Is Complete Privacy Possible on Ethereum? Developers Advocate for Encrypted Mempool and Standardized Privacy Features

Key Points:

• In 2022, the U.S. government sanctioned the crypto mixing service Tornado Cash, sparking intense debate within the crypto community.

• In March, President Donald Trump lifted those sanctions, reigniting discussions on privacy: Why should users rely on third-party apps for private transactions on the network?

• Crypto security researcher Pascal Caversaccio shared his thoughts on incorporating privacy-preserving features into the blockchain in a blog post on Wednesday.

• In response, Ethereum creator Vitalik Buterin presented his own set of ideas on Friday.

The U.S. government's 2022 sanctioning of the Ethereum-based crypto mixing service Tornado Cash sparked a debate within the crypto community, a conversation that is still ongoing three years later.

Tornado Cash allowed users to transfer crypto anonymously, but the government argued it was used for money laundering. This led some Ethereum validators and block builders to avoid transactions linked to Tornado, making the service slower and more expensive.

Supporters of Tornado Cash claimed that complying with the sanctions was a form of censorship, violating a core cypherpunk principle. In March of this year, President Donald Trump sided with the cypherpunks by lifting the sanctions. However, for some Ethereum developers, the episode highlighted an ongoing issue: Why should users rely on third-party apps for privacy when transacting on the network?

Crypto security researcher Pascal Caversaccio highlighted in a blog post that publicly accessible transaction graphs allow anyone to trace the flow of funds between accounts, with balances visible to all participants in the network, which undermines financial privacy. While Ethereum’s transparency promotes trustlessness, it also opens the door to potential surveillance, targeting, and exploitation.

Encouraged by the recent developments surrounding Tornado Cash, Ethereum developers and researchers are revisiting ideas to make Ethereum's core network more private.

"Privacy should not be an optional feature that users must actively enable — it should be the default state of the network," Caversaccio argued, outlining his vision for a privacy-focused Ethereum roadmap. "Ethereum’s architecture must be designed to ensure that users' privacy is the default, not the exception."

In his post, Caversaccio suggested several potential changes, both new and revisited, that could make Ethereum more private for users. One idea involves encrypting Ethereum’s public mempool — where transactions are temporarily stored before being permanently recorded. Another idea is to use zero-knowledge cryptography, new transaction formats, and other methods to make Ethereum transactions confidential.

"Currently, Ethereum operates under a partial, opt-in privacy model where users must actively work to conceal their financial activities — often at the expense of usability, accessibility, and even effectiveness," wrote Caversaccio. "This paradigm needs to change. Privacy-preserving technologies should be integrated at the protocol level, ensuring that transactions, smart contracts, and network interactions are inherently confidential."

In response to Caversaccio's post, Ethereum co-founder Vitalik Buterin shared a shorter privacy-focused roadmap on the network’s main developer forum.

Buterin proposed prioritizing privacy for on-chain payments, anonymizing on-chain activities within applications, making network communication anonymous, and privatizing on-chain data access.

To achieve these goals, Buterin suggested incorporating certain third-party privacy features into the core network. One significant intervention he proposed is shifting to a “one address per application” model, moving away from the current system where a single application may use multiple wallets for different features. Buterin acknowledged that this would require major convenience sacrifices but argued it was the most practical way to eliminate public links between various activities across applications.

Buterin believes that if all his suggestions are implemented, private transactions could become the default on Ethereum.

This privacy discussion comes ahead of Ethereum's upcoming major upgrade, Pectra, which does not prioritize privacy. Developers are also planning the next upgrade, Fusaka, though the specifics of that hard fork are still undecided.