Solana launches Confidential Balances based on ZK, combining security and compliance

The Solana (SOL) development team has announced a comprehensive upgrade to its privacy security system called “Confidential Balances,” introducing a new set of cryptographic extensions that sophisticatedly conceal token trading activities, while meeting regulatory compliance requirements.

The new toolkit is built on the “Confidential Transfers” platform under the Token2022 program, adding the ability to hide sensitive information related to the amount of tokens being transferred, minted, burned, or charged through homomorphic encryption ( and zero-knowledge proofs – ZKP ).

Unlike traditional security technologies that often conflict with the demand for financial transparency, Solana uses the concept of “information security” instead of “anonymity” to assert that these are tools that support regulatory compliance, rather than completely hiding.

What does the Confidential Balances Toolkit include?

Under the name “Confidential Balances”, the issuer and token users can utilize three main extensions:

• Confidential Transfers: secure money transfer
• Confidential Transfer Fees: security transaction fees
• Confidential Mint and Burn: mint and burn security tokens

These tools allow for the validation of transactions on-chain ( without exposing sensitive data. The initial builds have now been implemented in Rust, supporting Wallets-as-a-Service ) providers to handle encryption and generate off-chain proofs.

Although mainstream wallets do not yet fully support this feature, JavaScript libraries for ZK-proof are expected to be released this year. At that time, users will be able to create and verify proofs directly in the browser or on mobile devices without the need for a server, making secure transactions more common.

Balancing Privacy and Auditability

Notably, Confidential Balances also supports an optional feature for organizations: “auditor keys” (. When configured by the token issuer, this key allows regulatory bodies or auditors to access verification data related to secure transactions ) such as the amount of tokens transferred, minted, or burned ( without disclosing that information to the entire network or the public.

This mechanism does not affect the on-chain security of users, but serves as a parallel monitoring channel. Depending on the legal requirements of each region, projects may grant audit rights to banks, internal control teams, or third-party auditors.

This design opens up the possibility of applying privacy at the organizational level while still being auditable, meeting legal obligations regarding anti-money laundering )AML(, counter-terrorism financing )CTF(, or tax reporting — without compromising user privacy.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should conduct thorough research before making any decisions. We are not responsible for your investment decisions.

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Thach Sanh

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