Welcome to The Protocol, CoinDesk’s tech newsletter covering the most important stories in blockchain. I’m Margaux Nijkerk, a reporter at CoinDesk.
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This week, we’re diving into where privacy is headed in the Ethereum ecosystem.
The latest example is pERC-20, a proposed Ethereum token standard that would allow users to hold and transfer tokens without publicly revealing their balances, transaction amounts or counterparties. The proposal has sparked renewed discussion around whether public blockchains should expose every financial interaction by default.
Unlike traditional ERC-20 tokens, which is the default token standard on Ethereum today that displays balances and transaction histories onchain for anyone to inspect, pERC-20 keeps sensitive details private.
Today, most Ethereum tokens function like 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 no changes to the transactions occurred.
Importantly, 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 secretly created. The proposal also includes a compliance mechanism that would allow issuers to freeze specific notes through a cryptographic blacklist without exposing ordinary users’ balances or transaction histories.
The design reflects a broader shift in how privacy is being discussed across crypto.
Rather than treating privacy and compliance as mutually exclusive, many newer projects are attempting 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 confidentiality beyond simple token transfers and into decentralized finance applications such as lending, staking and token swaps.
According to Eli Ben-Sasson, the co-founder of StarkWare, the main developer firm behind Starknet, the biggest obstacle facing privacy technologies today is not cryptography. “The big problem of dealing with privacy is UX,” Ben-Sasson told CoinDesk.
Historically, privacy-focused cryptocurrencies have struggled with usability. Users often faced slow wallet synchronization, cumbersome transaction flows and limited compatibility with the broader crypto ecosystem. Those 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 are going to be using it,” Ben-Sasson said. “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.”
Ben-Sasson said pERC-20 appears to be largely focused on private token transfers and draws on ideas pioneered by privacy-focused projects such as Zcash. While he described that as an important capability, he argued that the next stage of 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 framework was built with that goal in mind. Rather than 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 such as swapping, borrowing and staking without sacrificing privacy.
The framework also uses post-quantum secure cryptography, which Ben-Sasson argued will become increasingly important as blockchain developers begin preparing for future advances in quantum computing.
The contrast between pERC-20 and STRK20 highlights an emerging debate about what privacy in crypto should actually look like.
One vision focuses on making payments private while preserving transparency elsewhere. Another seeks to make privacy a foundational layer that extends across an entire ecosystem of financial applications.
Either way, the discussion itself marks a notable 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 mixing services. Today, the conversation is increasingly centered on mainstream infrastructure, token standards and institutional use cases.
Whether pERC-20 ultimately becomes an Ethereum standard remains uncertain. Like all Ethereum Improvement Proposals, it must go through a lengthy review process before it could see widespread adoption. But its emergence, alongside projects such as STRK20, suggests that privacy is once again becoming a priority for blockchain developers.
The move marks an integration of blockchain-based payments into a major live sporting and gaming event.
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