This week, The Protocol Newsletter examines the future of privacy within the Ethereum ecosystem.
By Margaux Nijkerk|Edited by Nikhilesh De Jun 10, 2026, 6:14 p.m. 4 min readMake preferred on (Unsplash)Key Insights:
Welcome to The Protocol, CoinDesk’s tech newsletter that highlights key developments in blockchain technology. I’m Margaux Nijkerk, a CoinDesk reporter.
We are enhancing the newsletter to provide a more thorough exploration of significant trends, innovations, and discussions in the blockchain space every week.
This edition focuses on the evolving landscape of privacy in the Ethereum ecosystem.
For many years, the promise of privacy in crypto transactions was a major ambition. However, it has recently taken a back seat to other developments.
As developers prioritized blockchain scalability and faced regulatory scrutiny regarding privacy tools like Tornado Cash, the focus shifted. Yet, a new Ethereum proposal and an increasing number of privacy-centric products indicate a resurgence of interest in this area.
The latest development is pERC-20, a proposed token standard for Ethereum that enables users to hold and transfer tokens while keeping their balances, transaction amounts, and counterparties concealed. This proposal has ignited fresh discussions on whether public blockchains should automatically disclose all financial activities.
In contrast to the standard ERC-20 tokens, which openly display balances and transaction histories, pERC-20 aims to maintain user privacy.
Currently, Ethereum tokens operate much like public bank accounts, where anyone can look up a wallet address to see its token holdings, their origins, and destinations. The pERC-20 standard would treat tokens as encrypted cryptographic "notes," akin to cash transactions.
This approach would ensure that transactions remain confidential while still permitting the network to verify that the transactions are legitimate.
However, the proposal does not obscure all information.
The overall supply of a token would still be publicly accessible, allowing for verification that no tokens are being created without notice. Additionally, there would be a compliance feature allowing issuers to freeze specific notes through a cryptographic blacklist without revealing the balances or transaction histories of standard users.
This design reflects a significant change in the dialogue surrounding privacy in crypto.
Instead of viewing privacy and compliance as oppositional, many emerging projects are striving to create systems that incorporate both.
Nonetheless, some developers contend that private payments alone do not address the entire issue.
Earlier this week, Starknet launched STRK20, a token framework focused on privacy that aims to extend confidentiality beyond basic token transfers to decentralized finance applications, including lending, staking, and token swaps.
Eli Ben-Sasson, co-founder of StarkWare, the primary development firm behind Starknet, stated that the primary challenge for privacy technologies is not about cryptography. "The significant hurdle with privacy is user experience," Ben-Sasson explained to CoinDesk.
Historically, cryptocurrencies focused on privacy have encountered usability challenges. Users often dealt with slow wallet sync times, cumbersome transaction processes, and limited compatibility across the crypto landscape. These issues have made privacy tools less user-friendly and, in some cases, have compromised the very privacy they intended to ensure.
Privacy systems depend on a broad user base participating collectively. If only a few individuals utilize a privacy network, it becomes easier to pinpoint specific users.
"If the user experience is poor, very few will adopt it," Ben-Sasson noted. "If only a handful of users engage, and for a limited range of activities, the level of anonymity diminishes significantly."
Ben-Sasson remarked that pERC-20 seems primarily concentrated on private token transfers, drawing inspiration from privacy-centric projects like Zcash. While he acknowledges this capability as crucial, he believes the next phase of privacy infrastructure must encompass a wider array of financial functions.
"We can achieve more today," he stated, referring to privacy-preserving decentralized finance applications.
The STRK20 framework was designed with this broader vision in mind. Instead of protecting a single token, it allows users to manage multiple assets under a single privacy layer and engage with decentralized applications while retaining confidentiality. Ben-Sasson claims that users can access services like swapping, borrowing, and staking without sacrificing their privacy.
This framework also employs post-quantum secure cryptography, which Ben-Sasson emphasized will be increasingly vital as blockchain developers prepare for advancements in quantum computing.
The distinction between pERC-20 and STRK20 underscores an emerging discourse regarding the nature of privacy in the crypto space.
One perspective prioritizes private payments while maintaining transparency in other areas, while another envisions privacy as a foundational element that permeates an entire ecosystem of financial applications.
Regardless of the direction taken, the ongoing discussion signifies a significant transformation.
For much of the recent past, privacy was relegated to a niche segment of the crypto industry, often linked to specific privacy coins or contentious mixing services. Presently, the conversation is increasingly focused on mainstream infrastructure, token standards, and applications for institutions.
It remains uncertain whether pERC-20 will ultimately become a standard for Ethereum. Like all Ethereum Improvement Proposals, it must undergo an extensive review before it can gain widespread acceptance. However, its introduction, alongside initiatives like STRK20, indicates that privacy is once again becoming a focal point for blockchain developers.
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