Confidential Balance Token Extensions

Today marks a significant milestone for confidentiality in the Solana ecosystem: confidential balances is launching on mainnet. This feature allows users to protect the sensitivity of their transactions by encrypting token balances and transfer amounts through powerful cryptographic techniques, while still leveraging Solana's speed and low fees.

Confidential balances are possible with the  implementation of Token 2022’s token extensions on Solana. Confidential balances offer a spectrum to privacy with flexible levels of confidentiality for token issuers. This balance between privacy and compliance makes it suitable for both consumer applications and institutions handling regulated assets.

Key Highlights:

• Confidential balances transitions from Devnet/Testnet to Solana Mainnet.
• Agora Dollar ($AUSD) is already enabled for confidential transfers.
• The current implementation relies on Solana CLI or Rust, with JavaScript libraries coming soon.
• Configurable privacy levels, from opt-in to required confidentiality.
• Built-in compliance features for regulated assets.

What Are Confidential Balances?

Confidential balances is a set of three Token 2022 extensions that encrypt token balances and transfer amounts on Solana. Unlike traditional transparent blockchain transactions, which are entirely public and viewable via blockchain explorers, these extensions allow users to keep their financial information private while still leveraging Solana's speed and low costs. It is important to note that accounts and transactions are still visible, but the balance of the accounts and the amounts of the transfers are encrypted.

The feature includes two key components:

• Confidential Transfer: For obscured token movements between accounts.
• Confidential Transfer Fee: Similar to Transfer Fees extension, using the same cryptographic primitives to enable confidentiality for fees.
• (future) Confidential MintBurn: For private token creation and destruction 

Why This Matters for Developers

Confidential balances introduces a critical privacy layer that enables entirely new use cases on Solana:

• Configurable Privacy Levels: Token issuers can choose from multiple privacy options, from opt-in to required confidentiality, giving developers flexibility in implementation.
• Regulatory Compliance Built-in: Auditor functionality maintains compliance for regulated assets while preserving privacy when needed.
• Confidential Business Functions:
  • Process sensitive payroll transactions discretely.
  • Keep vendor payment amounts confidential.
  • Enable large-scale institutional transfers without triggering market speculation.
• User-Controlled Privacy: Protect sensitive financial information from public view, giving users confidence in financial applications

These capabilities open up markets that previously couldn't use blockchain due to privacy concerns, particularly for enterprise and institutional users who require confidentiality but must also maintain regulatory compliance.

How It Works (The Simple Version)

Confidential balances uses three key technologies:

1. Homomorphic Encryption: Allows mathematical operations on encrypted balances.
2. Advanced Encryption Standards: Simplifies encryption/decryption of actual balance values.
3. Zero-Knowledge Proofs: Ensures transactions are valid without revealing amounts.

In practice, each token account has three balances:

• Non-Confidential (Public) Balance: operates the same as any traditional SPL token.
• Confidential Pending Balance: Where incoming transfers initially land.
• Confidential Available Balance: Funds ready to be used for transfers.

When a user sends confidential tokens:

1. The transfer amount is encrypted three ways—for each of the sender, receiver, and (optionally) auditors.
2. Zero knowledge proofs are generated based on the transfer amount.
3. The zero knowledge program verifies the proof for a transaction's validity.
4. The receiver sees a pending encrypted balance.
5. After “applying” the pending balance, funds become available for use or withdrawal to their public account.

“Applying” pending balances prevents front-running attacks while maintaining Solana's performance advantages.

Getting Started

Ready to implement confidential balances in your project? Here are two paths to get started:

• Confidential Transfers on Solana: A Developer's Guide - a walkthrough of the confidential account type and new instructions necessary for utilizing confidential balances.
• Confidential Balances Cookbook - A collection of ingredients (tests) and recipes (test sequences) demonstrating Solana confidential transfer patterns.

QuickNode: Secure Infrastructure for Confidential Balances

QuickNode provides the enterprise-grade security essential for privacy-focused applications:

• Industry-Certified Security: SOC 1 Type 2, SOC 2 Type 2, and ISO/IEC 27001 certified infrastructure protects sensitive operations
• Performance Optimized for Privacy: Our nodes efficiently handle computationally intensive zero-knowledge proofs with ultra-low latency
• 99.99% Uptime: Ensuring your confidential applications remain consistently available

Confidential balances bring sophisticated discretion to the Solana ecosystem, enabling new categories of applications that were previously impossible.

• Developers: Sign up free to start building with confidential balances
• Enterprises: Contact our team to discuss your confidential transaction requirements

QuickNode's security-first infrastructure makes us the ideal partner for building the next generation of privacy-preserving Solana applications.

About QuickNode

QuickNode is building infrastructure to support the future of Web3. Since 2017, we've worked with hundreds of developers and companies, helping scale dApps and providing high-performance access to 60+ blockchains. Subscribe to our newsletter for more content like this, and stay in the loop with what's happening in Web3!