The Second Crypto War: A Private Ethereum

In September 1988, a former Intel engineer named Timothy May distributed a 497-word document at the Crypto '88 conference. He'd written it in ninety minutes, loosely modeled on the Communist Manifesto. It opened with a prophecy:

"A specter is haunting the modern world, the specter of crypto anarchy. Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner."

May wasn't describing some distant future. He was sketching a blueprint. Two persons could exchange messages, conduct business, and negotiate electronic contracts without ever knowing the legal identity of the other. Reputations would become more important than credit ratings. These developments would "alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret."

Five years later, Eric Hughes—May's collaborator and the administrator of the Cypherpunk mailing list—published a companion document. A Cypherpunk's Manifesto opened with a distinction that remains the clearest articulation of the privacy position ever written:

"Privacy is not secrecy. A private matter is something one doesn't want the whole world to know, but a secret matter is something one doesn't want anybody to know. Privacy is the power to selectively reveal oneself to the world."

Hughes understood that privacy wasn't merely a preference but a prerequisite for an open society. And he knew it wouldn't be granted from above: "We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy... We must defend our own privacy if we expect to have any."

His solution was characteristically direct: "Cypherpunks write code."

Thirty-seven years later, developers are going to prison for doing exactly that.

The First Crypto War: When Code Became Speech

The cypherpunks' first test came quickly. In 1991, Phil Zimmermann released Pretty Good Privacy—PGP—software that gave ordinary people access to military-grade encryption. The U.S. government classified cryptographic software as munitions under the International Traffic in Arms Regulations. Zimmermann faced a three-year criminal investigation for exporting weapons. His crime: posting software on the internet.

The cypherpunks' response was characteristically subversive. Zimmermann convinced MIT Press to publish PGP's source code as a physical book, then ship it to European bookstores. The gambit was brilliant: if Zimmermann was an arms dealer, then so was one of America's most prestigious universities. The Electronic Frontier Foundation challenged the Clipper Chip—the NSA's scheme to mandate government backdoors in all encryption. They won.

By 1996, the Justice Department dropped its investigation. Federal courts ruled that code is speech, protected by the First Amendment. By 2000, export restrictions collapsed. Strong encryption became legal, then ubiquitous.

Zimmermann later reflected that PGP "ignited the decade of the Crypto Wars, resulting in all the western democracies dropping their restrictions on the use of strong cryptography." Every HTTPS connection, every encrypted message, every secure bank transfer exists because the cypherpunks won.

The victory seemed permanent. It wasn't.

The Second Crypto War: When Code Becomes Crime

In May 2024, a Dutch court sentenced Tornado Cash developer Alexey Pertsev to 64 months in prison. The judge declared from the bench that "Tornado Cash in its nature and functioning is a tool intended for criminals." Pertsev wrote open-source code that anyone could run. He's now serving four and a half years.

In August 2025, a U.S. jury convicted Roman Storm—another Tornado Cash co-founder—of operating an unlicensed money transmitting business. Storm is now challenging the verdict.

The Samourai Wallet founders fared worse. In April 2024, Keonne Rodriguez and William Lonergan Hill were arrested—Rodriguez in Pennsylvania, Hill extradited from Portugal. In November 2025, they were sentenced to four and five years in federal prison for building a Bitcoin mixer.

The parallel to the 1990s is precise but inverted. Then, the government argued that encryption was a weapon; the cypherpunks established that code was speech. Now, the government argues that privacy tools are money laundering infrastructure; developers are trying to establish that protocols aren't services. The first crypto war asked whether you could publish encryption software. The second asks whether you can run it.

The Privacy Renaissance

But something unexpected is happening. After years of capitulation—privacy coins delisted, mixing protocols abandoned, the industry genuflecting before regulators—the tide appears to be turning.

In December 2023, Vitalik Buterin published "Make Ethereum Cypherpunk Again," a meditation on how far the industry had drifted from its origins. "We are not here to just create isolated tools and games," he wrote, "but rather to build holistically toward a more free and open society and economy." He and Gavin Wood had always conceived of Ethereum as part of a cypherpunk stack—not merely "Bitcoin plus smart contracts" but infrastructure for a permissionless internet.

Buterin has followed words with action. At the Ethereum Cypherpunk Congress in November 2025, he unveiled Kohaku—an open-source framework for building privacy-preserving wallets. The name is Japanese for amber, something that preserves what it contains. The philosophy is characteristically direct: "Privacy is freedom. It gives us space to live our lives in the ways that meet our needs without having to constantly worry about how our actions will be perceived."

The Ethereum Foundation has reorganized around this priority. The Privacy & Scaling Explorations team rebranded as the Privacy Stewards of Ethereum—a 47-member team of cryptographers and engineers tasked with making privacy "a first-class property" of the network. Buterin's roadmap calls for wallets like MetaMask to integrate privacy tools natively, giving users "shielded" balances by default.

Meanwhile, Naval Ravikant ignited a market frenzy in October 2025 with a single tweet: "Bitcoin is insurance against fiat. ZCash is insurance against Bitcoin." The logic was stark—if Bitcoin's transparency makes it surveillable, then a privacy coin becomes a hedge against that surveillance. Zcash surged 140% in a week. The Winklevoss twins piled on, calling it "one of the most important and underrated crypto projects."

Perhaps most telling: ShapeShift, which delisted privacy coins in 2020 under regulatory pressure, has reversed course. Now operating as a DAO rather than a company, ShapeShift announced in October 2025 that it would once again support Zcash's shielded transactions. The structure matters—a decentralized autonomous organization faces different legal exposure than a Swiss corporation with executives to arrest.

The pattern is clear: the industry is rediscovering that privacy isn't a liability to be managed but a feature to be built. And the builders who never stopped are finally getting reinforcements.

Into This Moment Walks Aztec

On November 19, 2025, a network called Aztec launched its "Ignition Chain"—the first fully decentralized layer 2 on Ethereum designed from the ground up for privacy. Not privacy as a feature. Privacy as infrastructure.

The founders—Zac Williamson and Joe Andrews—are not typical crypto operators. Williamson is a former particle physicist who helped develop the PLONK zero-knowledge proof system now used across the industry. Andrews comes from materials science. They raised $100 million from a16z in 2022 and spent it on cryptography research while the rest of crypto chased yield farms, NFT drops, and meme seasons.

Eight years of grinding. The conviction required is difficult to overstate. Most projects pivot to whatever's hot; Aztec kept building privacy infrastructure through multiple crypto winters, watching competitors get prosecuted, knowing they could be next.

What sustained them? The same thing that sustained May, Hughes, and Zimmermann: the belief that the technology matters more than the market. In a recent interview, Williamson put it simply: if he'd pivoted to "some random piece of junk" he didn't believe in, what would be the point? This is the opportunity of a lifetime. Do or die.

The Private World Computer

Aztec's technical distinction is crucial: it's not just private Bitcoin. It's private Ethereum.

Zcash, Tornado Cash, Railgun—these provide private transactions. You can shield a balance, transfer it, unshield it. Useful, but limited. You cannot build complex applications with private state, private logic, and private composability between contracts.

Aztec does exactly that. Every transaction is a zero-knowledge proof by default. Smart contracts can have private and public components. They can call other contracts. They can compose atomically. Users generate proofs locally—sensitive data never leaves their device.

The implications cascade. Consider a private lending protocol: the contract knows your collateral ratio but observers don't. Or a compliant darkpool: trades execute atomically while participants remain anonymous. Or identity verification: prove you're not sanctioned without revealing your name.

This last application—called ZK Passport—uses the NFC chips already embedded in modern passports. Your phone reads your passport's cryptographic chip, then generates a zero-knowledge proof attesting to specific claims without revealing the underlying data. Prove you're over 18 without revealing your birthday. Prove you're from a specific country without revealing which one. Swiss regulators have accepted this as valid sanctions screening—meaning Aztec's token sale uses cryptographic proofs instead of traditional KYC.

This matters enormously because AI is about to break identity verification entirely. Deepfakes can already fool selfie-based KYC systems. Within months, the "take a photo with your ID" paradigm will be worthless. The only verification that survives will be cryptographic—proving things about credentials without revealing them.

The Decentralization Imperative

Most layer 2s promise "progressive decentralization" that somehow never arrives. Aztec launched fully decentralized from day one. No centralized sequencer. Over 500 validators spread globally. Decentralized proving. Community governance from the start.

This isn't ideological purity—it's legal strategy. The courts partially vindicated Tornado Cash on precisely this distinction: OFAC couldn't sanction the autonomous smart contracts because no one controlled them. A protocol that anyone can run is fundamentally different from a service that processes transactions.

Aztec's structure embodies this lesson. The team can be arrested, the company dissolved—but the network would continue. Privacy "hardcoded directly into Aztec's base protocol" through decentralized sequencing, proving, and governance means no central entity exists with the power to violate it.

The founders understand what they're building will attract regulatory attention. They're not naïve about the risks. But they've concluded that the danger comes not from regulators failing to understand the technology but from regulators understanding it all too well—and recognizing that private, permissionless financial infrastructure threatens incumbent power structures that have nothing to do with crime prevention.

The Road Ahead

The Ignition Chain is live but limited—gas limits currently prevent user transactions. Full mainnet comes after audits complete in early 2026. The founders are explicit that this remains experimental.

But the architecture is in place. Through "private intents," users can route transactions through Aztec to access DeFi protocols anywhere on Ethereum—privately. You don't migrate to Aztec; you pass through it. Swap ETH for USDC on Base without revealing your identity. Provide liquidity to Uniswap without exposing your position. The privacy layer blankets existing infrastructure rather than replacing it.

This solves the cold-start problem that kills most new chains. Aztec doesn't need to bootstrap liquidity—it taps existing liquidity everywhere. It doesn't need protocols to redeploy—it composes with them directly.

Cypherpunks Write Code

The cypherpunk movement has always understood that rights not exercised atrophy. Privacy exists only when infrastructure makes it practical. Encryption mattered because PGP made it accessible. Financial privacy will matter only if systems like Aztec make it default.

The second crypto war is uglier than the first. Pertsev is in prison. The Samourai founders are serving time. Storm awaits sentencing. The chilling effect is real—developers fear building privacy tools, projects self-censor, much of the industry has capitulated to surveillance-first thinking.

But not everyone. Vitalik is building privacy wallets. The Ethereum Foundation has reorganized around privacy as a core mission. ShapeShift reversed its capitulation. Naval and the Winklevosses are publicly backing privacy coins. And a team of physicists just shipped a fully decentralized private blockchain after eight years of work that most of the industry had written off as impossible.

Tim May died in December 2018, a few months after calling out an industry he felt had lost its way—too focused on getting rich, too willing to compromise with the surveillance state. He didn't live to see the prosecutions. But he would have recognized what's happening now.

The cypherpunks never left. They just kept writing code. And the code is finally ready.

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Disclaimer: I hold a ZKPassport account and am participating in the Aztec public token sale. The views expressed are entirely my own.

For more on Aztec, visit aztec.network.

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Related Reading: AI and the War Machine — How centralized AI labs abandoned their humanitarian missions to build weapons systems for American empire.