Ethereum News: pERC-20 Proposal Pushes Token Transfers Toward Default Privacy
A new draft Ethereum token standard, pERC-20 (ERC-7605), proposes a significant redesign of token mechanics by making transfers private by default. It integrates zero-knowledge proofs directly into token contracts to conceal balances, transaction amounts, and counterparties.
Rather than acting as an add-on to ERC-20, pERC-20 is positioned as a full replacement interface. It is designed to be privacy-native across the entire lifecycle of a token, ensuring that balances are never exposed in public on-chain state.
The architecture is inspired by Zcash-style ZK-UTXO systems, including Groth16 proofs and Orchard-based note commitments, and adapts these techniques for Ethereum’s EVM environment. It is intended to remain compatible with existing wallets such as MetaMask and does not require new precompiles or specialized infrastructure changes.
In this system, tokens are represented as encrypted cryptographic notes instead of publicly visible account balances.
A compliance-oriented blacklist mechanism is also included, reflecting a design that aims to balance privacy with regulatory constraints rather than pursuing absolute anonymity.
Ethereum News: How pERC-20 Replaces the ERC-20 Account Model
Under the current ERC-20 standard, token balances are fully transparent. Anyone can query an address using balanceOf to see holdings and track transaction history.
pERC-20 removes these account-based primitives entirely.
Instead of functions like balanceOf, approve, or transferFrom, the new standard relies on a simplified model built around mint, burn, and transfer operations, all of which must be validated using zero-knowledge proofs.
The system adopts a UTXO-inspired, note-based structure similar to Zcash’s Orchard design. Tokens are not stored as account balances; instead, they exist as encrypted notes tied to cryptographic keys, each representing a specific value and usable only once.
Ownership is verified using standard ECDSA signatures, ensuring compatibility with existing Ethereum wallets without requiring additional tools or hardware.
Transaction validity is enforced through Groth16 zero-knowledge proofs, allowing the network to verify correctness—such as balanced inputs and outputs and valid ownership—without revealing any underlying data.
Poseidon hash commitments are used for efficient note construction, while spent-note tracking is optimized to prevent long-term state growth issues observed in earlier privacy systems.
A key limitation remains: although transaction amounts are hidden, the interaction graph between addresses is still partially visible, meaning full network-level privacy is not achieved.
Status and Next Steps
pERC-20 remains a draft proposal and must pass Ethereum’s formal improvement process before it can be adopted. However, it can also be implemented at the application layer, meaning no changes to Ethereum’s base protocol are required.
The key question now is whether it evolves from discussion into a stable specification with a reference implementation. If successful, Ethereum could soon face a fundamental design decision: whether token transfers should remain fully transparent by default or shift toward privacy-first standards as the new baseline.
