Technical experts explain the on-chain privacy and security revolution.

Author: a16z crypto

Translation: Blockchain in Plain Language

1: More new investments, and a return of some old business models

AI will continue to explode in 2025, and cryptocurrency investments are also expected to warm up later that year. I am pleased to see this trend extend into 2026. Stablecoins are undoubtedly the focus, leading to a significant concentration of trading activity in the intersection of cryptocurrency and fintech. Notably, this includes a return to traditional business models: most stablecoin businesses are no longer monetizing through token network models but are instead generating revenue through take rates.

2: Several standout sectors in new investments: prediction markets, DeFi, and stablecoins

The first emerging area is applications and businesses built around prediction markets. As these platforms gain momentum, supporting businesses are being established, and I believe they have huge growth potential.

Additionally, with potential market structure legislation in 2026, we should see continued growth of DeFi applications in the U.S., as well as increased interest from traditional finance (TradFi) in these markets. After the passage of the GENIUS Act, we have already seen a similar explosive trend in stablecoin businesses.

Another category is agentic, stablecoin-driven payments. The internet was not originally designed for agents; it could even be said to have been designed to prevent automated activities. However, as agents become first-class economic entities representing user transactions, parts of the internet architecture need to be redesigned to support them. In the new agentic paradigm, stablecoins are destined to become the native payment method.

3: IPO window for cryptocurrency companies

After the first quarter of 2025, financial institutions have shown unprecedented interest in cryptocurrency, leading to a significant rise in business metrics for service providers: including custodians, stablecoin infrastructure companies, and institutional trading platforms. Many of these companies are nearing the scale required for an IPO this year and are fully capable of achieving a leap to public listing in 2026.

Next Steps: Privacy Trends in 2026

Privacy is a prerequisite for moving global finance on-chain and is expected to become the biggest moat in the cryptocurrency space. Here are our team's (and some guest contributors') views on the future of on-chain privacy.

This year's instant messaging applications face not only the challenge of resisting quantum attacks but also the need for decentralization

As the world prepares for quantum computing, many encrypted communication applications (like Apple, Signal, WhatsApp) are leading the way. The issue is that every mainstream instant messaging tool relies on trusting a single organization to run private servers. These servers are highly susceptible to government shutdowns, backdoor implants, or forced handovers of private data.

If a country can shut down a server, or a company holds the keys to a private server, then what good is quantum encryption? Private servers require "trust me," while the absence of private servers means "you don't need to trust me." Communication does not need intermediaries. Communication requires open protocols that do not require trust in anyone.

The way to achieve this is through network decentralization: no private servers, no single application, fully open-source code, and top-notch encryption including defenses against quantum threats. With an open network, no individual, company, nonprofit, or nation can strip away our ability to communicate. Even if a country or company shuts down an application, 500 new versions will emerge the next day. Shut down one node, and under blockchain economic incentives, new nodes will immediately take its place.

When people own their messages through keys just as they own money, everything changes. Applications may evolve, but people will always control their messages and identities; end users can now own their messages even if they do not own the application itself. — Shane Mac, Co-founder and CEO of XMTP Labs

We will see "secrets as a service," making privacy a core infrastructure

Behind every model, agent, and automation lies a simple dependency: data. However, most data pipelines today—whether inputting into models or outputting from them—are opaque, mutable, and non-auditable.

This is not an issue for some consumer applications, but many industries (like finance and healthcare) require companies to maintain the confidentiality of sensitive data. This is also a significant barrier currently hindering institutions from tokenizing real-world assets (RWA).

I focus on data access control: who controls sensitive data? How does it flow? Who (or what) can access it? Without data access control, anyone wanting to keep data confidential currently has to use centralized services or build custom systems—this is not only time-consuming and labor-intensive but also hinders traditional financial institutions from fully leveraging the advantages of on-chain data management. As agent systems begin to autonomously browse, trade, and make decisions, what users and institutions need is cryptographic guarantees, not "best-effort trust."

That is why I believe we need "secrets as a service": new technologies can provide programmable native data access rules, client-side encryption, and decentralized key management to enforce who can decrypt, under what conditions, and for how long… all of which are enforced on-chain.

Combined with verifiable data systems, "secrets" will become part of the foundational public infrastructure of the internet, rather than an afterthought application-level plugin, thus making privacy a core infrastructure. — Adeniyi Abiodun, Chief Product Officer and Co-founder of Mysten Labs

Security testing will shift from "code is law" to "spec is law"

Last year's hacking incidents in decentralized finance (DeFi) affected some well-established protocols with strong teams, diligent audits, and years of operational experience. These events highlighted an awkward reality: today's standard security practices are still largely heuristic and case-by-case.

To mature this year, DeFi security needs to shift from capturing vulnerability patterns to designing layer attributes, and from a "best-effort" to a "principled" approach:

• In the static/pre-deployment phase (testing, auditing, formal verification), this means systematically proving global invariants, rather than merely verifying manually selected local properties. Several teams are currently developing AI-assisted proof tools that can help write specifications, propose invariants, and alleviate the burdens of costly manual proof engineering in the past.

• In the dynamic/post-deployment phase (runtime monitoring, runtime execution, etc.), these invariants can be transformed into real-time guardrails: the last line of defense. These guardrails will be directly encoded as runtime assertions that every transaction must satisfy.

Now, we no longer assume we have caught every vulnerability; instead, we enforce key security properties in the code itself, automatically rolling back any transactions that violate these properties.

This is not just theoretical. In practice, almost all exploits that have occurred to date would trigger these checks during execution, potentially terminating the hacking attempts. Thus, the once-popular "code is law" has evolved into "spec is law": even novel attacks must satisfy the security properties that maintain system integrity, making the remaining attacks trivial or extremely difficult to execute. — Daejun Park, a16z crypto engineering team

Article link: https://www.hellobtc.com/kp/du/01/6195.html

Source: https://a16zcrypto.substack.com/p/the-forces-shaping-crypto-this-year

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