It’s been a month since Solana revealed her confidential balance. This is an extension set that adds a new confidentiality tier to asset owners and token issuers. This move is similar to efforts to enhance privacy capabilities without sacrificing the required compliance.
Beincrypto consulted Pat Zhang, Woo X’s research director, to analyze how these latest developments impact user recruitment and the broader Solana ecosystem.
Confidential Balance: Solana Privacy Upgrade
In April, Solana extended a special extension developed under the Token2022 program. This latest development has been renamed Confidential Balances and upgrades the level of confidentiality that users can access beyond their previous confidentiality transfer framework.
In previous extension sets, asset managers could hide certain information from the public, but confidential balance provides a set of encrypted extension sets.
“Built on the previous confidentiality transfer capabilities, using zero knowledge proof along with homogenous encryption, allows for on-chain verification of confirmations, while keeping transaction details hidden from public views. Confidential balance allows you to hide the amount of transactions while watching the wallet address. beincrypto.
These features are compatible with regulatory requirements and enhance privacy for on-chain transactions. The upgrade provides a new feature set to the token issuer.
“An optional feature called the Auditor Key allows designated entities such as regulators and compliance teams to decrypt transaction data as needed. Token issuers can configure various privacy levels, from completely public to completely confidential, allowing flexible to be used in a variety of applications, whether they require opt-in or default privacy settings,” Zhang added.
He also expects Solana to attract more users by balancing its enhanced privacy features and compliance with compliance standards.
Can Solana surpass our competitors in privacy adoption?
Competitors like Ethereum have already used zero knowledge proofs to enhance user privacy, but Zhang believes Solana’s inherent strengths can achieve greater adoption through confidential balances.
“Solana’s low fees, high throughput, and configurable privacy levels offer clear benefits for both developers and retail markets. For retail users, the impact can be huge. Solana’s low fees, often under $0.01, and its privacy features are more accessible than Ethereum’s expensive Zkrollups.”
Institutional investors also benefit, especially when dealing with large transactions.
“Solana’s low transaction fees, approximately $0.00025 and high performance, with a theoretical throughput of 710,000 transactions per second, allowing agencies to efficiently process large quantities while reducing operational costs,” added Zhang.
Meanwhile, the auditor key adds a layer of consumer protection in situations of suspicious activity.
“The institutions managing high-end clients can carry out large transactions through confidential transfers without triggering market manipulation or front-turning. The key function of an auditor provides compliance support by enabling designated regulators or compliance teams to decrypt transaction data as needed and to comply with anti-money landing (AML) (AML).
However, compliance can come at the expense of users who place privacy first.
Does Solana’s approach alienate privacy-focused users?
Regulation is essential to protecting users and maintaining market integrity, but a focus on confidentiality in the crypto industry could put compliance as a secondary concern.
As a result, Solana’s latest privacy features could drive away users who prioritize privacy over compliance.
“The emphasis on compliance, particularly features such as auditor keys, can prevent entities who prioritize complete anonymity or minimal regulatory oversight. As confidential balances aim to balance privacy and compliance, they may not suit the preferences of these privacy-focused institutions or entities.
Still, he believes these features will ultimately encourage greater adoption.
Early impacts and future possibilities
Given that the secret balance was only available for one month, it is difficult to measure how much it contributed to promoting Solana’s recruitment at this stage.
Without this information, tracking key metrics is important to measure the performance of this latest feature. Zhang recommended tracking benchmarks such as tokens, mints, on-chain metrics and institutional wallet activities.
However, Zhang is cautiously optimistic about his ultimate success.
“The confidentiality balance appears to be an important step in Solana’s efforts to attract institutional adoption. Addressing privacy and compliance concerns can help raise Solana’s position in the Defi, Depin and Enterprise markets.
Although the outcome of this initiative has not been seen yet, it serves as a good expression of efforts to balance privacy and coordination of frequent competitive demands for compliance.
Disclaimer
Following Trust Project guidelines, this feature article presents the opinions and perspectives of industry experts or individuals. Although Beincrypto is dedicated to transparent reporting, the views expressed in this article do not necessarily reflect the views of Beincrypto or its staff. Readers should independently verify the information and consult with experts before making decisions based on this content. Please note that our terms and conditions, privacy policy and disclaimer have been updated.
