Key Takeaways:
- pERC-20 replaces public ERC-20 balances with encrypted cryptographic notes
- Transfers verified via Groth16 zero-knowledge proofs on Ethereum
- Compliance blacklist mechanism built into the draft standard
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ERC-7605 draft hides token balances with ZK proofs on Ethereum
A draft Ethereum token standard, pERC-20, proposes hiding balances and transfer amounts by default using zero-knowledge proofs embedded directly in the token contract.
The proposal, formally tracked as ERC-7605, draws on Zcash's UTXO architecture and the Groth16 proof system, according to the draft specification published on Ethereum's research forum.
Under the current ERC-20 standard, any wallet's balance is publicly readable via balanceOf. pERC-20 removes that interface entirely, replacing it with an IPERC20 interface built around mint, burn and transfer operations — each requiring a valid zero-knowledge proof. Tokens exist as encrypted cryptographic notes, not public account balances, with ownership proven via standard ECDSA signatures.
The standard remains a draft and must survive the full ERC review process before any widespread deployment. No mainnet changes are required for it to launch as an application-level standard, but if adopted, it would make privacy a default property of Ethereum's token layer rather than an opt-in wrapper.
The pERC-20 mechanism uses Poseidon hash commitments optimized for ZK circuit efficiency, with spent-note tracking operating in O(1) time and configurable epoch cleanup to prevent unbounded state growth — a problem that plagued earlier on-chain privacy experiments such as Tornado Cash.
One deliberate tradeoff: the transfer graph — which addresses interacted with which — remains public. Amounts are hidden, but the linkage between Virtual One-time Sub-Accounts is not, meaning pERC-20 does not provide full transaction graph privacy.
The proposal also includes a compliance blacklist mechanism, positioning pERC-20 as regulation-aware infrastructure rather than a privacy-maximalist tool. That framing matters given the regulatory environment that stalled Ethereum privacy development for several years, including sanctions on Tornado Cash by the US Treasury's Office of Foreign Assets Control.
The standard is MetaMask-compatible and requires no new precompiles, lowering the adoption barrier for existing wallets and decentralized applications. If pERC-20 advances from forum discussion to a stable interface with a reference implementation, the question of whether Ethereum's default token layer should be transparent or private becomes a live design choice for developers and users alike.
This article is for informational purposes only and does not constitute investment advice.
