a16z Trend Insights: By 2026, Privacy Will Become a Key Moat in the Crypto Industry

2026.01.07

a16z Trend Insights: By 2026, Privacy Will Become a Key Moat in the Crypto Industry

Privacy as a Service.

2026.01.07 - 07:53:28

a16z隐私

Navigating Web3 tides with focused insights

Privacy as a Service.

Author: a16z crypto

Compiled by: TechFlow

This week, we continue to share our observations on this year's trends... Stay tuned and subscribe to our weekly newsletter for more trend updates, industry reports, developer guides, news analysis, and other resources.

Privacy Will Be the Most Important Moat in Crypto This Year

Privacy is a key function driving global finance on-chain. However, almost all existing blockchains today have significant shortcomings in privacy. For most blockchains, privacy seems to be an afterthought, an ancillary feature. Yet, privacy features themselves are now powerful enough to become a differentiating competitive advantage for a blockchain to stand out.

The role of privacy goes beyond providing security; it offers even more important value: it can create on-chain lock-in effects, forming so-called "privacy network effects." This is particularly crucial today, as performance competition is no longer the sole determining factor.

Thanks to cross-chain bridge protocols, migrating from one chain to another has become very simple as long as the data is public and transparent. But once privacy is involved, this is no longer the case: transferring tokens is easy, but transferring secrets is difficult. When you move from a private chain to a public chain, or switch between two private chains, there is always risk. Observers of the chain, mempool, or network traffic might infer your identity. Crossing the boundary between private and public chains, or even switching between two private chains, can leak metadata such as transaction timing and amount correlations, increasing the likelihood of being traced.

Compared to many homogeneous new chains, whose competition might drive transaction fees down to near zero (since block space is largely the same across chains), blockchains with privacy features can form stronger network effects. In fact, if a "general-purpose" blockchain lacks an established ecosystem, killer applications, or significant distribution advantages, there is little reason for users to choose it, let alone remain loyal to it.

On public blockchains, users can easily transact with users on other chains—which chain they join makes little difference to them. However, on private blockchains, the chain a user chooses is crucial because once they join a chain, they are more likely to stay on it rather than risk privacy leakage by migrating to another chain. This phenomenon creates a "winner-takes-all" dynamic. And since privacy is a core requirement for most real-world use cases, a few privacy chains could capture a large share of the crypto market.

—Ali Yahya (@alive_eth), General Partner, a16z Crypto

The Key Issue for Communication Apps in 2026: Not Just Post-Quantum, But Decentralization

As the world prepares for the advent of quantum computing, many encryption-based communication apps (like Apple, Signal, WhatsApp) have been ahead of the curve, making excellent efforts. However, the problem is that every mainstream communication tool relies on a private server operated by a single entity. These servers are easy targets for governments to shut down, implant backdoors, or compel access to private data.

What's the point of quantum encryption if a country can shut down the server, if a company holds the keys to a private server, or even just owns a private server?

Private servers require users to "trust me," whereas having no private server means "you don't need to trust me." Communication doesn't need an intermediary company. What we need are open protocols that allow users to trust no one.

The path to achieving this lies in decentralized networks: no private servers, no single application, all code open-source. Employ the most advanced encryption—including encryption resistant to quantum threats. In an open network, no individual, company, non-profit, or country can deprive us of our ability to communicate. Even if a country or company shuts down one app, 500 new versions will appear the next day. Shut down one node, and the economic incentives brought by technologies like blockchains will prompt new nodes to immediately take its place.

When people control their messages through keys, just as they own their funds, everything changes. Applications may come and go, but people will always control their messages and identities; even if they can't own the app, end-users can truly own their messages.

This isn't just about post-quantum resistance and encryption; it's about ownership and decentralization. Without these two, what we build is merely an "unbreakable encryption" that can still be shut down.

—Shane Mac (@ShaneMac), Co-founder and CEO, XMTP Labs

Secrets-as-a-Service: Making Privacy Core Infrastructure

Behind every model, agent, and automation lies a simple dependency: data. But most data pipelines today (i.e., data fed into models or output from models) are opaque, mutable, and difficult to audit.

This might be acceptable for some consumer applications, but for many industries and users (such as finance and healthcare), enterprises must ensure the confidentiality of sensitive data. And this has currently become a major obstacle preventing institutions from tokenizing real-world assets.

So, how do we drive secure, compliant, autonomous, and globally interoperable innovation while protecting privacy?

There are many methods, but I want to focus on data access control: Who controls sensitive data? How does data flow? Who (or what) can access this data? Without data access control, anyone wishing to keep data confidential currently needs to rely on centralized services or build custom solutions—which is not only time-consuming and expensive but also hinders traditional financial institutions and other industries from fully unleashing the functions and advantages of on-chain data management. And as intelligent agent systems begin to autonomously browse, trade, and make decisions, users and institutions across industries need cryptographic-level guarantees, not just "best-effort trust."

Therefore, I believe we need "Secrets-as-a-Service": a new set of technologies that can provide programmable native data access rules, client-side encryption, and decentralized key management. These technologies can dictate who can decrypt data under what conditions and for how long—and enforce this via on-chain technology.

Combined with verifiable data systems, "secrets" will no longer be an afterthought, an application-level patch, but part of the internet's fundamental public infrastructure—truly making privacy core infrastructure.

—Adeniyi Abiodun (@EmanAbio), Chief Product Officer and Co-founder, Mysten Labs

From "Code is Law" to "Spec is Law": A New Paradigm for DeFi Security Testing

Last year, hacks in the decentralized finance (DeFi) space even affected protocols that were battle-tested, had strong teams, rigorous audits, and years of operational experience. These incidents revealed an unsettling reality: current security practices still largely rely on heuristic methods and are mostly handled on a case-by-case basis.

To achieve higher security this year, DeFi security needs to shift from focusing on vulnerability patterns to design-level properties, from a "best-effort" approach to a "principled" approach:

In static/pre-deployment phases (such as testing, auditing, formal verification), this means systematically proving global invariants, not just verifying manually selected local invariants. Currently, AI-assisted proof tools developed by multiple teams can help write specifications, propose invariants, and share the heavy lifting of what was once expensive and time-consuming manual proof engineering work.
In dynamic/post-deployment phases (such as runtime monitoring, runtime enforcement, etc.), these invariants can be transformed into real-time safeguards, serving as the last line of defense. These safeguards are directly encoded as runtime assertions that every transaction must satisfy.

Thus, instead of assuming every vulnerability can be discovered in advance, key security properties are enforced by the code itself, automatically rolling back any transaction that violates these properties.

This isn't just theory. In practice, nearly every attack to date could potentially have triggered these checks during execution, thereby potentially preventing the hack. Therefore, the once-popular "Code is Law" concept is evolving into "Spec is Law": even novel attacks must satisfy the core security properties that maintain system integrity, making any remaining attacks only minor or extremely difficult to execute.

—Daejun Park (@daejunpark), a16z Crypto Engineering Team