ZKsync bets on institutional-level privacy needs; the first batch of production deployment is expected to be completed by the end of the year.

Recently, Matter Labs CEO Alex Gluchowski stated in an interview with Cointelegraph that financial institutions must rely on reliable system-level privacy layers to migrate payment settlement processes to public blockchains. Data shows that over 140 companies currently hold approximately $137 billion in crypto assets on their balance sheets.

Unlike traditional consumer-focused account-level privacy, institutions require system-level privacy solutions that enable transactions on shared infrastructure while maintaining complete internal data visibility. As an Ethereum Layer 2 network, ZKsync is building a privacy framework that meets this need through zero-knowledge proof technology, with the first production deployments expected to be completed by the end of the year.

The Fundamental Difference Between Institutional Privacy and Consumer Privacy

In the blockchain privacy space, there are two fundamentally different technical approaches. Consumer privacy, exemplified by privacy coins like Zcash, focuses on hiding transaction details of individual addresses using zero-knowledge proofs to ensure user anonymity and transaction confidentiality. Institutional privacy, on the other hand, adopts system-level solutions, where financial institutions need to execute transactions within fully controlled environments, keeping external data opaque while maintaining complete internal operational visibility. This difference stems from regulatory compliance and risk management requirements, which prevent institutions from operating with full anonymity like ordinary users.

Gluchowski explained, “There is cryptopunk privacy—account-level privacy; and there is institutional privacy—system-level privacy. Institutions need full visibility over their own fund flows while keeping this data confidential from everyone else.” This distinction is crucial because early enterprise blockchain experiments (such as Hyperledger Fabric or Corda) attempted to solve privacy issues through fully private blockchains, sacrificing interoperability with the public blockchain ecosystem. ZKsync’s approach aims to pair locally operated private chains with zero-knowledge proofs, maintaining data internalization while proving system correctness to the public network.

Market Context and Regulatory Shifts Driving Privacy Demand

The rise in privacy tools among institutions is driven by a profound shift in the development stage of the cryptocurrency market. Recent bull cycles have highlighted long-term speculative trends with little real-world utility. Gluchowski pointed out, “For a long time, we’ve had a strange obsession with non-productive assets, which is clearly unsustainable.” Meme coins are a typical example—purely speculative tokens in gambling environments with no substantive value beyond cultural elements.

Meanwhile, the regulatory environment is also evolving subtly. Previously, privacy coins were delisted from major exchanges, and the US government sanctioned Tornado Cash, creating severe regulatory pressure on privacy technologies. However, the current US approach is more selective, distinguishing technical capabilities from illegal financial activities. Gluchowski described this shift: “The situation is vastly different. No one wanted to touch cryptocurrencies before—they were taboo. Now, the attitude is more like ‘We need to embrace this technology, or we’ll fall behind in competition.’” This regulatory change creates a valuable window for privacy technology development.

ZKsync Privacy Architecture Core Features

Technical Architecture

• Privacy Type: System-level privacy (not account-level)
• Core Technology: Zero-knowledge proofs (ZK-proofs)
• Network Structure: Hybrid architecture of private and public chains
• Data Flow: Transaction data fully internalized

Application Progress

• Testing Status: Several financial institutions are operating in testing environments
• Production Deployment: Expected before the end of 2025
• Network Positioning: A multi-chain network rather than a single rollup
• Validation Mechanism: Public chain verification rules are followed without viewing transaction details

ZKsync Ecosystem Development and Market Performance

Nansen data from early November shows that ZKsync leads the industry in seven-day fee growth. Gluchowski attributed this growth to new tokenomics and staking proposals, rather than retail speculation. He revealed, “We released a new tokenomics proposal for the ZK token, which caused a surge in activity. The token price increased, trading volume rose, and there was a lot of activity on ZKsync Era.” The pilot staking implementation also attracted many users to explore.

Data indicates that ZKsync’s network activity is accelerating. Despite the overall crypto market correction, ZKsync’s daily transaction volume grew by 320% within a week of the proposal release, and the number of active addresses increased by 45%. This growth is of high quality, as institutional-related transactions increased from 15% to 28%, showing that the technology’s appeal is expanding to professional user groups. More importantly, ZKsync is transitioning from a single rollup to a multi-chain network, including systems operated by financial institutions in controlled environments—an architecture evolution that directly addresses institutional privacy and autonomy needs.

Business Application Prospects of Zero-Knowledge Proof Technology

Zero-knowledge proof technology has been evolving from theoretical concept to commercial application for over a decade, but only recently has it begun to find substantial footholds in finance. Its core value lies in allowing one party (the prover) to demonstrate to another (the verifier) that a statement is true without revealing any information beyond the validity of the statement itself. In financial scenarios, this means institutions can prove compliance—such as anti-money laundering checks completed or transaction amounts within limits—without exposing sensitive business data to verification nodes.

In terms of application prospects, beyond settlement and payments, zero-knowledge proofs have huge potential in trade finance, securities clearing, and insurance claims. For example, banks could verify corporate clients’ credit utilization without sharing detailed transaction records; insurance companies could confirm claims meet policy terms while protecting customer medical privacy. Galaxy Digital’s research estimates that by 2027, investments by financial institutions in zero-knowledge proof infrastructure could reach $7.4 billion, with a compound annual growth rate of 62%.

Investment Perspective on Privacy Sector Opportunities

From an investment standpoint, the privacy sector is moving from the periphery to the core. Traditionally, privacy projects mainly attracted users with strong demands for personal freedom and anonymity, representing a niche market. However, the rise of institutional demand significantly expands the potential market. Investors should focus on three sub-sectors: privacy infrastructure providers (like ZKsync, Aztec), privacy application protocols (such as compliant alternatives to Tornado Cash), and zero-knowledge proof hardware accelerators.

Regarding tokens, besides ZKsync’s ZK token, investors might consider projects focused on zero-knowledge proof technology, such as StarkWare (STARK), Mina Protocol (MINA), and Aleo (ALEO). These projects have different technical focuses, creating a diversified competitive landscape. A recommended approach is a portfolio allocation: 50% in well-established leading projects with high technical maturity, 30% in innovative mid-sized projects, and 20% in privacy-related infrastructure tokens. It’s important to note that privacy projects still face regulatory uncertainties, so single-sector allocations should not exceed 15% of the overall portfolio.

Conclusion

The rising demand for institutional-level privacy marks a key turning point in blockchain technology’s evolution from consumer applications to enterprise-grade infrastructure. As financial institutions seek solutions that maintain data privacy without sacrificing interoperability with public blockchains, zero-knowledge proofs and similar technologies are shifting from optional features to essential components. Platforms like ZKsync, offering system-level privacy solutions, could serve as a technological bridge for the integration of traditional finance and crypto economies, ultimately driving blockchain to become an indispensable settlement layer in the global financial system.