Ethereum is betting big on privacy.

In a major statement on October 8, the Ethereum Foundation announced an expanded effort to embed privacy into the blockchain, led by a new “Privacy Cluster” team of 47 engineers, researchers, and cryptographers.

“Privacy is the freedom to choose what you share, when you share it, and who you share it with,” the foundation said. “It’s essential for dignity, security, and digital trust.”

The Ethereum Foundation is a non-profit that supports the Ethereum ecosystem.

The initiative signals a turning point for crypto’s privacy debate.

On one side, Ethereum’s leaders are moving to make privacy a foundational feature of its ecosystem. On the other, courts in Europe and the United States are deciding whether writing privacy software can itself be treated as a crime.

In August, Roman Storm, co-founder of Tornado Cash, a protocol designed to obfuscate the traceability of crypto transactions, was convicted of conspiracy to operate an unlicensed money transmitting business. Many feared it would chill development across open-source privacy software.

Storm has filed a motion to acquit.

In May last year, a Dutch court found fellow Tornado Cash developer Alexey Pertsev guilty on money laundering charges, sentencing him to 64 months in prison.

A full-stack approach

The crypto industry is still digesting the fallout from Tornado Cash’s high-profile criminal trials and regulators’ shifting tone on privacy technology.

The Ethereum Foundation now appears determined to rebuild confidence in privacy as legitimate infrastructure rather than a liability.

The Privacy Cluster will focus on several initiatives, including private payments, improving the user-experience of privacy technologies, and building a new privacy-preserving wallet.

Many of these ideas rely on zero-knowledge proofs, a cryptographic technique that lets someone prove something is true, without revealing any information beyond the statement’s validity itself.

The cluster also absorbs and expands the foundation’s long-running Privacy and Scaling Explorations group.

Since 2018, the group has built more than 50 open-source tools including Semaphore, a private messaging system, MACI, a private onchain voting system, and Anon Aadhaar, a way for Indian government ID holders to prove their residency without revealing any personal information.

Battle rages

In August, a group of 115 crypto firms, builders, investors, and advocates sent a letter to the Senate Committee on Banking urging lawmakers to introduce provisions into the Clarity Act to shield open-source developers from being misclassified or prosecuted as operators of money transmitting businesses.

“It is critical that legislation recognises and preserves the historical protections afforded to open-source software development,” said the letter, signed by the DeFi Education Fund, an industry lobby group.

Other signatories included heavy hitters like venture capital giant a16z crypto, crypto exchanges Coinbase and Kraken, Galaxy Digital, and Ripple.

Ethereum co-founder Vitalik Buterin has long advocated for privacy-preserving technologies, publicly supporting privacy protocol Railgun, and donating almost $500,000 to the legal defences of Storm and Pertsev.

“Improving privacy on Ethereum is a great responsibility,” the foundation said.

Crypto market movers

• Bitcoin is up 0.4% over the past 24 hours to trade at $122,000.
• Ethereum is down 0.6% over the past 24 hours, trading at $4,430.

What we’re reading

Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email lance@dlnews.com.