Why We Don’t Need Privacy-Focused Layer 1 Blockchains
There is already enough evidence to state that building privacy blockchains is not worth it.
Let’s examine the status of the current privacy blockchains:
- Monero, Zcash & Dash transactions per day have remained flat at 25k, 6k & 17k per day since 2021 with no growth.
In contrast, projects that build privacy tools on existing layer1s have seen explosive growth:
Since launching on Ethereum in 2019, Tornado Cash has seen a steady increase in transaction volume as well as unique user count. 90% of the TVL is from Ethereum.
Railgun application fees and revenue have been growing steadily as shown above. 90% of TVL is on Ethereum.
Why is this the case?
Bootstrapping a DeFi ecosystem and dev tools is a hard task in itself, and doing this while solving privacy makes it even harder.
In contrast, Tornado Cash and Railgun are secured by layer 1. Users have access to all the economic activity on the blockchain and benefit from the rich history of existing dApps and builders.
Projects in the privacy space
New Blockchains
Aztec: It is a privacy-focused Ethereum L2. It uses zk-magic to enable privacy. However, it doesn’t use EVM’s Solidity as the smart contract language. Instead, it uses Noir. So, it might take some time for a full DeFi ecosystem to develop.
Monero (XMR): Monero is perhaps the best-known privacy-centric cryptocurrency. It is a Layer1 blockchain that uses ring signatures and stealth addresses to obscure all transactions’ origins, amounts, and destinations.
Oasis Network (ROSE): It is a privacy-enabled L1. It differentiates itself by separating the consensus and execution layers, which gives them scalability and flexibility. Their Oasis Privacy Layer (OPL) is making waves. With OPL, all dApps on EVM chains can add privacy to their apps. Currently, ROSE has a market cap of around $609 million.
Build on existing blockchains:
Tornado Cash ($TORN): It is impossible to talk about on-chain privacy without mentioning Tornado Cash. It is the leading mixing service, with over $440 million in TVL.
Railgun ($RAIL): With this, you can use any DeFi app privately. There is no bridge, no isolated chain or liquidity, or similar. Just create a private Railgun account and transfer funds to it. Then you can use DeFi with your private account.
TLDR: Privacy-focused Layer 1s haven’t seen much adoption; instead, privacy tools built on existing blockchains — where users and the DeFi ecosystem already exist — have seen great adoption.
