2025 Review of Crypto Privacy Technologies
It is the last month of 2025, and it’s time for a round of “year-in-review” content. We’ll start with a review of the 2025 crypto regulatory progress across major countries and regions. This series will later include, but is not limited to: a stablecoin market review, a memecoin market review, a review of crypto attack incidents, a SuperEx platform review, and more.
Today is the fourth installment of this series. The topic is “2025 Review of Crypto Privacy Technologies.” Over the past year, driven by the dual forces of an increasingly complex global regulatory environment and continuously rising data security needs, crypto privacy technologies have shown a development trend of multi-dimensional deepening and innovation.
From the perspective of technical iteration: Zero-knowledge proof (ZKP) technology is no longer confined to theoretical research or niche application layers; its efficiency and practicality have significantly improved.
From the perspective of expanding application scenarios: Crypto privacy technology is penetrating from the traditional digital currency domain into a broader Web3 ecosystem.
From the regulatory perspective: The development of privacy technology is also facing new challenges and new opportunities from regulators.
From user cognition and market acceptance: As data breach incidents occur more frequently and awareness of personal information protection awakens, user demand for privacy-enhancing products and services continues to grow.
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The Crypto Privacy Survival Battle Behind the $3.4 Billion Stolen
Today I saw a set of data online: in 2025, the entire crypto industry has cumulatively lost more than $3.4 billion, hitting a historical high. At the same time, according to the tracing of fund flows, more than 60% of funds ended up flowing to North Korean hacker organizations, which is enough to illustrate one point: hacking attacks have evolved from the scattered guerrilla-style actors of previous years into professionalized, organized, systematic attacks.
However, more than 75% of major attacks point to the same core weakness — blockchain transparency. This places higher demands on privacy technology.
Shrinking Privacy Teams and Talent Shortages: The Hidden Worry Behind Efficiency Gains
In 2025, a seemingly counterintuitive phenomenon is happening in the privacy sector: privacy technology is getting stronger, but privacy teams are getting smaller.
On one hand, the maturation of zero-knowledge proof toolchains (such as Circom, Halo2, and the Plonk series) has greatly lowered the engineering barrier of privacy protocols;
On the other hand, tightening capital conditions and rising regulatory uncertainty have forced many privacy projects to reduce team size, and some have even shifted into “maintenance mode.”
The deeper problem is — privacy engineers themselves are becoming scarce resources. Privacy technology is not ordinary smart contract development; its core involves:
Cryptography
Mathematical proof systems
Low-level systems engineering
Security auditing and game-theoretic design
The training cycle for this type of compound talent is extremely long, while market demand is expanding rapidly, directly leading to one result: the “usability” of privacy systems has improved, but the “security margin” has not expanded in sync. Against the backdrop of highly organized attackers and frequent action by nation-state adversaries, this structural contradiction — “engineering efficiency gains + insufficient talent reserves” — is becoming one of the biggest systemic risks before 2026.
AI’s Dual Role in Privacy Protection: An Empowering Tool and a Source of Risk
In 2025, AI has deeply entered the privacy sector, but it is not a one-way positive. As an empowering tool:
AI is used to automatically generate ZK circuits;
It assists in vulnerability scanning and formal verification;
It optimizes private transaction routes and gas costs;
It increases the complexity of de-linking on-chain behaviors.
Some privacy protocols have already begun introducing AI as a “privacy-enhancing middleware layer,” significantly lowering the user barrier. But as a source of risk:
AI makes on-chain behavior pattern recognition more precise
Address clustering and fund path analysis efficiency increases exponentially
Multimodal data fusion (on-chain + social + device) is dismantling “weak anonymity”
In other words: AI is simultaneously increasing the ability to “build shields” and “break shields.” This means that future privacy protection is no longer a question of “whether to use privacy technology,” but whether it can continue evolving in an AI adversarial environment.
Privacy Design: From Compliance Requirement to Strategic Advantage
In the past, privacy was more often viewed as a “compliance burden” or a “regulatory opponent.” But in 2025, this perception is undergoing a fundamental shift. More and more institutions are realizing: privacy is not used to “fight regulation,” but to “reduce systemic risk.”
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Especially in highly sensitive domains such as finance, payments, identity, and AI:
Data minimization = risk minimization
Verifiable disclosure = compliance efficiency improvement
Local processing = reduced attack surface
Based on this, privacy design is upgrading from a “functional module” into a long-term systemic competitive advantage. Protocols that consider the balance between privacy and transparency from the ground up often demonstrate stronger resilience in security incidents, regulatory changes, and user trust crises.
Technology: From Fringe Tech to Nation-State Entry
When we talk about it, nation-state-level entry and confrontation stem from the active operations of the Lazarus Group, a North Korean hacker organization. Their planned, layered, strategic hacking attacks make it difficult for non-state organizations to respond. Crypto security has upgraded from technical confrontation into asymmetric warfare between states.
The clearest sign is that multiple countries and large institutions have begun to:
Invest in zero-knowledge proof research
Test privacy modules in CBDCs and government chains
Explore nation-state standards for “compliant privacy”
This marks a transformation in the identity of privacy technology: from underground tools to infrastructure-level capabilities. At the same time, it also means the privacy sector will inevitably enter:
Standardization
Auditing
Compliance
Privacy is no longer “whether you want to use it,” but “whether you use it compliantly and credibly.”
Rebalancing Transparency and Privacy
In 2025, a question that had long been simplified into “either black or white” finally formed a more mature consensus within the industry: transparency and privacy are not mutually exclusive value choices, but design variables at different system layers. The real question has never been “whether to be transparent,” but “at which layer to be transparent, transparent to whom, and transparent to what extent.”
Under the new technical and regulatory realities, a clearer layered path is gradually being established:
The protocol layer remains transparent and verifiable
The user layer provides privacy and choice
Regulation intervenes via interfaces rather than the protocol
First, at the protocol layer, transparency remains a non-negotiable foundation
Whether it is the consensus mechanism, state transition rules, or asset issuance and clearing/settlement logic, everything must remain public, verifiable, and auditable. Transparency at this layer serves the credibility of the overall system — it is the foundation for preventing wrongdoing, avoiding black-box operations, and maintaining decentralized order. If the protocol layer is privatized or blurred, the entire blockchain system will degrade into “black-box finance” and lose its meaning of existence.
Second, at the user layer, privacy is being reaffirmed as a “legitimate right,” not an optional add-on
Users do not need to be forced to expose their full identity, complete asset structure, or long-term behavioral trajectories just to use the system. Through zero-knowledge proofs, selective disclosure, and DID, users can only prove “I meet the conditions,” “I am qualified,” and “I am not violating rules,” without publicly revealing “who I am” and “all my historical behavior.” This “minimum necessary disclosure” principle is becoming the privacy design consensus for the next generation of Web3 products.
Finally, at the regulatory layer, the method of intervention is undergoing a structural shift
More and more practice shows that hard-coding compliance requirements into the protocol itself damages privacy and reduces system flexibility. In contrast, regulating through on-chain/off-chain interfaces, compliance gateways, and audit proofs is more aligned with technical reality and the logic of rule of law. Regulators are no longer trying to “see everything,” but to ensure that when necessary, it “can be proven.”
From a more macro perspective, this rebalancing is not just a technical upgrade, but a manifestation of institutional maturity. Zero-knowledge proofs, selective disclosure, and decentralized identity are essentially answering the same question of our era: how to avoid individuals being harmed by “excessive transparency” without sacrificing system credibility.
When blockchain begins to respect boundaries, adopt layered governance, and be transparent on demand, it truly gains the conditions to move toward mainstream society. This is not a simple technical iteration, but a “civilizational upgrade” that must be completed.
Summary
Looking back at 2025, crypto privacy technology is no longer a fringe narrative, but has been pushed to the core position of the industry.
The expansion of attack scale forces privacy upgrades
Regulatory complexity pushes privacy compliance
AI entering the battlefield pushes privacy into an era of dynamic game-theoretic confrontation
It can be foreseen that in the future Web3 world:
Systems without privacy design will be difficult to survive in the long term;
Privacy without transparency will also lose its foundation of trust.
Truly mature crypto infrastructure must be built on the dynamic balance between the two. This is the most important lesson 2025 has left for the entire industry.
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