Any Layer 2 implementation worth its salt must offer privacy; otherwise, it's useless.
Privacy is not part of the blockchain trilemma (decentralization, security, and scalability), but it is closely linked to these properties, and privacy in a Layer 2 is voluntary, unlike in Layer 1, where it is impossible due to the verifiability of the blockchain.
If we introduce privacy into layer 1 with the technology we have today, the following happens:
- Monero model: Possible hidden inflation, and therefore a single mistake and Bitcoin's reputation goes to hell.
- Liquid model: We lose decentralization and scalability due to the size of the data.
- Zcash model: Same problem as Monero, actually worse because it is a more complex system and inflation bugs are more likely to occur, and worse solved, because the pool is blocked and honest users are screwed and lose everything.
So privacy has to go into layer 2, because the trade-offs we make at the expense of decentralization and security allow us to effectively address the privacy issue.
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