Privacy is back on the agenda for Ethereum developers.
After years in the background while scaling debates and regulatory scrutiny — including high-profile attention on tools like Tornado Cash — privacy is resurfacing as a core design question. The spark this time is pERC-20, a proposed token standard that would let users hold and move tokens without publicly exposing balances, amounts or counterparties.
How pERC-20 would work
- Today’s ERC-20 tokens behave like public bank accounts: anyone can look up an address and see token balances and full transaction histories.
- pERC-20 swaps that model for encrypted cryptographic “notes” — closer to digital cash — so transfers and holdings aren’t visible onchain to casual observers.
- Crucially, the design still lets the network verify that transactions are valid and unchanged. Total token supply remains public so people can confirm no secret minting occurs.
- The proposal also builds in a compliance tool: issuers could freeze specific notes via a cryptographic blacklist without revealing ordinary users’ balances or histories.
A broader pivot in privacy thinking
The pERC-20 idea signals a shift from privacy as a niche or adversarial feature to privacy integrated with mainstream infrastructure — and one that tries to balance confidentiality with regulatory and compliance needs. Rather than treating privacy and compliance as mutually exclusive, many newer projects aim to combine both.
But some developers say private payments are only part of the problem. This week Starknet launched STRK20, a privacy-focused token framework designed not just for transfers but for decentralized finance use cases such as swaps, lending, staking and multi-asset management under a unified privacy layer. That approach tries to extend confidentiality across an entire DeFi experience instead of shielding a single token.
UX and network effects remain the bottleneck
Eli Ben-Sasson, co-founder of StarkWare (the team behind Starknet), told CoinDesk the main obstacle isn’t cryptography but usability. “The big problem of dealing with privacy is UX,” he said, noting historic pain points: slow wallet syncs, clunky transaction flows and poor compatibility with the wider ecosystem. Those frictions shrink the anonymity set — if too few people use a privacy system, it becomes easier to deanonymize participants. “If the UX is bad, very few users are going to be using it,” Ben-Sasson warned. “If very few users are going to be using it, and only for a very small number of things, they don't really get a lot of anonymity.”
STRK20 also emphasizes long-term security, employing post-quantum secure cryptography to prepare for future advances in quantum computing, per Ben-Sasson.
Two competing visions
The conversation now centers on what role privacy should play in crypto’s future. One model prioritizes making payments private while retaining transparency for other onchain activity. The other envisions privacy as a foundational layer spanning tokens, DeFi primitives and institutional use cases.
What happens next
pERC-20 is only a proposal and would have to survive Ethereum’s lengthy improvement process to become a standard. Still, its emergence alongside frameworks like STRK20 shows privacy is reclaiming space in mainstream blockchain design, from token standards to DeFi tooling — and that developers are increasingly trying to build privacy that is practical, compliant and usable.
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