Confidential assets and where they live, 2026/01/19 14:43:13

In real financial scenarios, you need instruments that do not expose amounts, balances and transaction patterns to the public – these are called confidential assets. In them, all data is hidden from outside observers, but at the same time, the network cryptographically guarantees the correctness of transactions.

Privacy is not a whim of crypto-anarchists, but a basic requirement of the financial world. Disclosure of data on transfers creates risks: competitors can guess the market strategy or learn the details of a trade secret, and the risks of attacks on large holders and custodians increase.

Attempts to create confidential assets on the blockchain have been underway for 10 years, but only now are developers closer to a possible solution. 

Why are confidential assets needed

Discussions about the need for such tools have been ongoing since the mid-2010s. The loudest statements were made by developers and researchers from Blockstream. Greg Maxwell, Andrew Poelstra, Adam Back and others have repeatedly explained why financial markets cannot operate in a completely transparent environment and that concealment of amounts and types of assets must be combined with provable verifiability of transactions. 

In 2017, Blockstream published a blog article about how to protect business transaction information, Confidential Assets are needed, which will allow both the amount and type of assets to be encrypted and hidden, while the network must remain publicly verifiable and secure.

Attempts to create confidential assets

One of the first attempts to create it was made in 2014. Then Massachusetts Institute of Technology (MIT) graduates Guy Ziskend and Ken Kisagun launched the Enigma project. In 2020, the project rebranded as Secret Network, and in the same year the main network with 20+ validators was launched.

Secret Network is a first-level blockchain that allows you to create applications with private smart contracts (Secret Contracts), where the input, output and state of data are not visible to other users and network nodes. Network validators reach consensus on the chain through staking and voting – the blockchain is built on the Cosmos SDK and uses Delegated Proof-of-Stake (DPoS) with the Byzantine Fault Tolerance mechanism from Tendermint.

Despite the use of Trusted Execution Environments (TEE), a black box for data that prevents even nodes from seeing the information during processing, contract addresses are still visible at the blockchain level. And if the address of the contract is known, you can also find out the type of asset involved in the transfer.

There have been other initiatives to create confidential assets. The Haven Protocol project, launched in 2018, used CryptoNote technology, which underlies the anonymous cryptocurrency Monero. 

CryptoNote ensures that transaction amounts and addresses are hidden using ring signatures and one-time addresses, making transfers private by default. But in this project, the architectural limitations of CryptoNote were not resolved in any way – the asset type remained visible. The original team stopped working on the protocol a year later, and active community members took over the development. After a failed update and a critical vulnerability, the project was closed at the end of 2024.

They also tried to release confidential assets on the Ethereum blockchain. One of the most famous is Aztec Protocol. In November 2025, Aztec Protocol launched its own layer-2 network, Ignition Chain, with 500+ validators that supports zero-knowledge proof-based transactions. But Aztec Protocol failed to fully implement anonymity. The network hides amounts and recipients through zk‑SNARK‑proofs, but the type of asset or contract being interacted with remains visible.

The team at ZCash, one of the most famous anonymous cryptocurrencies, is also currently working on creating a mechanism for issuing confidential assets. They plan to release the Zcash Shielded Assets (ZSA) extension as part of updates scheduled for 2025-2026. This extension should allow sensitive assets to be released and sent without the amount, type of asset, or recipients being visible on the network.

Asset type as an Achilles heel

As can be seen from the attempts of various projects, one of the key problems of confidential tools turned out to be hiding the type of asset. The developers already knew how to work with amounts and recipients—these mechanisms have been successfully implemented in many blockchains. But it turned out to be much more difficult to hide exactly what kind of asset was involved in the transaction.

A solution to the problem appeared recently. In 2022, the Zano project published a work that mathematically shows how it is possible to implement a mechanism for confidential transactions in which everything will be hidden: amounts, inputs and outputs, transaction participants, and most importantly, the type of assets circulating in the blockchain. The article was co-authored by Koe, one of the key Monero researchers.

The ideas scientifically substantiated in the article were deployed on the Zano mainnet in 2024. The authors demonstrated the operation of the new protocol at the MoneroTopia 2023 and MoneroCon 2024 conferences. 

On the Zano blockchain, all transactions are confidential. This also applies to those assets that are issued by users. The release of user assets does not occur through separate smart contracts, as is the case with ERC-20 and Ethereum, but directly through the wallet API. This is because the design of confidential assets is directly built into the complex cryptographic model of the protocol. 

At the same time, the UTXO of user coins is no different from the UTXO of a native token. In other words, when examining a transaction by an outside observer, it is impossible to determine the number of coins being transferred, the type of asset involved in the transaction, or the recipients or senders. 

Cryptography for decentralization and privacy

Technically this is implemented as follows. To ensure transaction confidentiality, the Pedersen Commitments and an extension of CLSAG, which the authors call d/v-CLSAG, are used, plus additional checks implemented through the Bulletproofs+ mechanism. 

This is a bit like how ring signatures work in Monero. But while in the Monero blockchain, ring signatures use 15 UTXOs for obfuscation, consisting solely of native coins, in Zano, a ring of decoys (a set of addresses that are added to the ring signature along with the real sender) can include UTXOs of different assets at the same time. 

Thus, the subset of possible decoys becomes much larger compared to networks where there is only one type of coin. As a result, it becomes even more difficult to determine which output is connected to which input, and therefore increases the level of privacy of the entire network and the complexity of analytical attacks.

The technology developed by the Zano team opens up new possibilities for secure asset tokenization, enterprise settlements, and institutional use of blockchains, combining decentralization and auditability with a level of privacy previously thought unattainable. Confidential assets are no longer just a dream, but become a practical tool – reliable and safe.