Privacy track enters application verification phase: What does Midnight's Mōhalu stage mean

Privacy computing narratives have been circling in the encryption industry for at least five years. From Zcash's zk-SNARKs to the regulatory storm around Tornado Cash, and then to Aztec and Aleo attempting to build universal privacy layers, this track has always been oscillating between technological idealism and regulatory uncertainty.

In Q2 2026, a subtle but noteworthy change occurred. The Midnight privacy sidechain, led by Input Output Global, officially entered the Mōhalu and Hua phases— a batch of zero-knowledge proof-based dApps began large-scale deployment on this Cardano sidechain, with some end users gaining interaction permissions for the first time. This is not just another routine announcement of mainnet launch or testnet deployment, but a structural turning point where the privacy track shifts from “can we do it” to “do people use it.”

Privacy computing is no longer confined to white papers and funding news; it is entering an application stage that can be observed, verified, and traded.

Why the Privacy Chain Narrative Is Shifting from Technical Whitepapers to Application Validation

Midnight’s approach differs from most public chains. It did not choose the common path of opening the mainnet all at once, airdrop incentives, or community FOMO, but instead took a layered, incremental access route.

At the end of 2023, IOG first disclosed Midnight’s design goal: to use zero-knowledge proofs to provide a privacy-focused sidechain for Cardano. In 2024, a developer testnet was launched, introducing a TypeScript-based domain-specific language called Compact, and establishing the Kachina protocol as the execution framework for ZK smart contracts. In 2025, the NIGHT token completed its TGE and entered secondary market circulation.

The real pace change happened in 2026. The Mōhalu phase allows authorized developers to deploy applications in an environment close to mainnet, while the Hua phase begins to open interaction permissions to some users. This means Midnight is no longer just a chain with nodes and a block explorer—it now carries actual DeFi protocols, identity verification tools, and NFT marketplaces.

This strategy reflects a harsh reality faced by the industry: the technical complexity of privacy chains far exceeds that of general-purpose public chains, the cost of security vulnerabilities is extremely high, and a gradual open approach is a rational choice for controlling early risks. Privacy protocols in the Ethereum ecosystem have experienced multiple delays over the past two years due to regulatory pressure and technical bottlenecks, and market patience for the privacy track is running out. Midnight’s decision to push application deployment in 2026 hits precisely at the market’s transition point from “listening to stories” to “watching data.”

A deeper judgment is that the competition in privacy computing is shifting from the protocol layer to the application layer. Whoever can first develop usable DeFi scenarios, identity solutions, and user entry points may hold the pricing power in the next privacy narrative. The quality of technical architecture is no longer defined by whitepapers but by on-chain activity, developer retention, and real user scale.

What’s Happening Behind the Rise of the NIGHT Token and the Ecosystem

As of June 1, 2026, according to Gate行情 data, the NIGHT token price is $0.03865, with a market cap of about $641 million, and a 24-hour trading volume of $28.53 million. The total supply is 24 billion tokens, with an estimated circulating supply of about 16.58 billion tokens at the current price, and a circulation rate close to 70%.

In the past week, NIGHT increased by 18.73%, and over the past 30 days, it rose by 21.87%, closely aligning with the launch timing of the Mōhalu phase. The market is evidently pricing in ecosystem progress—but whether this valuation is sustainable depends on whether on-chain applications can generate real gas consumption and token demand.

Currently, the NIGHT tokenomics in the Midnight network serve both for gas fee payments and governance. This means the token’s value capture mechanism is not reliant on staking yields or deflationary designs but is directly linked to the activity level of on-chain applications. If Pact lending protocols and Midnight Swap can attract sufficient TVL, the token’s consumption scenarios will expand accordingly; if the ecosystem remains in testing phases for a long time, the token will lack fundamental support.

A point to watch is trading depth. The 24-hour trading volume of NIGHT is about $28.53 million, which is relatively thin liquidity for a $641 million market cap. Looking at a longer timeframe, NIGHT has retraced over 61% from its all-time high of $0.12 in the past year, and has fallen 35.37% in the past 90 days. The recent rebound more resembles market pricing of expectations for the Mōhalu phase rather than signals of fundamental improvement.

Tokens in the privacy track have historically faced a structural dilemma: grand technological narratives but slow growth in actual use cases. Zcash’s ZEC experienced years of value regression after the privacy coin boom, and Monero was delisted by many exchanges under regulatory pressure. Whether Midnight can break this curse depends not on short-term price fluctuations of NIGHT but on whether its ecosystem applications can achieve a leap from testing to large-scale adoption within the next two to three quarters.

Who Is Building on Midnight and How These Projects Could Change the Market Landscape

As the Mōhalu phase advances, Midnight’s ecosystem map is becoming more concrete. Currently, publicly known dApps cover four main areas: wallets, DeFi, identity verification, and NFTs, forming a relatively rare application matrix in the privacy computing track.

Dust Wallet and Lace Wallet solve the most basic interaction entry issues. Dust has implemented functions for storing, transferring, and connecting to dApps with NIGHT tokens, while Lace provides cross-chain channels for Cardano users. In the privacy chain domain, wallets are often underestimated but are the most critical infrastructure—no user is willing to go through complex private key management and cross-chain processes just to experience a dApp.

On the DeFi front, Pact and Midnight Swap represent two different paths. Pact focuses on privacy-preserving lending, using ZK proofs to protect borrower data while verifying collateral—something nearly impossible in traditional DeFi, where MakerDAO or Aave’s lending records are fully transparent on-chain, and institutions or high-net-worth individuals often avoid participation for strategic confidentiality. Midnight Swap aims to build a ZK-based AMM mechanism that protects trading strategies’ privacy while maintaining liquidity efficiency, directly competing with Ethereum-based DEXs like Uniswap that lack privacy.

The identity and credential track, with projects like ShroudedID and zkVote, is more strategically significant. ShroudedID enables KYC verification without exposing raw data, solving a long-standing contradiction in the crypto industry: compliance requirements for identity disclosure versus user reluctance to have personal information exposed on-chain. zkVote applies similar logic to DAO governance, enabling anonymous yet verifiable voting. If these projects can integrate with Cardano’s existing Atala PRISM identity framework, Midnight could become the preferred privacy layer for institutional entry into DeFi.

The core significance of this ecosystem map is not the number of projects but the real demand scenarios it reveals. The market used to describe privacy chains as “more secure Ethereum” or “anonymous financial infrastructure,” but the dApps on Midnight point to a more specific answer: privacy is not a universal necessity, but in lending, identity verification, and strategic trading, privacy protection can indeed create incremental value.

Another dimension of industry structural change is the competitive landscape. Before Midnight, the privacy track was mainly occupied by Ethereum-based projects—Aztec focused on payment privacy, Aleo aimed to build a universal privacy computing platform, but neither had achieved large-scale application deployment. Midnight, backed by Cardano’s UTXO model and user base, has chosen a differentiated technical route. If the Mōhalu phase’s dApps successfully attract users and liquidity, the competition in the privacy track will shift from a single-ecosystem dominance to multi-chain coexistence.

Regulatory Variables and Institutional Demands in the Privacy Track

Midnight’s privacy design takes a relatively moderate route—allowing applications to implement selective disclosure within a compliant framework, known as “auditable privacy.” This is fundamentally different from Tornado Cash’s fully anonymous scheme and could be a key variable for institutional adoption.

Over the past three years, the regulatory environment for privacy protocols has continued to tighten. Tornado Cash was sanctioned by the US Treasury in 2022, sparking widespread debate about the legality of privacy tools. Many financial regulators worldwide have explicitly stated that fully anonymous transaction protocols do not meet AML requirements. Against this backdrop, the positioning of “auditable privacy” is both a response to regulatory pressure and a market strategy—traditional financial institutions like BlackRock and Fidelity, if they want to enter privacy DeFi, must ensure transaction records can be queried by regulators.

But regulatory risks have not disappeared. Policy uncertainty in the privacy track is global, not project-specific. Any privacy chain could face stricter compliance requirements in the future, directly impacting the stability of developer ecosystems. Midnight’s incremental openness strategy has security advantages but is also vulnerable to sudden regulatory changes.

Changes in institutional behavior are also worth noting. Since 2025, traditional financial institutions’ willingness to allocate to crypto assets has diverged—Bitcoin ETF assets have grown significantly, but attitudes toward DeFi and emerging public chains remain cautious. If Midnight can demonstrate that “auditable privacy” is sufficient for compliance while providing higher data protection than traditional finance, it could open a new market between fully transparent DeFi and fully anonymous protocols. The size of this market is currently hard to quantify, but it exists—large hedge funds’ on-chain trading leakages, asset managers’ need for client position privacy, are real pain points that remain unmet.

Three-Stage Projection: Possible Paths and Bottlenecks for the Midnight Ecosystem

Based on the current progress in the Mōhalu phase, token performance, and external environment, three typical scenarios for Midnight’s future can be envisioned.

The optimistic scenario requires two core conditions simultaneously: at least two or three core dApps complete migration from Mōhalu to full openness, and these applications generate real demand in privacy lending or identity verification. If Pact’s TVL surpasses a certain scale, ShroudedID gains institutional adoption, and NIGHT’s gas consumption jumps, Midnight could establish a differentiated position in the privacy track and boost Cardano’s DeFi activity.

The neutral baseline is more probable. Ecosystem projects proceed as planned but do not explode in user growth or liquidity. Midnight remains a stable functional layer for Cardano, satisfying certain privacy needs but not threatening Ethereum’s dominance in DeFi. The NIGHT token price likely follows broader market trends, and ecosystem TVL stays at a limited but sustainable level.

The pessimistic scenario mainly hinges on external factors. If major economies impose stricter regulations on privacy protocols, developers may be forced to exit or migrate. Alternatively, the overall demand for privacy could be disproved—market finds that most users are unwilling to pay for privacy, and dApps cannot sustain activity without subsidies. In this case, NIGHT could face ongoing selling pressure and liquidity decline.

The key bottleneck is whether the application layer can find scenarios where “privacy is non-negotiable.” Transfer privacy needs can be addressed by mixers or privacy coins, but the market size for DeFi strategy privacy remains unverified. The boundary of compliance for identity verification is still fuzzy. Midnight needs not more technical documentation but one or two flagship applications that can demonstrate the commercial value of privacy computing.

Conclusion

The competition among privacy chains is ultimately not an academic contest about cryptographic complexity. The greatest significance of Midnight’s progress in the first half of 2026 is not about code optimization or performance metrics but about pushing privacy computing from protocol-level concepts to application-level testing. The projects Dust, Pact, and ShroudedID sketch a map—not an already successful ecosystem, but a sample that can finally be observed and verified.

Market patience for the privacy track is shifting from “technological faith” to “data verification.” The recent price rebound of the NIGHT token reflects expectations, but these expectations need to be realized through on-chain activity, TVL growth, and developer retention. What truly determines Midnight’s height is not whether it belongs to the Cardano or Ethereum ecosystem, nor whether it uses TypeScript or Rust, but whether users are willing to stay engaged for functions like lending, identity, and strategic trading that make “non-privacy” non-negotiable. The answer to this question will not appear in whitepapers but will be reflected in on-chain data over the coming quarters.

FAQ

What is the Mōhalu phase of Midnight?

Mōhalu is the application deployment phase of Midnight’s privacy sidechain launched in Q2 2026, allowing authorized developers to deploy dApps in an environment close to mainnet, marking Midnight’s transition from infrastructure to application validation.

What is the purpose of the NIGHT token?

NIGHT tokens serve dual functions in the Midnight network: paying for gas fees and governance. Its value is directly related to the activity level of ecosystem applications.

What is the relationship between Midnight and Cardano?

Midnight is a privacy sidechain developed by Input Output Global, utilizing zk-SNARK technology, connected to the Cardano mainnet via cross-chain bridges, sharing Cardano’s security and user base.

What projects are building on Midnight?

Publicly known projects include Dust Wallet, Lace Wallet, Pact lending protocol, Midnight Swap DEX, ShroudedID privacy identity tool, zkVote anonymous voting system, and NightMarket NFT marketplace.

How has the market performance of NIGHT been recently?

As of June 1, 2026, the price is $0.03865, up 18.73% in the past 7 days and 21.87% in the past 30 days, but down 61.22% over the past year, indicating a recent rebound related to ecosystem progress.

What are the regulatory risks facing the privacy track?

Global regulatory attitudes toward privacy protocols are tightening. Fully anonymous tools like Tornado Cash have been sanctioned, and many countries’ regulators state that anonymous transactions do not meet AML standards. Midnight’s “auditable privacy” aims to balance compliance and privacy.

How does Midnight differ from privacy projects on Ethereum?

Midnight is built on Cardano’s UTXO model and uses the Kachina protocol, with development in TypeScript using the Compact language, contrasting with Aztec and Aleo’s Ethereum-based privacy solutions.

How can early users participate in the Midnight ecosystem?

In the current Hua phase, some users can interact via Dust or Lace wallets to store NIGHT tokens and connect to dApps. Applications like Pact and Midnight Swap are gradually opening access to users.