On some Ethereum L2s, bots now burn over half the fuel simply looking for MEV, and so they don’t pay proportionally for it. That’s a scaling and market-fairness downside rooted in market construction.
The privateness dialog in crypto has lastly escaped the “nameless cash” framing that dominated the final cycle. In early 2026, the urgency is financial and rooted in fast monetary realities.
The trade faces a structural downside: on-chain transparency generates extractable worth at large scale, and that extraction has grown right into a scaling bottleneck reasonably than remaining a purely philosophical concern.
Flashbots has documented how MEV-related “search spam” can devour greater than 50% of fuel on main layer 2s whereas paying a small share of charges. Alchemy, citing EigenPhi information, factors to just about $24 million in MEV revenue extracted on Ethereum over simply 30 days, from Dec. 8, 2025, to Jan. 6, 2026.
When a hedge fund’s $10 million DEX swap is seen within the mempool earlier than it lands, slippage from sandwich assaults can dwarf fuel prices.
Privateness is now not a function request. It is a market equity downside.
Reads, writes, proving
The Ethereum Basis’s Privateness and Scaling Explorations group has standardized a three-part framework: non-public writes, non-public reads, and personal proving.
Non-public reads relate to hiding transaction intent earlier than execution. Non-public reads disguise which customers and apps are querying, comparable to balances and positions. Non-public proving is about making zero-knowledge proofs and attestations low cost and moveable sufficient to embed all over the place.
Cais Manai, co-founder and CPO of TEN Protocol, argues probably the most pressing downside is reads. He said that the trade has spent years obsessing over hiding who despatched what to whom, the ‘write’ aspect of privateness.
Nevertheless, he famous:
“The true hemorrhage proper now’s on the learn aspect: the truth that each stability, each place, each liquidation threshold, each technique is sitting there in plaintext for anybody to examine. That is what powers MEV. That is what makes institutional DeFi a non-starter.”
Over 112,000 ETH, roughly $400 million at present costs, has been extracted from customers by sequencers and MEV bots feeding on the readable state, in keeping with TEN’s estimates.
The answer Manai advocates entails encrypting the whole execution setting utilizing Trusted Execution Environments (TEEs). He defined:
“Contract state and logic keep encrypted whereas in use, not simply at relaxation. No person reads what they don’t seem to be speculated to, as a result of there’s nothing uncovered to learn.”
Tanisha Katara, founding father of Katara Consulting Group, sees “writes” as the most expensive downside proper now.
In accordance with her:
“Learn privateness (RPC leakage, question patterns) is a slow-burning surveillance situation. Write privateness (front-running, sandwich assaults on institutional flows) is actively destroying worth right now. It is a whole bunch of hundreds of thousands per 12 months being extracted from customers as a result of their transaction intent is seen earlier than execution. “
Andy Guzman, who leads the Ethereum Basis’s Privateness and Scaling Explorations group, emphasizes that personal reads usually are not extensively understood.
He elaborated additional:
“Non-public Writes is the one which at present takes most consideration, it is the ‘first base’ and arguably the very first thing you need to do. Non-public Proving is the enabler of the opposite two, and it has superior considerably in recent times. Nonetheless so much to do.”
Ethereum non-public writes because the wedge
Non-public orderflow is a product.
Flashbots’ MEV-Share operates as an order-flow public sale during which customers and wallets selectively share transaction information to redistribute MEV. By default, 90% of extracted worth flows again to customers reasonably than disappearing to bots.
Encrypted mempools symbolize the following layer. Shutter’s analysis paperwork a pathway that makes use of threshold encryption and timed key launch, built-in with proposer-builder separation.
Transactions enter the mempool encrypted and are decrypted solely after the order is dedicated, eliminating the general public mempool as an assault floor. The design acknowledges sensible constraints: latency overhead, reorg edge instances, and coordination challenges throughout validator units.
The financial stress is actual sufficient that main infrastructure suppliers are constructing MEV safety into default flows.
Alchemy’s MEV overview characterizes the issue as systemic, with documented revenue extraction totaling roughly $1 billion yearly throughout main chains.
LayerWhat’s uncovered todayEconomic harmWhat’s deploying now (examples)Principal bottleneckWritesTrade intent pre-executionSandwiching / slippageMEV-Share, non-public orderflow, encrypted mempool researchCoordination + pockets defaultsReadsBalances / positions / queriesStrategy leakage / MEV fuelPrivate RPC, stealth addresses (ERC-5564), TEEs / confidential executionUX + developer UXProvingPrivacy proofs portability/costDeployment frictionzk tooling enhancing (Ethproofs: ~5× latency ↓, ~15× price ↓)Integration + product selections
Silent leak changing into the following Ethereum headline
The Ethereum privateness roadmap now explicitly elevates non-public reads as a first-class observe.
RPC privateness, which hides which addresses question which contracts, is necessary as a result of question patterns expose methods. If a bot observes {that a} particular handle repeatedly checks a liquidation threshold, it is aware of the place is close to collapse.
Pockets-side privateness primitives are the place this will get sensible. Stealth addresses are formally standardized below ERC-5564, enabling recipient privateness by producing distinctive, unlinkable addresses for every fee.
The specification exists, however broad Ethereum pockets adoption stays hindered by UX challenges, together with scanning incoming funds, reconciling balances throughout ephemeral addresses, and the complexity of key administration.
Manai’s developer UX argument hits hardest right here:
“The true UX bottleneck in 2026 is developer UX, the hole between ‘I need to construct a personal utility’ and really with the ability to do it with out studying a wholly new programming mannequin, a customized language, or a bespoke proving system.”
He highlighted the necessity for full EVM/SVMs operating inside TEEs so builders can construct encrypted dApps utilizing the identical instruments, languages, and psychological fashions they have already got. No circuits to jot down, no customized VMs to study.
Proving is enhancing quick sufficient
Zero-knowledge proving prices have collapsed. Ethproofs’ 2025 evaluation paperwork onboarding a number of zkVMs and provers, verifying roughly 200,000 blocks, and seeing latency fall roughly fivefold whereas prices dropped round fifteenfold over the 12 months.
Proof technology is now not the first constraint on privateness deployment.
The Ethereum bottleneck has shifted to coordination and integration. Guzman identifies person expertise and value as the first obstacles for retail customers, and regulation and compliance as the first obstacles for establishments.
He mentioned:
“The most cost effective transaction you may ship on Ethereum is round 21,000 fuel, roughly $0.02. A personal switch can simply be 420,000 fuel or extra. In durations of low exercise, it is okay (round $0.40), however excessive exercise may turn out to be pricey for some use instances.”
Katara frames it as a coordination downside:
“Proof price was the bottleneck in 2023-24. It is resolving. The coordination downside is the bottleneck: Who decides that shielded sends are on by default in a pockets? Who governs the important thing server threshold in an encrypted mempool? These are the unsexy mechanism design issues that decide whether or not privateness truly reaches customers.”
Regulation is shaping and directing the Ethereum design area
Privateness builders are designing within the shadow of compliance necessities and authorized threat.
The US Treasury delisted Twister Money sanctions in 2025, however authorized uncertainty did not vanish. Twister Money developer Roman Storm confronted a blended verdict: responsible on an unlicensed money-transmitting enterprise cost, with the jury deadlocked or acquitted on different counts.
On the compliance aspect, the EU’s crypto journey rule regime below Regulation (EU) 2023/1113 took impact on Dec. 30, 2024, requiring the gathering and transmission of identities for crypto-asset transfers.
Privateness is not disappearing, however being productized into kinds that may survive regulation: selective disclosure, coverage controls, auditability home windows.
Everlasting opacity scares regulators. Privateness that is auditable on a schedule is one thing they will work with.
Katara notes the irony:
“Permissioned and enterprise chains could ship default privateness to institutional customers earlier than public chains ship it to retail.”
What minimal viable privateness appears to be like like in 2026
For the typical MetaMask person in 2026, Katara expects one-address-per-application to turn out to be extra widespread, elective shielded sends in just a few wallets, and early RPC privateness options.
Guzman factors to stealth addresses and shielded swimming pools as already sensible, with UI enhancing quickly:
“I believe we’re going to see extra L2s specializing in funds and personal transfers.”
Manai is extra pessimistic about defaults on most chains. He said:
“Actually? Near nothing. The common person in 2026 remains to be broadcasting each swap, each stability verify, each approval in plaintext. The minimal viable privateness ought to be: your balances aren’t public, your commerce intent is not seen earlier than execution, and you are not shedding worth to front-runners.”
Three paths ahead
The primary situation is that MEV makes privateness unavoidable.
Wallets and apps proceed to combine non-public transaction pathways, comparable to non-public RPC, MEV-Share-style routing, and per-app addressing. The set off is sustained MEV extraction plus extra institutional capital transferring on-chain.
The second situation is confidential execution goes enterprise-first. TEEs and policy-based encryption acquire traction in managed environments, comparable to establishments, regulated apps, and personal markets, as a result of they prioritize enterprise confidentiality over shopper anonymity.
The third situation is that regulatory chill pushes privateness to an opt-in-only mannequin. If enforcement focuses broadly on privateness tooling, retail privateness UX stays area of interest. Groups shift to selective disclosure and “coverage privateness” designs, comparable to Privateness Swimming pools, reasonably than generalized shielding.
Privateness in 2026 is not a function. It is a response to structural issues that turned too costly to disregard.
Ethereum MEV extraction, technique leakage, and on-chain surveillance create quantifiable losses at an institutional scale. The know-how to deal with these issues exists: encrypted mempools, stealth addresses, confidential execution environments, and zero-knowledge proving with collapsed prices.
The barrier is not cryptography anymore. It is coordination, developer UX, and the unsexy work of creating privateness the default reasonably than opt-in.
The trade spent the final cycle constructing privateness as an exception. The subsequent cycle will decide whether or not privateness turns into infrastructure (boring, invisible, and all over the place) or stays a distinct segment function for the paranoid and the institutional.
The distinction comes down as to whether the individuals constructing wallets, apps, and protocols determine that leaking every part by default is a bug price fixing. In 2026, the economists lastly counsel it is a bug.
