The core of Midnight Network is not 'pure privacy', but rather 'verifiable but not exposed' around zero-knowledge proofs. Adding to that the selective disclosure and viewing key you mentioned, it essentially addresses a long-standing unsolved problem:
It is necessary to hide details from the market while being completely transparent to regulators.
This aligns with real-world regulations like the General Data Protection Regulation, which is where its true value lies. It fills in a piece of the puzzle regarding 'whether institutions can use it', rather than directly rewriting the power structure.
The reason is simple: institutions have never only looked at technology when entering the market.
For players the size of BlackRock, at least four layers need to be considered:
The first is regulatory certainty, not just the ability to investigate, but also the attribution of legal responsibility
The second is liquidity, whether money can flow in and out smoothly after entering
The third is counterparty risk, who the on-chain trading counterpart is
The fourth is privacy and execution efficiency
Midnight addresses a critical piece in the fourth layer, but it cannot solve the first three layers on its own.
There is also an easily overlooked point.
Understanding "privacy chains + viewing keys" as institutions' "one-way mirrors" is a vivid metaphor, but in reality, this mirror will not only be open to regulators.
Auditors, cooperating banks, and clearing institutions will all be required to connect. In other words, it is more like a "multi-party controllable and visible gray box," rather than an absolute black box.
Looking at the dual-token model again.
The separation of NIGHT and DUST indeed serves the purpose of "avoiding side-channel leaks," which holds true in privacy computing. But its significance is more:
Isolate the value layer and execution layer
Reduce the inferability of on-chain behavior
Instead of simply to make it "difficult for retail investors to understand"
As for the point that "real activity cannot be seen from the outside," it actually won't be completely valid. On-chain privacy enhancement does not mean that all macro signals disappear. Capital flows, bridging scale, and derivative exposures will still be captured by the market indirectly.
If institutional-level settlement systems connect to such compliant privacy networks in the future, will Ethereum be shaken?
In the short term, no; in the medium term, it depends on the division of labor.
Ethereum's advantage lies in:
Asset issuance layer
Liquidity aggregation
Open ecology
And @MidnightNetwork Midnight networks are more like:
Privacy execution layer
Compliant computing layer
The greater probability is not replacement, but layering:
Public assets on Ethereum
Sensitive execution on the privacy layer
The future is not about one chain consuming all, but different chains each carrying different "real-world constraints."
So this chess game does exist, but it's not about "who takes over whom"; it's about changing rules: whoever can simultaneously meet regulation, privacy, and liquidity will be qualified to handle real large funds.