Circle Releases ‘Confidential ERC-20’ Whitepaper
Date: 2024-10-29 Author: Gabriel Deangelo Categories: BUSINESS
Circle has released a whitepaper outlining the ‘Confidential ERC-20’ standard, an innovative approach to enhancing the privacy of existing and new cryptocurrencies on Ethereum and other EVM-compatible blockchains. The technology allows for privacy without compromising legal compliance.
The concept of the standard involves creating confidential versions of regular ERC-20 tokens that hide balances and transaction volumes, allowing users to protect their data while still meeting compliance requirements. Additionally, the whitepaper introduces features such as delegated viewing rights and programmable rules for transfers. These capabilities will allow developers to provide data access to auditors and regulators while maintaining user privacy.
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Jointly developed by Circle Research and Inco Network, the standard allows compliance measures to be built directly into smart contracts, eliminating legal risks when implementing tokens. The technology is based on Fully Homomorphic Encryption (FHE), which enhances data security on public blockchains compatible with the EVM ecosystem.
The privacy-focused ERC-20 framework provides a modular approach and the ability to work with encrypted data, made possible by using encryption instead of traditional zero-knowledge proof protocols. This standard is a significant step towards ensuring privacy in blockchain transactions while complying with regulatory requirements.
The need for privacy on public decentralized networks has been debated since the inception of the blockchain. Cryptocurrency users have long demanded greater transaction privacy, but anti-money laundering and financial transparency requirements in Europe and elsewhere often complicate the implementation of such solutions.
If the testing and implementation of the ERC-20 privacy standard is successful, the solution could improve mutual understanding between regulators and the crypto industry, satisfying the needs of both sides.
