Privacy is essential to scaling tokenized assets and DeFi, Aztec co-founder says

Privacy is a prerequisite for expanding real-world asset tokenization and decentralized finance, according to Aztec co-founder Zach Williamson. Protecting sensitive information while allowing assets and services to work together could remove a constraint on the market’s growth, he argued.

In an interview shared on Bankless’s X account, Williamson said privacy would gain adoption by enabling financial products that cannot operate without it. Users generally favor lower costs and a better experience over privacy alone, making it a requirement for new applications rather than a feature consumers necessarily pay for.

Trading real-world assets such as mortgages and bonds requires checks on ownership and legal eligibility, Williamson said. Current tokenization models often depend on a data custodian that knows users’ identities, accounts and activity. That dependence makes it difficult to incorporate those assets into other DeFi services.

Developers seeking to combine assets from several platforms must establish relationships with each platform’s data custodian, he explained. When know-your-customer records remain off-chain, putting an asset’s transactions on a blockchain does not by itself make the asset available to an open ecosystem of applications.

Williamson said these constraints push financial activity toward proprietary networks and vertically integrated applications. Losing the ability to combine new assets and financial functions with existing protocols limits the range of assets and liquidity accessible on-chain, he argued, making privacy necessary to address that bottleneck.

He presented Aztec’s ability to support private smart contracts without network-level viewing keys or centralized monitoring authorities as a distinguishing feature. Williamson claimed that, apart from Zcash, Aztec was the only privacy-preserving blockchain without such backdoors and said he was willing to debate that claim publicly. Its private data, identities and credentials could serve as inputs to smart contracts that other financial applications reuse, he said.

Williamson distinguished that network design from decisions made by individual applications. A bank building on Aztec could add a viewing key to its own application code, even though the protocol does not provide one at the network level. He described Aztec as a neutral network whose users determine how their applications operate.

He cited technical complexity and integration with existing financial infrastructure as reasons other projects rely on third parties. Private transactions require complex zero-knowledge proofs and place additional demands on networks, creating incentives to use outside operators. Integrating with existing infrastructure can also bring demands for viewing access to support transaction monitoring and compliance, he said.

Decentralization was another condition for protecting privacy, Williamson argued. He said Aztec’s live version had reached stage two, a measure of rollup decentralization. Centralized operators can acquire responsibilities to monitor network activity, he said, underscoring the need for infrastructure that allows financial services to work together without depending on those operators.