Why Privacy Will Be the Biggest Moat in Crypto

**Ali Yahya** (0:00)
People claim that users don't ultimately care about privacy, and I think that may be true when it comes to Instagram and Facebook and other social media, but I don't believe it is true when it comes to finance. In order for crypto to actually become mainstream, it's going to have to have privacy. And so then that creates a self-reinforcing feedback loop, it creates a network effect, that means that there will be a handful of winning privacy chains. Everything else will be small relative to those winners.

**Robert Hackett** (0:36)
Welcome to the a16z crypto podcast. I'm Robert Hackett, and today we're joined by Ali Yahya, a general partner here at a16z crypto, who recently published a thesis about how he thinks privacy will become the most important moat in crypto. We talked to him about his idea, what's given him conviction in it, and its implications. We also talk about the variety of technologies that are available to us to achieve that privacy vision, and whether the outcome of having just a handful of privacy chains that win conflicts with the decentralization ethos of crypto. If you want to read Ali's post, you can check it out on a16zcrypto.com. It's part of our Big Ideas for 2026 package. Here is my conversation with Ali. Ali, you recently put out a thesis. You said that privacy will be the most important moat in crypto.
That's a big claim. What gives you such confidence in that thesis? And why are you so sure of it now?

**Ali Yahya** (1:41)
This was inspired by just me spending some time thinking about how block space is becoming functionally the same everywhere. There's this overabundance of sort of quote unquote high performance blockchains that are coming to market, or that maybe in some cases have existed for a long time now.
And also with the fact that we now have very easy bridging solutions, that block space that is essentially functionally equivalent is also now accessible from everywhere. So there's this commoditizing force. So I was trying to think what will be the actual sources of defensibility and value capture in crypto longer term. And it occurred to me that privacy is a unique feature, both because it is the one feature that no existing blockchain or very few existing blockchains actually have. And also, it is a feature that creates a form of lock-in that actually strengthens the network effects of a blockchain. And then the reason for that is that in a public blockchain, in a public setting, because of the fact that it's trivial to move assets from one chain to another, you don't have strong network effects because users no longer care as much what blockchain they're on. And I do believe that longer-term people are not even going to know. They're just going to be operating and using applications that under the hood use whatever blockchain satisfies the needs of the application best. And the blockchains themselves will become fungible and commoditized with respect to one another. That's the case in the public setting. In the private setting, once you have privacy, that is no longer true as much because moving secrets is much, much harder than moving assets. The reason for this is that when you have private states on a blockchain, moving it to another chain entails quite a bit of risk that some of the private state will be exposed. And the reason for that is that you are, different privacy zones have different anonymity sets and moving between one zone and another entails transactions on the mempool.

**Robert Hackett** (3:45)
I want to get into all these different aspects of what you're saying here, especially the idea of lock-in and this idea of the difficulty, the friction involved when it comes to migrating secrets. But before we get into that, I want to interrogate this view that block space is becoming commoditized. Because I think that there are people working on different teams out there who are different blockchain tribes are working on different projects. They have different end goals, different visions of what they're trying to build, different product roadmaps, different sort of trade-offs that they're making in their technical approaches. And so I want to interrogate this idea that it's all becoming commoditized, because I think some of those teams might push back and say, hey, we're building something that's unique and differentiated and it's fit for these purposes versus those purposes. Even if we just look at Solana and Ethereum, they've taken different approaches in what they're trying to optimize for. So what would you say to somebody who is saying, no, my blockchain is different?

**Ali Yahya** (4:47)
I would argue that at this point, performance alone is no longer enough. So in order to succeed as a general purpose blockchain, you need one of three things. You either need an already thriving ecosystem, the way that maybe Solana and Ethereum have. You need some kind of unfair advantage on distribution, the way that some of the fintech companies like Robinhood and others may have.