ERC20 Confidential Transfers

This project is a proof-of-concept implementation of confidential transfers for ERC20-like tokens on Ethereum Virtual Machine (EVM) compatible blockchains. It leverages zk-SNARKs (PLONK) to enable privacy-preserving transactions, allowing users to transfer tokens without revealing the amounts on-chain while keeping the link between sender and receiver private.

How It Works

The system uses an Account-Based Model where a user's private balance is represented by a cryptographic commitment. All state transitions (deposits, transfers, withdrawals) are validated by zero-knowledge proofs, ensuring correctness without revealing underlying private data.

• Confidentiality: Balances and transfer amounts are hidden using Pedersen commitments.
• Compliance: The protocol supports a flexible Auditor role. Transactions include encrypted Audit Reports (using One-Time Audit Keys), enabling designated auditors to decrypt transaction details for regulatory compliance without exposing data to the public.
• Recoverability: Users can recover their confidential state and funds using only their Ethereum private key (via deterministic entropy derivation).

Technology Stack

• ZKP Circuits: Written in circom, implementing the core logic for state transitions.
• Proving System: PLONK (Universal Trusted Setup).
• Smart Contracts: Solidity contracts for verification and state management.
• Cryptography: Poseidon Hash, Baby Jubjub Curve (ECDH), Pedersen Commitments.

Features

The implementation supports the full lifecycle of a confidential token:

Note: The prefix c stands for "confidential".

• cInit: Initializes a new confidential account for a user, creating their first zero-balance commitment and publishing their public key.
• cDeposit: Converts public ERC20 tokens into confidential tokens by depositing them into the contract.
• cTransfer: Sends a confidential transfer to another user. This creates a "pending transfer" for the recipient.
• cApply: Allows a recipient to claim incoming pending transfers, rolling them into their main confidential balance. Supports batching multiple transfers.
• cApplyAndTransfer: Gas Optimization. Combines cApply and cTransfer in a single transaction, allowing users to receive funds and immediately send them out efficiently.
• cWithdraw: Converts confidential tokens back into public ERC20 tokens, withdrawing them to the user's public address.

Project Structure

.
├── circuits/         # Circom source code for ZKP circuits
│   ├── modules/      # Reusable circuit components (State generation, Checks)
│   ├── utils/        # Cryptographic primitives (Poseidon, ECDH, OTK)
│   └── *.circom      # Main entry point circuits
├── src/              # Solidity smart contracts
│   ├── interface/    # Interfaces and Struct definitions
│   ├── verifiers/    # Auto-generated ZKP verifier contracts
│   └── ConfidentialTransfers.sol # Core abstract contract
├── packages/         # Monorepo packages
│   ├── sdk/          # TypeScript SDK for key derivation and proof generation
│   ├── frontend-demo/# Next.js Demo Application
│   └── backend-service/ # NestJS Service example
└── test/             # Comprehensive test suite (Foundry & Hardhat)

Getting Started

Prerequisites

• Node.js (v18 or higher)
• Foundry (for Solidity tests)
• Circom (for ZK circuits)

Installation

1. Clone the repository:

   git clone <repository-url>
   cd <repository-name>

2. Install dependencies:

   npm install
   npm run download:powersOfTau

Usage

Build

Compile circuits and smart contracts:

# Build all ZK circuits (requires circom installed)
npm run build:circuits:all

# Compile contracts
npm run build:contracts

Testing

Test build on top of SDK so first build the SDK and then run the tests.

npm run build:sdk

The project includes three tiers of tests:

1. Foundry Tests (Unit Logic):

   npm run test:foundry

2. Hardhat "Cold" Tests (Fast Integration): Use pre-generated proofs for quick iteration.

   npm run test:hh:cold:prepare # Generate proofs once
   npm run test:hh:cold         # Run tests

3. Hardhat "Hot" Tests (Full Integration): Generate real ZK proofs on-the-fly. Slower but comprehensive.

   npm run test:hh:hot

Demo Application

The project includes a demo application that allows you to interact with the confidential transfers contract. See frontend-demo for more details.

Documentation

For more detailed information, check the docs/ directory:

• Technical Specification
• Integration Guidelines
• Custody Guidelines