Ethereum co-founder Vitalik Buterin on Wednesday outlined near-term steps the network is taking to build privacy into the chain, a feature highlighted by institutions during the Hong Kong Consensus as necessary for widespread institutional adoption of blockchain technology.
Buterin’s X post was technically dense but highlighted a simple fact: the world’s largest smart contract blockchain is making private transactions a feature of the network, not a workaround provided by third-party tools.
The message comes as the Ethereum Foundation, the nonprofit organization that supports the blockchain network and ecosystem, faces a wave of high-profile departures amid an internal transition linked to a new organizational mandate to redefine its role within Ethereum.
The three new near-term initiatives are: Account Abstraction (AA) and FOCIL, Casual Keys, and Access Layer work. Each of the three adds a different layer of privacy to Ethereum.
Here’s what each one actually does:
Uncensorable private transactions
Now, if a user sends a private transaction on Ethereum through crypto mixers like Tornado Cash, it first goes to the public memory pool (mempool), a sort of holding area visible to everyone on the network. Imagine dropping off a letter at a post office where each employee can read the address before finalizing which one to move for delivery.
Likewise, the Ethereum entities that decide which transactions go into each block can see those transactions and exclude them, which amounts to censorship.
FOCIL, or forced choice fork inclusion lists, makes censorship more difficult by allowing a committee of validators to propose a list of transactions that block builders are expected to include. Ignoring these transactions may lead to the block being rejected by the network. It then becomes difficult to censor transactions.
Meanwhile, account abstraction makes Ethereum accounts work better. Today, most Ethereum users rely on external accounts (EOAs) through applications such as a basic MetaMask, Trust Wallet, or Coinbase Wallet, each controlled by a single private key. If a user loses this key, they lose access to their funds.
Account abstraction allows all accounts to behave like programmable smart contracts, providing features like multi-signature approvals and social recovery. It also allows apps or friends to pay a user’s transaction fees.
keyed “nonces”
Each Ethereum account has an occasional number, a number used only once. It acts as a count of all transactions offered, increasing by 1 with each new transaction sent. This configuration helps prevent the same transaction from being repeated on the network.
It’s like getting a sequentially numbered ticket at a restaurant counter. But this poses a problem. Even if an order is private, anyone looking can see that ticket #5 and ticket #6 are from the same person. On Ethereum, this sequential nonce allows observers to link transactions to the same account, even if the transactions are private and their contents hidden.
The fix for this is the occasional key. This replaces the single counter with a structure that includes an occasional key and an occasional sequence, giving each account several distinct ticket counters for different activity types. This makes it more difficult to trace transactions and correlate them on-chain.
“This replaces the unique sender nonce with (nonce_key, nonce_seq), giving frame transactions independent replay domains,” said pseudonymous researcher soispoke.eth.
Work at the access layer: private reads and Kohaku
The third proposed measure addresses the problem that although transactions are private, users’ browsing behavior on the network is not. Imagine making a private phone call. No one heard the conversation, but the telecommunications company knows who called and to whom.
Similarly, every time a user queries the blockchain to check a balance or read a smart contract, their wallet relies on third-party RPC node providers, exposing their IP address, physical location, and the full identity of their wallet to the enterprise servers that record this data.
Kohaku, an open source privacy toolkit introduced in 2025, is at the heart of this effort. Rather than completely eliminating reliance on RPC node providers, Kohaku gives wallet developers tools to query blockchain data privately, using techniques like private information retrieval, so that nodes can respond to queries without knowing what specific data the user requested.
“The utility value of ETH”
Ethereum has long had a goal of privacy, but this is not a native feature. The new initiatives, if implemented, could serve as a positive catalyst for Ether (ETH), Ethereum’s native token.
The plan for new privacy initiatives is not just a story; the market also validates it.
Valuations of established privacy-focused projects have surged, reflecting real demand. For example, Zcash (ZEC) is up more than 800% since the start of last year, pushing its market cap to around $9.85 billion. Meanwhile, Monero (XMR), despite frequent criticism for its use by bad actors in darknet markets and for financing terrorism, has also increased by more than 100% during the same period.
Bitcoin market leader, fell by more than 5% over the same period.
One X user explained Ethereum’s need for privacy best: “The missing component of Ethereum at this point is a form of native privacy. The utility value of ETH would increase literally overnight. Privacy is the type of feature that can make an asset truly financial.
None of these changes are in effect yet, but Tuesday’s release is a significant signal about where things will be headed.
