The Future of Privacy on Public Blockchains and How COTI is Paving the Way for Secure Decentralized Systems
In Brief
COTI, a privacy layer on Ethereum, is integrating transparency into its infrastructure, enabling users to control sharing and sharing with whom, fostering a more secure and practical Web3.
How do public blockchains balance transparency with the need for privacy? It’s a question that’s becoming increasingly critical as more businesses and individuals bring their operations on-chain. COTI, a next-generation privacy layer on Ethereum, is tackling this challenge head-on by embedding privacy directly into its infrastructure, offering tools that allow users to control what they share and with whom.
In this conversation, Shahaf Bar-Geffen, CEO at COTI, explains why privacy isn’t just a feature but an essential component of blockchain’s future. From pioneering solutions like selective disclosure to real-world applications with enterprises and central banks, Shahaf shares how COTI is building a bridge to a more private, secure, and practical Web3.
What are the top privacy concerns that COTI’s solution directly addresses?
Let me start by saying something that I think, once you see it, you cannot unsee: privacy on a public blockchain is inevitable. There is no version of the future, I think, where we don’t have privacy on a public blockchain.
What do I mean by that, and why am I so certain about it? First, it’s clear that in our world, everything has two sides—the side that is public and the side that is private. This is how we run businesses, right? We have a public-facing side, of course, and then there are things that are private, like salaries, contracts, logistics, and revenue—businesses keep all these things private. And if we see a future where businesses will do some or all of their business on-chain, then you must have a solution for that. There is no way around it.
We can even see this today. A recent report by JPMorgan discusses the $200 trillion industry of real-world assets, which is a big buzz in crypto. Their number one concern is privacy because they have a fiduciary obligation to keep their client’s information private and their business operations confidential. That’s the first reason.
Businesses will not work on a blockchain if that blockchain cannot keep secrets. The other aspect of it is users. Right now, when we perform a transaction on a blockchain, we allow our entire purchase history—everything we’ve ever done from that wallet—to be publicly available forever. I think most people in Web3 take it for granted that this is how things are. However, if you look at Web2 applications, like banking or e-commerce, we take for granted that these remain private. Why not in Web3?
This is another concern that I think will be solved. If we understand all this, that businesses and users both want it, and it protects our very basic rights… you’re not truly free if you know that everything you do is publicly visible and can be scrutinized, analyzed, or linked directly to you forever. This loss of freedom is part of the status quo, but once you understand it, you know that a solution is inevitable.
That’s why I am so happy to be in a position where I’m building this right now because I know that, at some point, this will be the standard. At COTI, we allow for something called selective disclosure. People often confuse privacy and anonymity, but they’re not the same thing. Privacy is your right to decide what you show and to whom. It’s contextual. For instance, I might share certain information with my wife but not my boss, and definitely not on social media. Similarly, in a business, the CEO might know some details, and HR might know others, but not the security guard at the entrance.
Privacy is not about hiding everything—it’s about providing context. What we do at COTI is allow developers to create smart contracts and dApps on a public blockchain that can decide which parts of information are public and which parts are private, and to whom and how.
It’s far more complex than anonymity. Anonymity becomes problematic, especially in financial transactions, because it can border on illegality. For this reason, privacy tokens have faced significant challenges with regulation and exchanges. What we offer is a framework for developers to define which parts of their interactions are public or private, ensuring high performance and low costs.
Can you explain the concept of “Privacy on Demand?”
Privacy on Demand is a concept that acknowledges how the future of blockchain will be cross-chain. Different blockchains specialize in different things. When someone is building a dApp on a specific blockchain, they have an existing network, users, and total value locked. They’re often reluctant to move everything to another blockchain, but they might want some aspects of their dApp to be private.
This is where Privacy on Demand comes in. It allows dApps on any of the 71 blockchains, aside from Ethereum, to integrate privacy features through COTI’s chain. For example, developers can maintain their existing tech stack and simply call our solution via a smart contract for privacy-enhanced operations and then return to their original chain. It’s an on-demand feature—used only when needed.
What advantages does COTI offer to enterprise clients and institutions compared to traditional privacy solutions?
I think a lot of it relates to the privacy solutions I’ve already mentioned, but there’s one particularly important feature: the ability to manage data on-chain privately. Everything on a public blockchain is public, so if you store critical data on it, like an important document, it’s publicly accessible. Naturally, you would encrypt such a document.
The problem is that if you use a smart contract to process that data on-chain, you would need to decrypt it to use it. Once decrypted, it becomes publicly available again. This is why sensitive or private data is rarely stored on-chain—not just because encryption is possible, but because decryption would expose the data.
There are two known methods to solve this. One is Fully Homomorphic Encryption (FHE), which lets you process encrypted data without decrypting it. While it’s intellectually fascinating, it’s extremely slow and expensive. The other solution we offer is Garbled Circuits.
Garbled Circuits achieve the same outcome—allowing you to use encrypted data without decrypting it—but they are thousands of times faster and cheaper than FHE. This efficiency makes our solution viable for enterprises needing secure, private, and decentralized applications.
This also opens up new opportunities in the era of AI, where private data can be stored and processed on-chain to train AI models. Companies can securely train AI using private data without exposing or losing control of it.
How can a partnership with an AI-powered company enhance COTI’s solutions?
We’re exploring a few directions in this space. First, there’s private learning. Imagine storing private data on-chain that can train AI models without the model owner ever seeing the actual data. This is useful for monetizing data while retaining privacy. For example, you could allow your data to train a model, receive payment, and still keep it confidential.
Another direction is federated learning. Let’s say I have a collection of cat images and you have dog images. We both want to train a model to classify these images without sharing our data directly. Federated private learning allows the model to learn from both datasets without exposing individual data to the other party.
This capability could foster collaboration between enterprises while safeguarding sensitive data. Beyond that, we’re also investigating how AI agents could benefit from privacy. For example, agents that can trade or manage funds privately could open up a whole new realm of opportunities. Without privacy, agents’ on-chain actions would be fully visible, eliminating any competitive advantage.
Finally, we’re working on exciting projects like a token discovery platform. It’s similar to Tinder but for investments—you swipe right if you like a token and left if you don’t. AI curates these opportunities, and we’re exploring how privacy can be incorporated into the platform to enhance its usability.
Could you share insights into your collaboration with the Bank of Israel on CBDCs? What role does privacy play in central bank digital currencies?
Privacy is a massive consideration in CBDCs, and central banks understand this. I’ve heard officials from the Bank of Israel state that they don’t want to use CBDCs as tools for surveillance. They recognize that people won’t use CBDCs if they feel their privacy is at risk.
Even today, private transaction data in Web2 systems comes to central banks encrypted. They don’t want to know the details, nor do they want to be liable for such sensitive information. Privacy is not just an expectation—it’s protected by law, and central banks are obligated to uphold it.
In Israel, there was a major initiative where companies could apply to join a sandbox hosted by the Bank of Israel to develop their future CBDC. Hundreds of companies applied, and only 14 were selected, including COTI. We’re the only blockchain network in this group, alongside companies like PayPal and Fireblocks.
We’re currently developing one product with the Bank of Israel and discussing another. While I don’t think we’ll see a CBDC launched this year, our involvement in this initiative has opened doors to similar projects globally. We’re excited about the future possibilities.
What are the key goals for the mainnet launch? How do you plan to ensure a smooth transition for developers and users?
The top priority for a mainnet launch is ensuring it is stable and safe. It needs to handle user funds securely, so safety is non-negotiable.
Another major milestone with the mainnet is the massive token upgrade. Current token holders will be able to upgrade to the new token using a one-to-one ratio. This will also be the moment when many developers and applications that are in the works will officially launch.
We’re partnering with projects in DeFi, identity, AI, gaming, and more. For us, the mainnet is a transformative step—similar to the moment when ChatGPT made AI accessible to everyone. It’s a point of realization for people about what can be achieved.
Additionally, we’re introducing a decentralized node ecosystem. Anyone will be able to run a COTI node, making it an open and rewarding experience.
What trends in Web3 are driving demand for privacy-preserving technologies?
Privacy isn’t just a trend—it’s a fundamental necessity, much like scalability. With privacy, existing applications can be enhanced, and entirely new use cases become possible. For example, confidential transactions enable payments without exposing transaction histories to the world.
DeFi is another area where privacy will be transformative. As the market grows, decentralized exchanges with privacy features will become a significant innovation. AI applications that require privacy will also be a huge area of growth.
The demand for privacy stems from the fact that without it, certain advancements are either impractical or outright impossible. We’re positioned to play a key role in this transformation.
What does the future hold for COTI? How do you see privacy shaping the next generation of blockchain solutions?
Privacy is inevitable and essential for the future of blockchain. We’re building the best technology to enable confidentiality on public blockchains.
The future belongs to highly scalable, interoperable blockchains that integrate privacy as a core feature. The next billion users will come when developers can create innovative products with privacy baked into the stack. When $200 trillion in real-world assets finally move on-chain, COTI will be a critical part of that infrastructure.
Beyond the vision, we’re also actively working on new partnerships and projects. For instance, we’re collaborating with MyEtherWallet, MetaMask, Bancor, and PrivX, among others, to bring privacy-preserving solutions to wallets, DEXs, and lending platforms. We’re exploring privacy standards for token minting and autonomous agents. These efforts ensure we’re not just preparing for the future—we’re actively shaping it.
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About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
