A Vision for Light Protocol

Swen Schäferjohann
Light Protocol Writings
8 min readNov 16, 2021


co-authored by swen schäferjohann and jorrit palfner

It’s 2021, and crypto is blooming again. Even your favorite pizza shop down the street now accepts crypto payments.

You pay for your pizza with a stablecoin — only to be reminded of the current state of privacy: well, there’s no privacy. Now, anyone who knows your favorite pizza shop’s public key has full access to your complete payment history.

You wouldn’t publish your bank statements on social media even though you think you have nothing to hide.

Extrapolate this to the average mainstream user, and you’ll quickly realize: if we can’t solve privacy at scale, crypto won’t become mainstream.

This post is addressing the following question: could Light Protocol scale privacy to a billion crypto users? It’s divided into two parts. First: why might privacy be able to scale to a billion crypto users. Second: if privacy could scale, why we think it’s most likely to be Light Protocol.

Why privacy might scale

In order to understand why privacy might be able to scale to a billion crypto users, one first has to know why it isn’t currently able to scale.

The overwhelming majority of humans readily discard privacy for convenience and better user experience (UX).

That’s also why Google Search gets ~56x more queries than privacy-focused search DuckDuckGo. Their UX is just better.

The same applies to crypto. Today, maintaining privacy in crypto is very hard.

So if we make privacy more convenient, we can move the needle toward the right end of the spectrum.

Just making it somewhat easy is probably not enough. The UX has to be unnoticeable; private crypto transactions shouldn’t feel any less convenient than regular ones.

It’ll be a long road until we get to this point.

But we believe it’s possible to achieve unnoticeable UX by taking on the most critical problem of private transactions: liquidity.*

*So what’s the deal with liquidity? Liquidity (as in throughput) is what in common privacy solutions determines how quickly a transaction can become private. That’s because — put simply — the more transactions flow through such a privacy system the lower the chance that a single sender can be linked to a recipient. (More on how it works in a later post)

UX and liquidity form a strong dependency; you need one to improve the other, and vice-versa.

This dependency between UX and liquidity is what we call the “UX-Liquidity flywheel”.

One requirement for the UX-Liquidity flywheel is low cost; you need low cost and sufficiently good UX and liquidity to get it going.

The powerful thing about the flywheel is that once it gains momentum it’ll become an unstoppable force that enables more liquidity — which improves UX, and so on.

If we scale the flywheel successfully the UX of private transactions could eventually be on par with regular transactions.

And if that happens privacy could scale to a billion crypto users.

Why Light protocol

Two new questions arise:

  1. How does one start the UX-Liquidity flywheel?
  2. How scale it?

The short answer:

  1. Solve the most pressing use case of today’s early adopters.
  2. Provide composable privacy infrastructure with shared liquidity to enable more use cases.

Let’s dive into the first part in detail first. We’ll talk about the second part of providing composable privacy infrastructure later.

Part I

Who are today’s privacy early adopters?

They are folks who want private transactions on Solana right now; many of them are DeFi users who don’t want to be copy-traded. Others want to keep their identity separate from their crypto net worth.

Solana doesn’t have a native privacy solution yet. That leaves users with two options in which they can maintain privacy.

They could bridge over to ETH, use existing privacy solutions over there, then move their funds back to Solana.

But that’s expensive and slow.

Alternatively, they could run complicated schemes that involve centralized exchanges to create new wallets, transaction layering, and separation of concern.

But that’s not just complicated to do — it’s really bad UX, a huge time suck, and no worthwhile option for many.

Today’s DeFi Solanians want a simple way to fund their wallets anonymously.

That’s why we introduce the first use case built on Light Protocol: Light Shield.

Light Shield will provide Solana with privacy from day one — and it will provide the fuel to start the UX-Liquidity flywheel.

Light Shield

Light Shield works like prepaid cards but for crypto.

Users can fund fresh wallets anonymously on-chain and then use them to participate in the crypto ecosystem. (Or finally, pay for their pizza without doxxing themselves)

It works as follows: users shield tokens to Light’s privacy pool, and after some waiting time unshield again into a new address.

During that process, the program breaks any on-chain link between the deposit and withdrawal address.

Here we’ll highlight some of Light Shield’s improvements along with cost and UX and liquidity that will make the early adopters’ lives easier.

Low cost

Current privacy protocols on Ethereum have high fees. That means the only use case that makes sense for privacy right now is high-value transactions.

High fees block out most regular users from using privacy solutions.

Some privacy protocols build on L2s to enable low fees. But each L2 is locked into its own application and liquidity silo.

Users who want to participate outside their L2’s silo need to move through the underlying L1 (i.e. Ethereum), which comes with high fees again.

We’re convinced that Solana — next to its sub-second confirmation times and airtight security — offers the best of both worlds: high liquidity growth and ultra-low fees. ($13.5B+ TVL and growing at incredible pace and privacy for cents instead of dollars)

Choosing Solana allows us to reach near-free and fast private transactions and tap into its fast-growing DeFi ecosystem. This is fundamental to our vision of frictionless privacy.


As said before, maintaining privacy on Solana is very hard right now.

We propose two core UX improvements over existing solutions on other chains that make privacy more accessible to DeFi users.

1) Flexible deposit sizes
Most existing solutions only allow fixed-sized deposit amounts, not arbitrary amounts.

For example, if a user wants to transfer 116 ETH privately, they have to split them into 8 separate deposits! (1x100 ETH, 1x10 ETH, 6x1 ETH)

This is far from the convenience that regular crypto transactions provide.

Fortunately, using Light Shield users can deposit any amount of SOL and fund any amount of wallets.

That’s because Light Shield uses a shielded pool similar to Zcash to enable arbitrary deposit amounts.

When talking to dozens of DeFi users, we learned that this is clearly the most anticipated feature.

2) Easier cryptographic note storage
Nowadays, when you deposit into most existing privacy solutions, they return a cryptographic note to you.

The note acts like a ticket for your tokens. Anyone who knows that note can now withdraw to a new wallet address.

So you need to safeguard your note like a private key.

Imagine you’d have to store and enter a new private key whenever you wanted to make a transaction! Sounds inconvenient? It is.

Luckily, Light Shield abstracts that away.

Notes are stored securely on-chain — so users can access and manage their deposits by using their regular wallets.


Liquidity plays the most important part in scaling the UX-Liquidity flywheel towards frictionless privacy. Remember: the more liquidity is in the system, the faster your deposit reaches decent levels of privacy.

Current solutions lack liquidity, in particular for low and medium-size deposits. It’s because mediocre UX and high fees restrict access to a wider user base. That’s where Light Shield fits in. Light Shield’s UX improvements make private transactions accessible to a wide range of DeFi users who want privacy but couldn’t afford it before.

While we’re convinced that Light Shield will initially lead the way in making privacy accessible for more DeFi users, that’s really just the start. To make privacy scale to a billion users, we need much more liquidity.

That’s why Light Protocol is a composable privacy infrastructure.

Composable privacy

Our goal is to create a single liquidity pool that’s shared by ecosystem partners.

Ecosystem partners will be able to compose with private transactions and build new GUIs and products on top of it.

End users benefit from access to more privacy-enabled use cases and ecosystem partners benefit from existing ZK tooling and instant liquidity.

Use cases

There are two types of privacy-enabled use cases: real-time use cases and staking-based use cases.

1) Real-time use cases
Real-time use cases are use cases that require at least near-real-time transaction privacy.

For example, if we pool enough liquidity and process enough transactions — speaking of hundreds of TPS — we could reach the point where adding privacy as an ecosystem partner is as easy as calling a “sendPrivateTransaction” function.

Again, a UX this smooth requires huge amounts of liquidity.

Staking-based use cases can help us get the liquidity we need for that.

2) Staking-based use cases
Staking-based means that depositing (staking) funds for a period of time is a core part of the user experience.

We’re excited about several staking-based use cases, including:

  • Private Wallets
  • Private Voting for DAOs
  • Private Yield farming

The main difference between real-time use cases and staking-based use cases is that the latter can be implemented already with lower liquidity.

For example, Light Shield is one such staking-based use case. Light Shield is a simple GUI that composes with our privacy infrastructure. In fact, we plan to incentivize others to fork and host their own GUIs for Light Shield.

Staking-based implementations provide new liquidity to the system because they give more users access to our shared pool infrastructure.

Composability and the UX-Liquidity flywheel go hand-in-hand; as more ecosystem partners compose with our shared privacy pool, the UX-Liquidity flywheel accelerates: as liquidity increases, ecosystem partners benefit from shorter waiting times. (Waiting time refers to the necessary time needed for funds to reach sufficient privacy levels.) Shorter waiting times mean better UX for every product composing with our shared pool, and better UX attracts more users and liquidity.

Composability is a long-term winning strategy that could eventually enable the “real-time” transactions we talked about. If we reach that point, private transactions would be accessible throughout the crypto landscape, nearly free and with a high speed almost indistinguishable from regular crypto transactions.

This vision is obviously very far down the road, and it doesn’t mean that Light Protocol will succeed.

But it does mean that it can.

Read part II: How Light Protocol works

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