The lack of private state within blockchain is holding back this technology from being more widely adopted by businesses. However, I believe that the blockchain privacy and security sector will boom over the next few years as privacy enabling tech becomes more advanced.

The current state of privacy enhancement features 3 main technologies: Multi-Party Computing (MPC), Fully Homomorphic Encryption (FHE), and Trusted Execution Environments (TEE). How do these systems work and how will they be implemented in blockchain? Let's find out:

Multi-Party Computing is the process of splitting data across multiple nodes (computers) so that it's not all processed in one place. All the data is encrypted before being processed, and then a portion of that encrypted data is sent to each node. For an attacker, it then becomes much more difficult to obtain sensitive data because it's spread out across these nodes so that even if they are able to take over one, they will only be able to get a portion of the data and won't be able to decrypt it without getting the rest of the data from the other nodes.

Fully Homomorphic Encryption is a system where the data being processed is never decrypted and instead stays in an encrypted state the entire time. Usually, data has to be decrypted into plain text to be processed, which opens it up to security issues. FHE processes all the data without converting it into plain text so that it's never in this more vulnerable state.

Trusted Execution Environments are a system that uses physical hardware to isolate the data being processed. Having data processed in a TEE makes it so that no one except the node responsible for processing that data can access it since it's only being processed by that one physical computer.

On their own, each of these systems have individual flaws. However when combined, they become much more formidable against attacks. Blockchain has the ability to integrate these systems into one cohesive environment through the use of ZK proofs - a technology that's rapidly advancing in the Web3 ecosystem.

MPC is a core tenant of decentralization, where spreading the workload across a network inherently makes it more secure. If each of these nodes has its own TEE, the computation process occurs solely on that node where no one else can access it. When adding in FHE to this mix, processing transactions can be done without ever revealing any transaction data - something that ZK proofs already do today. ZK proofs alone aren't enough to increase onchain privacy, which is why all of these systems need to work together to create a network-wide private state.

While a critical part of decentralization, full transparency can scare away businesses from using this technology, which is why enhancing onchain privacy is crucial for increasing blockchain adoption. @milian wrote a great article about all of these processes and explains them in a much more nuanced and in-depth way: https://x.com/milianstx/status/1873767492767654359…