For years, transactional privacy was one of crypto’s most ambitious promises. Then it took a backseat as other trends took off.
As developers focused on scaling blockchains and regulators scrutinized privacy tools such as Tornado Cash, much of the industry’s attention shifted elsewhere. But a new Ethereum proposal and a growing number of privacy-focused products suggest the topic is making a comeback.
The latest example is pERC-20, a proposed Ethereum token standard that would allow users to hold and transfer tokens without publicly disclosing their balances, transaction amounts or counterparties. The proposal has sparked renewed discussion about whether public blockchains should disclose every financial interaction by default.
Unlike traditional ERC-20 tokens, which are the default token standard on Ethereum today, which display balances and transaction histories on the chain for anyone to inspect, pERC-20 keeps sensitive details private.
Today, most Ethereum tokens act as public bank accounts. Anyone can look up a wallet address and see how many tokens it owns, where they came from, and where they were sent. Under pERC-20, tokens would instead exist as encrypted cryptographic “notes”, similar to digital cash.
The result is a system where transactions remain private while still allowing the network to verify that transactions have not been altered.
It is important that the proposal does not hide everything.
The total supply of a token would remain publicly visible, allowing anyone to verify that new tokens are not being created in secret. The proposal also includes a compliance mechanism that would allow issuers to freeze specific notes through a cryptographic blacklist without revealing ordinary users’ balances or transaction history.
The design reflects a broader shift in how privacy is discussed across crypto.
Instead of treating privacy and compliance as mutually exclusive, many recent projects are trying to build systems that offer both.
But some developers argue that private payments are only part of the challenge.
Earlier this week, Starknet went live with STRK20, a privacy-focused token framework designed to extend privacy beyond simple token transfers and into decentralized finance applications such as lending, staking and token swaps.
According to Eli Ben-Sasson, co-founder of StarkWare, the main developer company behind Starknet, the biggest obstacle to privacy technologies today is not cryptography. “The big issue with dealing with privacy is UX,” Ben-Sasson told CoinDesk.
Historically, privacy-focused cryptocurrencies have struggled with ease of use. Users often faced slow wallet syncing, cumbersome transaction flows, and limited compatibility with the broader crypto ecosystem. These limitations made privacy tools difficult to use and in some cases undermined the privacy they were designed to provide.
Privacy systems rely on large groups of users participating together. If only a small number of people use a privacy network, it becomes easier to identify individual participants.
“If the UX is bad, very few users will use it,” Ben-Sasson said. “If very few users are going to use it, and only for a very small number of things, they don’t really get much anonymity.”
Ben-Sasson said pERC-20 appears to be largely focused on private token transfers, drawing on ideas developed by privacy-focused projects like Zcash. While he described it as an important capability, he argued that the next phase of the privacy infrastructure will need to support a much broader set of financial activities.
“Today we can do more,” he said, referring to privacy-preserving DeFi applications.
The STRK20 frame was built with this goal in mind. Instead of shielding a single token, the framework allows users to manage multiple assets under a unified privacy layer and interact with decentralized applications while maintaining confidentiality. According to Ben-Sasson, users can access services like swaps, loans and bets without sacrificing privacy.
The framework also uses post-quantum secure cryptography, which Ben-Sasson argued will become increasingly important as blockchain developers begin to prepare for future advances in quantum computing.
The contrast between pERC-20 and STRK20 highlights a burgeoning debate about what privacy in crypto should actually look like.
One vision focuses on making payments private while maintaining transparency elsewhere. Another seeks to make privacy a foundational layer that spans an entire ecosystem of financial applications.
Either way, the discussion itself marks a remarkable shift.
For much of the past several years, privacy occupied a relatively small corner of the crypto industry, often associated with niche privacy coins or controversial hashing services. Today, the conversation is increasingly centered on common infrastructure, token standards and institutional use cases.
Whether pERC-20 will eventually become an Ethereum standard remains uncertain. Like all Ethereum improvement proposals, it must go through a lengthy review process before it can see widespread adoption. But its emergence, along with projects like STRK20, suggests that privacy is once again becoming a priority for blockchain developers.
Read more: Not all Ethereum layer 2s die, but many mainstream chains no longer have a reason to exist
