important moat in the cryptocurrency space, triggering "winner-take-all" network effects.
Host: Robert Hackett (A16Z Crypto) Guest: Ali Yahya (General Partner, A16Z Crypto)
I. Why is Performance No Longer a Moat?
Host: Ali, you recently expressed a view that "privacy will become the most important moat in cryptocurrency." That's a big conclusion. What makes you so sure?
Ali: This idea stems from my thoughts on the commoditization of "Block Space." There is now an oversupply of high-performance blockchains, coupled with convenient cross-chain solutions, making the block space of various chains functionally very similar.
In this context, mere "high performance" is no longer sufficient for defense. Privacy is a feature that the vast majority of existing public chains lack. More importantly, privacy can create a special kind of "lock-in effect," thereby strengthening network effects.
Host: Current blockchain teams might refute this; for example, Solana and Ethereum have completely different technical trade-offs and roadmaps. How would you respond to those who think "my chain is unique and irreplaceable"?
Ali: I believe that for general-purpose blockchains, performance is just the entry ticket. To stand out, you must possess one of three things: a thriving ecosystem, an unfair distribution advantage (like Coinbase's Base), or a killer application.
Privacy is special because once users join a privacy chain, their willingness to leave decreases significantly due to the fact that "moving secrets" is much more difficult than "moving assets." This stickiness is something transparent public chains currently lack.
II. Do Users Really Care About Privacy?
Host: Many people believe users aren't concerned about privacy—just look at Facebook. What makes you think the situation will be different in the crypto space?
Ali: People might not care about 'like' data, but they absolutely care about financial data.
If cryptocurrency is to go mainstream, privacy is a must. Not only individuals, but businesses and financial institutions absolutely cannot tolerate their payrolls, transaction histories, and asset preferences being monitored in real-time by the whole world. In the context of finance, privacy is a rigid demand.
Host: Can you give a few specific examples? What kind of data do people most want to keep private?
Ali: There are so many. What did you buy on Amazon? What websites did you subscribe to? How much money did you send to which friend? What are your salary, rent, and balance? This information can be easily parsed from your financial activities. Without privacy, it's equivalent to walking down the street with a transparent wallet that everyone can stare into.
III. Why Are "Secrets" Hard to Migrate?
Host: You mentioned a key point: "Secrets are hard to migrate." Is this a technical problem or a social one at its core?
Ali: It's a core technical problem. Privacy systems rely on an "Anonymity Set." Your privacy is secure because your activity is mixed with the activities of thousands of other users.
The larger the anonymity set, the more secure the privacy.
Cross-chain risk: When you move privacy assets from one anonymity zone to another, it generates a lot of metadata leakage (like transaction timing, amount correlation, network layer characteristics).
This creates a situation where users tend to stay on the chain with the largest user base and anonymity set. Because cross-chain is not only troublesome but also risks "identity exposure." This self-reinforcing feedback effect will eventually lead to the market being dominated by only a few large privacy chains.
IV. Technical Path: How to Achieve Privacy?
Host: What technical means do we currently have to realize the vision you described?
Ali: There are mainly four technologies:
Zero-Knowledge Proofs (ZK Proofs): Prove a transaction is valid without revealing its content; currently the fastest progressing.
Fully Homomorphic Encryption (FHE): Allows computation on encrypted data; the most powerful functionally but extremely computationally intensive, still largely theoretical.
Multi-Party Computation (MPC): Multiple parties collaboratively compute without revealing their respective data; often used for key management.
Trusted Execution Environments (TEE): Relies on "isolated areas" provided by hardware manufacturers like Intel or Nvidia for encrypted computation; this is currently the most pragmatic and highest-performance method.
Ali: Actually, we might see a stacking of these technologies. For example, using TEE for performance, with an additional layer of MPC as a defensive barrier, ensuring privacy remains secure even if the hardware is physically compromised.
V. The Conflict Between Decentralization and "Winner-Take-All"
Host: The core spirit of crypto is decentralization and interoperability. If privacy chains present a "winner-take-all" scenario in the future, does this contradict the original intention?
Ali: I don't think so. Decentralization refers to "control" not "fragmentation."
A privacy chain is decentralized as long as it is open-source, its code is verifiable, and its validator nodes are dispersed. This provides developers with a "can't be evil" platform guarantee. Compared to the Web2 era behavior of locking in users by blocking APIs, the lock-in in the crypto privacy space is based on algorithms and security risks; the rules are still fair and neutral.
VI. Future Perspective: Quantum Threats and AI
Host: Looking at the long-term future, couldn't quantum computing break these privacy technologies?
Ali: This is a very real concern. According to assessments from our research team (like Dan Boneh), quantum attackers likely won't be able to break modern cryptography for maybe 15 years. While we should start preparing "quantum-resistant" solutions now, there's no need for excessive panic currently.
Host: One last question, when AI agents start taking over the internet, what kind of collision will happen with your privacy theory?
Ali: In the AI era, each of us lives in a "panopticon," where our every activity provides training data for the next generation of models. As AI becomes omnipresent, the human demand for privacy will only become stronger than it is now.
