Developers on the Solana (SOL) platform have launched a comprehensive update to their privacy capabilities called “Confidential Balances,” which introduces an array of cryptographic enhancements designed to discreetly conceal token transactions while ensuring compliance with regulations.
This new suite of features expands on the previous “Confidential Transfers” functionality implemented in Solana’s Token2022 initiative, providing token issuers with a more extensive set of tools for safeguarding sensitive transaction information, including the specifics of token amounts transferred, minted, burned, or incurred as fees, all utilizing homomorphic encryption and zero-knowledge proofs (ZKPs).
In contrast to conventional privacy technologies that often clash with the requirements for financial transparency, Solana’s strategy emphasizes “confidentiality,” framing these tools as compliant upgrades rather than means for anonymity.
Confidential Balances
Within the framework of Confidential Balances, both issuers and users are provided with various extensions: confidential transfers, confidential transfer fees, and confidential minting and burning.
These tools facilitate the validation of transactions directly on-chain while keeping private information secure from public view. Early implementations of these features are powered by Rust-based backends, allowing Wallets-as-a-Service providers to manage encryption and proof generation off-chain.
Although mainstream wallets currently do not offer comprehensive native support, developers anticipate that this will soon change with the anticipated release of JavaScript-based ZK-proof libraries later this year.
Once these libraries are integrated, browser and mobile wallets may have the ability to generate and verify cryptographic proofs locally, reducing the reliance on server-side support and making confidential transactions more user-friendly.
Striking a balance between user privacy and institutional compliance
This update also introduces optional compliance features such as “auditor keys,” which enable institutions or regulators to examine transactions without disclosing the amounts to the public.
When set up by a token issuer, an auditor key can decrypt or access cryptographic proofs linked to confidential token activities, such as the precise amounts that have been transferred, minted, or burned, without making this information visible to the larger network or public.
These keys maintain the confidentiality of user balances and transactions on-chain while serving as a supplementary mechanism for oversight. Importantly, their deployment is completely optional and can be tailored: projects can allocate auditor keys to regulated financial institutions, internal compliance teams, or external auditors, depending on specific jurisdictional requirements.
This setup allows for a high level of privacy suitable for institutional needs while still enabling audit capabilities, satisfying obligations related to anti-money laundering (AML), counter-terrorism financing (CTF), and tax reporting, all while upholding a significant degree of user confidentiality.