Mapping the Frontier of User Privacy in DeFi

Mapping the Frontier of User Privacy in DeFi

What if I told you that there was a security camera installed inside your fridge?

Every night for the last three weeks, we have footage of someone sneaking into your home and stealing small amounts of food.

Turns out, this is basically a true story. Your fridge symbolizes your crypto life. The food is the transactional data associated with your wallet address. And yes, here on Web3, anyone who wants to can pilfer your data for their own purposes. At least, that is true on public-by-default chains (which 99% are).

But something is happening. In the rare quiet moments of the market, users and builders have awakened to the fact that there is no future for DeFi (or Web3) without privacy.

Recent unpublished research from the Electric Coin Co (builders of ZCASH) reveals that 64% of US residents care about privacy. The number is similar in Nigeria but sits at about 44% in India.

If you’ve been tuned in, you can see this groundswell of desire and urgency for privacy - particularly in DeFi - emerging. Many credible voices even predict privacy as a core narrative that will drive the next bull run.

So the sentiment is clear. But what DeFi solutions are being innovated? What privacy tech is actually pushing the needle forward and serving users? Let’s take a look.

Zero Knowledge Proofs (ZK)

It’s a safe bet you’ve heard of ZK. Maybe your grandma even told you she was hearing about it. Polygon’s zkEVM, LoopRing, Optimism, Mina Protocol, and the list goes on.

Although projects like Aztec attempted to allow users to use DeFi dapps with ZK-based “privacy shielding”, has since been retired. ZK has some significant privacy limitations when it is flying solo - apart from other privacy solutions.

ZCASH leverages a new ZKsnark they call Halo (explainer article here). The Electric Coin Co is a world-class team, constantly innovating on ZCASH’s cryptography.

But let’s be very clear. Just because a project has ZK in the name does not mean it offers privacy. Guy Zyskind, Founder of Secret Network cautions,

“People often attribute more power to certain solutions than what is there in practice. As one simple example, ZK tech is primarily useful for scaling, not generalizable privacy, and it’s certainly not a silver bullet. But you wouldn’t know that from reading crypto Twitter or most thought-pieces.”

Every privacy solution has trade-offs, trust assumptions, and limitations. Protocols and their users should aim to be clear on what those are.


Mixers aren’t private DeFi but, nevertheless, do offer a valuable service to the cause of privacy.

HOPR (on Ethereum) and NYM (on Cosmos) are both aimed at obscuring IP and metadata leakage during online interactions. Neither token is private because, again, their goal is footprint privacy - not PriFi.

HOPR imagines their tech being used for Medical, DeFi, or general tech infrastructure.

NYM seems to hold a higher bar in their ambitions. They built their mixnet with the aim of “preventing traffic analysis by an adversary capable of watching the entire network, including the NSA.”

Secret Smart Contracts

3+ years ago, Secret Network launched secret contracts on mainnet. Since then, the volume of dapp builders leveraging the tech is staggering.

Programmable privacy is the ultimate blank canvas. Rather than the unilateral transparency of public-by-default chains, builders (and therefore users of those dapps) can layer permissioning and control access.

Secret 2.0 is a vision for a constellation of privacy solutions spanning TEE (trusted execution environments), ZK, HE (homomorphic encryption), FHE (fully homomorphic encryption), MPC (multi-party computation). Fhenix, a new sister chain to Secret is an FHE EVM chain.

This constellation concept provides builders and users multiple options to accommodate the specifics of their use case. It is like a garage with a McLaren, an SUV, a luxury sedan, and a tank. Which one will you drive on a given day? Depends on what you need at the moment.

But to take this another level - 2.0 opens the door to stack privacy solutions. You couldn’t drive two cars at once, but you can actually have multiple privacy solutions working in tandem. For example, a dapp might elect to build with TEE and HE.

This seems like a savvy approach because everyone needs privacy but privacy isn’t one size fits all. This deep tool box can accommodate nearly any use case rather than forcing a single solution onto everything.

Secret - and the larger Cosmos ecosystem - seems to be fertile soil for builders and users who value privacy.

The Future of User Privacy

The next few years are pivotal for the cause of privacy in DeFi (and beyond).

Many are fearful of CBDCs. Rightfully so. But how about these other potential payment applications?

Imagine a bank-owned L2 on Ethereum where your account is your address.

Imagine Visa building on StarkNet (an Ethereum L2) and your credit card and all its transactions live there. (This one isn’t quite so imaginary, Visa is exploring these options)

We can do better than this for a payments network.

We need privacy. If we don’t speak up now and “vote” with the dapps and tools we use, we are in danger of losing it.

There has never been a better time to explore the new frontier of Private DeFi. Use these tools and protocols. Consider building your own personal privacy stack. It feels like the gravitational center is, and has to be, Private DeFi. And that’s where Shade - and like-minded friends - will keep pushing the needle forward.

Information provided in this post is for general informational purposes only and does not constitute formal investment advice. Please read the full disclaimer at before relying on any information herein.