Can privacy chains like HashSphere, Midnight, and Zcash encourage TradFi adoption?

Enterprises are exploring distributed ledger technology, but many are hesitant to fully embrace DLT due to privacy concerns.

An emerging solution among altcoins is to develop private or permissioned networks that are interoperable with public ledgers, allowing organizations to enjoy the benefits of decentralization without exposing confidential information.

Private networks connected to Hedera Hashgraph can play a key role in unlocking corporate participation. Other networks such as Cardano and XRP Ledger are also exploring privacy options. Let’s take a look at how privacy can be the next step in DLT adoption.

Lessons learned from other private network initiatives

Hedera’s architecture is well-suited to a hybrid model that combines the architecture of public chains and private chains, such as HashSphere, Hedera’s upcoming privacy layer.

By allowing enterprises to run operations in a private environment while settling evidence, audit trails, or tokenized assets on Hedera, enterprises gain compliance-friendly control without sacrificing transparency or interoperability.

Other ecosystems can demonstrate how private networks can drive enterprise adoption. Cardano’s Midnight Layer 2 network is a data protection-centric chain designed to provide developers with confidential smart contract capabilities and enable enterprises to expand their use of cryptocurrency.

Midnight provides zero-knowledge capabilities for businesses looking to protect sensitive information while maintaining the ability to share data openly and selectively. This model responds to the trend where enterprises want flexibility in privacy with the assurance of public verification methods.

Zcash (ZEC) offers another alternative using zk-SNARKs, one of the first networks to utilize ZK proofs. Zcash will allow holders to make private transactions while allowing interoperability with public blockchain infrastructure as the DeFi ecosystem is planned.

Tyler Winklevoss:

We strongly believe that Zcash can become a meaningful percentage of Bitcoin market capitalization. Bitcoin’s transparency alone has the advantage of being a privacy hedge or insurance policy.

Likewise, HashSphere, the private Hashgraph network, demonstrates how organizations need a private alternative for sensitive business data. The privacy layer allows enterprises to continue participating in adopting existing networks rather than turning away from permissioned chains and creating them.

JP Morgan’s Kinexys blockchain is a private network that settles billions of transactions every day. Banking systems want privacy for obvious reasons, and altcoin networks are trying to attract their attention.

Accelerate enterprise integration through privacy protection

Private networks connected to Hedera can unlock a wide range of enterprise use cases. Financial institutions can run internal payment processes, have customer databases, or enable near-instantaneous private transactions using native tokens or stablecoins.

As enterprises continue to demand privacy, compliance, and operational control, hybrid architectures like HashSphere, Midnight, and privacy chains like Zcash can contribute to the next generation of blockchain adoption.

Last year, Zcash soared 1303.3% as the network DeFi became more adaptable and engaged with the community. As governments continue to enter the digital asset space, investors are keen on privacy features, which is causing many participants to look to private alternatives.