Why 'Privacy as a Feature' is a Weak Strategy in the Age of AA

Privacy is a protocol-level property, not a modular add-on. In AA systems like ERC-4337, bundlers and paymasters have privileged visibility into user operations. A feature-based approach, like a mixer module, creates a fragmented security model where privacy is a brittle, application-specific patch.

Feature-based privacy creates user confusion. A user with a private DeFi session on zkSync and a public NFT mint on Arbitrum via a smart account has two distinct, linkable identities. This defeats the purpose. Compare this to the native privacy of protocols like Aztec or Penumbra, where privacy is the base layer state.

The intent-centric future demands privacy by default. Systems like UniswapX and CowSwap route user intents through solvers. Without default privacy, these solvers extract maximum value by frontrunning or sandwiching the revealed intent. Privacy as a feature in this context is a contradiction; the intent is compromised the moment it leaves the private environment.

Privacy as a feature fails. Post-hoc integrations like Tornado Cash or Aztec require users to exit their primary wallet, breaking UX and fragmenting identity. This creates a compliance honeypot for regulators targeting the bridging layer.

Smart accounts demand stealth by default. A native primitive, like ZK-based stealth address generation, anonymizes every transaction at the protocol level. This contrasts with EIP-4337's current public bundler model, which exposes user intent graphs.

The architectural cost is zero-sum. Adding privacy later forces compromises in gas efficiency and interoperability. Protocols like Safe{Wallet} and Biconomy that treat it as an add-on will be outcompeted by native-privacy stacks.

Evidence: The $625M Ronin Bridge hack was enabled by traceable, EOAbased fund flows. A stealth-by-default account model would have obfuscated the attacker's consolidation, complicating the heist and automated tracking.

Modular privacy creates fragmented security. A dedicated privacy layer like Aztec or Penumbra forces users to trust a separate, often smaller, security budget and consensus mechanism. This introduces a weakest-link vulnerability absent in monolithic chains where privacy is a native, protocol-level guarantee.

Account Abstraction exposes the UX flaw. With AA wallets like Safe or Biconomy, users expect seamless, gas-abstracted interactions. Forcing a hop to a separate privacy chain for a single shielded transaction breaks the intent-flow that protocols like UniswapX and Across rely on, adding latency and complexity.

Composability becomes a negotiation. A modular privacy stack requires constant, trust-minimized bridging of state between execution and privacy layers. This is a coordination nightmare that protocols like StarkEx solve monolithically with validity proofs, but which modular systems struggle to standardize without centralization.

Evidence: The dominant privacy solution on Ethereum is Tornado Cash, a monolithic smart contract, not a modular L2. Its usage, despite sanctions, demonstrates that native execution-layer privacy attracts more developer and user activity than fragmented, modular alternatives.