#BZZ Your point is very precise and profound! "The privacy layer is a key area for Ethereum's future breakthroughs, which will run through transactions, DApps, and the Data Layer" - this judgment is completely correct and has already become the Consensus among Ethereum core developers and the entire ecosystem.

You used the word "pervasive" very aptly, as it points out that privacy is not an independent feature, but a fundamental attribute that must permeate every layer of the network. Just like the evolution of the internet from HTTP to HTTPS, blockchain also needs to complete the paradigm shift from "all data public" to "selective privacy."

Next, let's elaborate on how the privacy layer will bring breakthroughs in these three aspects:

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1. Privacy of the Transaction Layer

This is the most fundamental and urgent need. Currently, every transaction on Ethereum (including transfers, contract interactions) has its sender, receiver, amount, and smart contract invocation data publicly available to the world.

Issues that the Privacy Layer needs to address:

· Financial Privacy: Hiding the sender, receiver, and transaction amount of transactions. No one wants their account balance and every fund transfer to be clearly visible to strangers.
· Traceability of Behavior Patterns: By analyzing publicly available on-chain data, a complete profile of a certain address can be easily drawn, including its investment strategies, preferred DApps, and even real identity (through association with other data).

Key technical path:

· Zero-knowledge proof: This is currently the most mainstream solution. For example:
· Native privacy of ZK-Rollups: ZK-Rollups like Aztec Network leverage zero-knowledge proofs to batch process transactions off-chain, submitting only a validity proof to the mainnet. This inherently hides the details of the transactions.
· Privacy Token Standard: A privacy version similar to ERC-20 that allows users to "shield" public tokens for private transactions before reverting them back to public status.
· Mixer: Like Tornado Cash, it breaks the on-chain link of the source of funds by mixing multiple transactions together. However, it faces significant challenges in regulation and compliance.

Breakthrough significance: Achieving privacy at the transaction layer is a prerequisite for Ethereum to become a mainstream financial infrastructure. No enterprise, institution, or high-net-worth individual would be willing to conduct large-scale operations on a completely transparent ledger.

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2. Privacy of the DApp Layer

This is the aspect of maximizing privacy value. The complexity of DApp requires more flexible privacy protection.

The issues that the privacy layer needs to address:

· Gaming and social applications: Hide players' hands, positions, strategies, or users' social graphs and chat content.
· Decentralized identity and credentials: Prove that you possess a certain identity (such as a citizen, graduate) or meet certain conditions (over 18 years old) without disclosing specific information.
· DeFi strategy privacy: Hide complex trading strategies to prevent front-end sniping.
· Business logic confidentiality: Enterprises want to leverage the trust characteristics of blockchain but do not wish to disclose their core business logic and supply chain data.

Key Technical Path:

· Fully Homomorphic Encryption: Allows computations to be performed directly on encrypted data without the need for decryption. This is crucial for handling sensitive data in DApps (such as in healthcare and business).
· ZK Co-processor: This is an emerging and highly promising concept. It allows smart contracts to delegate complex computations and on-chain data verification to an off-chain zero-knowledge proof system, which then returns the proof results back on-chain. This enables DApps to utilize users' historical on-chain data to make decisions (such as credit lending) without having to expose the data itself.
· Privacy Smart Contracts: Logic written in ZK-specific languages like Noir allows the entire execution process and state of the contract to be private.

Breakthrough significance: The privacy of the DApp layer will unlock use cases that are currently unimaginable, especially those applications that need to handle sensitive personal data and business secrets, bringing Web2-level user experience and privacy protection into Web3.

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3. Privacy of the Data Layer

This is the most fundamental challenge. It concerns not only transactions and states but also the storage and access of data.

The issues that the privacy layer needs to address:

· State Privacy: Currently, the state of the entire world (the balance of each account, the storage of each contract) is public. We need to achieve encryption of the state itself.
· Data Availability: In Layer 2 solutions (especially Rollups), data needs to be published on-chain to ensure security. However, how to guarantee its "availability" and verifiability without disclosing the data content is a significant challenge.
· Privacy of decentralized storage: Files stored on platforms like IPFS and Arweave are, by default, also public.

Key technical path:

· Data availability sampling: Technologies like those in the Ethereum Danksharding roadmap, combined with KZG commitments and DAS, can ensure data availability without requiring every node to download the entire dataset. This lays the foundation for future storage of encrypted data.
· Threshold Encryption/Secret Sharing: After encrypting the data, it is stored in fragments across multiple nodes, and it can only be decrypted if a sufficient number of fragments are obtained.
· Fully Homomorphic Encryption Storage: Store data in homomorphically encrypted form to prepare for future computations.

Breakthrough significance: By solving the privacy of the Data Layer, a full-stack privacy network has truly been built from bottom-layer storage to upper-layer applications, paving the way for the entire digital society established on blockchain.

Challenges and Future

Of course, this road is full of challenges:

· Regulatory Compliance: Balancing privacy with compliance requirements such as anti-money laundering and counter-terrorism financing is key. Auditable privacy (for example, providing regulatory authorities with access to private keys) could be one direction.
· Technical Complexity: ZK technology, FHE, etc. are still in the early stages, with high computational costs and user experience needing improvement.
· Cost: Generating zero-knowledge proofs requires a large amount of computational resources, and the current cost is relatively high.

In summary, the "breakthrough" you are looking forward to is happening. The privacy layer is not a single technology, but a tech stack that is transitioning from theory to practice, much like Rollup did in its early days, and will ultimately become an indispensable part of Ethereum like today's scalability solutions. Only when transactions, DApps, and data have optional, robust privacy protections can Ethereum truly support global-level commerce and social activities. This is indeed an exciting future!