According to Blockworks, several crypto startups are working on developing the first-ever privacy-centric Ethereum Layer 2 (L2) solutions. Currently, transactions and smart contract executions on Ethereum are publicly visible, which can expose vulnerabilities to malicious actors. Privacy solutions offer decentralized application (dapp) developers the opportunity to address these issues without compromising security.

Aztec, a privacy layer of Ethereum, uses zkSNARKs and its own programming language, Noir, to offer private transfers. It combines private and public execution in a single zk rollup, with users' devices responsible for encrypting transactions before processing. Aztec's primary focus is to design a platform for engineers to write private smart contracts without requiring in-depth mathematical knowledge of zk proofs. The company recently revealed a new testing environment, Aztec Sandbox, and plans for a testnet launch early next year.

Encryption startup Fhenix aims to bring fully homomorphic encryption (FHE) to smart contracts. Unlike privacy startups that use zero-knowledge technology, FHE encryption performs computations directly on encrypted data, keeping it on-chain. Fhenix launched a developer testnet in July and plans for a full-scale testnet launch of its FHE rollup in early 2024.

COTI, a privacy L2 building on Ethereum, plans to use Garbled Circuits to enable private transactions. These circuits allow two different parties to evaluate information, even if they distrust one another. COTI will launch a developer testnet V2 in Q2 of 2024, with its mainnet launch following soon after.