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pattern-shielding.md

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title Pattern: Shielded ERC-20 Transfers
status draft
maturity PoC
works-best-when
You need confidential transfer amounts/counterparties.
Selective disclosure/auditing is required.
avoid-when
Transparency is mandated by design.
dependencies
ERC-20
Optional
ERC-5564 (stealth addresses), ERC-3643 (eligibility gating), [Attestations](pattern-verifiable-attestation.md) for audit

Intent

Enable confidential ERC-20 transfers by shielding balances and transfer metadata, while still allowing regulators/auditors to verify via selective disclosure (view keys, proofs).

Ingredients

  • Standards: ERC-20 base; optional ERC-5564 (stealth addresses)
  • Implementations:
    • L1/L2 contracts (e.g., Railgun-style shielded pools).
    • Privacy L2/app-chains (e.g., Aztec, Zama fhEVM, Fhenix) with native shielding.
  • Wallet/KMS: Management of shielded keys and optional viewing keys.

Guarantees

  • Hides amounts + counterparties from non-participants.
  • Enables scoped disclosures to auditors.
  • Anchors commitments on L1 for integrity.

Trade-offs

  • Cost/latency of ZK/FHE proofs.
  • Metadata leakage possible (timing, gas payer).
  • Tooling immaturity compared to ERC-20.

Example

  • Alice shields USDC into Railgun; transfers to Bob privately; regulator later verifies the transfer via Bob’s viewing key.

See also