COTI On Blockchain Privacy: How ZKPs Are Becoming A Competitive Advantage In Web3
In Brief
COTI highlights how blockchain privacy, particularly through zero-knowledge proofs, has evolved from a defensive feature into a strategic advantage, becoming essential for Web3 protocols to secure confidential transactions and gain a competitive edge.
Privacy-focused Layer 2 solution for Ethereum, COTI shared insights on the evolving role of blockchain privacy, highlighting how technologies like zero-knowledge proofs (ZKPs) have moved from being primarily defensive tools to strategic assets.
Traditionally, blockchain privacy has been seen as protection against surveillance or data collection, safeguarding sensitive information such as account balances and trading activity. While this defensive framing is valid, COTI emphasizes that privacy can also serve as a competitive advantage: protocols that embed privacy into their core infrastructure can attract both institutional and retail users seeking confidential transactions. ZKPs, in particular, offer versatile applications, with one of their most underappreciated strengths being the ability to enhance Web3 layers, enabling end-to-end private transactions that give projects an edge over competitors.
ZKPs For The People
For nearly a decade, blockchain privacy struggled with perception: regulators often equated it with evasion, while the public saw it as secrecy. However, as blockchain adoption has grown to include not only individual users but also publicly traded companies, privacy has emerged as a central, respected feature. In the evolving narrative of crypto, privacy has shifted from a perceived antagonist to a critical protagonist. Experts like Balaji Srinivasan predict that the coming years of blockchain development will be defined by privacy, marking a transition from “transparency as a feature” to “confidentiality as a requirement.”
Today, privacy is no longer optional; it is essential for any serious blockchain layer. Web3 protocols leveraging zero-knowledge proofs, along with complementary technologies such as fully homomorphic encryption and Garbled Circuits, gain a distinct strategic edge. Users increasingly demand privacy, and projects that integrate it seamlessly into their core services will thrive. Solutions like COTI’s Garbled Circuits demonstrate how confidential smart contracts can deliver end-to-end privacy in a computationally efficient manner, enabling secure, private transactions without compromising speed or accessibility.
No Longer A Liability
Just a few years ago, privacy-focused crypto projects were often at risk of having their tokens delisted, as regulators—led by an adversarial SEC under the Biden administration—tightened scrutiny. Concerned about repercussions, many centralized exchanges preemptively removed privacy coins. Today, however, privacy is no longer a liability.
Exchanges are relisting privacy tokens, particularly those with built-in compliance, while protocol designs have advanced to allow smart contracts to handle encrypted data and private transactions as efficiently as public ones. Privacy solutions have matured, and demand from blockchain users for confidential transactions has surged.
At the SEC’s Crypto Task Force roundtable on December 15, chair Paul Atkins emphasized that “being free to conduct one’s affairs, including financial affairs, free from government and other surveillance is a core American value,” noting that “Public blockchains are more transparent than any legacy financial system ever built.”
While blockchain users have long recognized the value of privacy, hearing it affirmed from the SEC underscores a significant shift. Atkins also highlighted technologies that can enable this privacy, including zero-knowledge proofs, stating: “This technology allows for privacy-preserving tools that the analog world could not provide, such as zero-knowledge proofs, selective disclosure, and wallet designs that allow users to prove compliance without handing over their entire financial history or personal details to intermediaries or to the government. One can imagine systems where a regulated platform can demonstrate that its users have been screened, without the ability to retain a permanent, person-by-person map of every payment, trade, or donation.”
From Defense To Offense
Privacy can serve as a formidable tool for strengthening any Web3 protocol that integrates it thoughtfully, but it is not a cure-all. Implementing privacy alone cannot turn inactive chains into thriving ecosystems or give utility to tokens that lack real value simply because they can be transferred confidentially.
Much like the wave of Web3 projects launching onchain agents this year—many of which were merely chasing relevance—some protocols will adopt ZKPs and other privacy technologies purely for appearances. However, beyond these superficial implementations, there are infrastructure projects embedding privacy for genuine, long-term benefits rather than fleeting headlines.
The true leaders in the next phase of web3 will not be the fastest or flashiest chains, but those that incorporate robust privacy features, making their platforms safe and appealing for all users. Applications that provide opt-in confidentiality will outperform those that leave users exposed. Just as HTTPS became the standard for securing internet transactions, Zero-Knowledge privacy is poised to become the encryption standard for Web3, reshaping the blockchain ecosystem into a global financial operating system.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
