Ethereum Developers Push for Privacy by Default Post-Tornado Cash Sanctions

In 2022, the U.S. government's sanctioning of the Ethereum-based crypto mixing service Tornado Cash sparked a debate within the crypto community that has persisted for three years. Tornado Cash allowed users to transfer crypto anonymously, but the government argued that the service facilitated money laundering. This led some of Ethereum's validators and block builders to avoid engaging with Tornado-linked transactions, making the service slower and costlier to use. Advocates contended that complying with the sanctions amounted to censorship, undermining a fundamental cypherpunk principle. President Donald Trump supported the cypherpunks and lifted the sanctions on Tornado Cash in March of this year, but for some Ethereum developers, the situation highlighted a flaw within the network that still exists today: Why should users depend on third-party apps to transact privately on the network?

Crypto security researcher Pascal Caversaccio explained in a blog post that publicly accessible transaction graphs allow anyone to trace the flow of funds between accounts, and balances are visible to all participants in the network, undermining financial privacy. While the Ethereum network's transparency fosters trustlessness, it also opens the door to potential surveillance, targeting, and exploitation. Perhaps emboldened by the recent Tornado Cash developments, Ethereum developers and researchers have once again begun discussing ideas for making the Ethereum network private at its core. Caversaccio argued that privacy must not be an optional feature that users must consciously enable — it must be the default state of the network. Ethereum's architecture must be designed to ensure that users are private by default, not by exception.

Caversaccio's post identified several potential interventions that could make Ethereum more private for end-users. One idea is to encrypt Ethereum's public mempool — where transactions are sent before they're recorded permanently. Another involves making Ethereum transactions confidential through zero-knowledge cryptography, new transaction formats, and other methods. Today, Ethereum operates in a partial, opt-in privacy model, where users must take deliberate steps to conceal their financial activities — often at the cost of usability, accessibility, and even effectiveness. This paradigm must shift. Privacy-preserving technologies should be deeply integrated at the protocol level, allowing transactions, smart contracts, and network interactions to be inherently confidential.

In response to Caversaccio's post, Ethereum co-founder Vitalik Buterin left a comment on the network's main developer forum with his own much shorter privacy-oriented Ethereum roadmap. Buterin suggested focusing on privacy for on-chain payments, anonymizing on-chain activity within applications, making communication on the network anonymous, and privatizing on-chain reads. To achieve all of this, Buterin listed various steps like integrating certain third-party privacy features into the core network. One of the more substantial interventions suggested by Buterin involves moving the network towards a “one address per application” model — a departure from today's system, where a single application may employ dozens of wallets for different features. “This is a major step, and it entails significant convenience sacrifices, but IMO this is a bullet that we should bite, because this is the most practical way to remove public links between all of your activity across different applications,” Buterin wrote. According to Buterin, if all of his suggestions are implemented, private transactions could be the default on Ethereum.

The privacy discussion comes a few weeks before Ethereum’s next major upgrade, Pectra, which doesn’t have a major focus on privacy. Ethereum developers are also currently planning the network’s following upgrade to Fusaka. The changes to be included in that hard fork are not yet set in stone. The ongoing debate highlights the tension between the need for transparency and the desire for privacy within the Ethereum community. As developers continue to explore ways to enhance privacy, the future of Ethereum's privacy features remains a topic of intense discussion and development.