Public blockchains like Ethereum and Solana are open by design. Anyone can create a wallet, submit a transaction, or launch a financial product on a shared digital ledger. Likewise, anyone can read the history of transactions, or initiate their own, on these open systems. Their transparency attracts liquidity, which attracts activity, which attracts more users.
But as blockchains inch into the financial mainstream and institutions begin trading and settling on them, their accessibility risks becoming a competitive liability. Some institutions may be hesitant to embrace open blockchains where they can’t control key factors, like who their counterparties are, and how important information is shared. In other words, they want privacy.
Privacy is nothing new to crypto. In bitcoin’s early days, casual observers incorrectly assumed that all on-chain transactions were completely untraceable. Chainalysis’s work has consistently demonstrated the opposite: using the right tools, blockchains can provide a roadmap for successful criminal investigations, as well as effective compliance regimes. In response, some builders started creating privacy-centric platforms that provided anonymity for transactions.
