Crypto startup AZTEC has recently proposed a standard interface for fungible tokens that seeks to implement confidential transaction functionalities that would serve as a zero-knowledge equivalent to Ethereum’s ERC20 standard.
Published January 25 by AZTEC Chief Technology Officer Zac Williamson, the Confidential Token Standard zkERC20 is an Ethereum Improvement Proposal (EIP) that aims to develop a common interface that can be used by on-chain applications such as confidential escrow accounts or confidential decentralized exchanges.
This standard refers to AZTEC’s cryptography engine that defines how to interact with a confidential token contract. As it stands, confidential tokens are represented by notes rather than traditional balances. These notes are used for transferring value through join-split transactions, that is, an input is destroyed to produce an output. Case in point, while an AZTEC note may be split into several notes before being sent to a recipient, the output’s value would still be equivalent to the input.
According to Williamson, the zkERC20 token interface was developed to separate the sender and the recipient of a transaction. This separation, as he explained, was implemented “to facilitate the use of one-time stealth addresses.” The standard interface would also allow third-party service layers to sign confidential transactions.
As of late, zero-knowledge cryptography has been increasingly drawing interest among the Ethereum community, as developers pivot toward privatizing Ethereum transactions. Previously Ethereum creator Vitalik Buterin has also begun exploring another type of zero-knowledge proof that might offer a second-layer solution for the Ethereum network.
During a previous hackathon held last December in Singapore, a zk-SNARK-based DAI transaction framework was also developed.