Published on Friday, January 25, by AZTEC Chief Technology Officer Zac Williamson, the proposed Confidential Token Standard zkERC20 offers a zero-knowledge equivalent to Ethereum's ERC20 standard. Williamson's Ethereum Improvement Proposal (EIP) is meant to establish a standard interface for a confidential token contract such that other on-chain applications, like confidential decentralized exchanges or confidential escrow accounts, can use it.
The zkERC20 standard refers to AZTEC's cryptographic setup, wherein confidential tokens do not carry balances but are rather represented as notes. These notes are used to transfer value in the system via join-split transactions – an input is destroyed to create an output. For example, an AZTEC note could be split into multiple notes and then sent to a recipient, but the output's value would be equal to the input (with a separate commitment value to balance the system).
Williamson added that the zkERC20 token interface was designed to divorce a transaction's sender and recipient. He noted that this separation was included "to facilitate the use of one-time stealth addresses." Further, with such an interface, he said, third-party service layers could take on the responsibility of signing confidential transactions.
Zero-knowledge cryptography has been a popular pursuit within the Ethereum ecosystem as of late. Ethereum creator Vitalik Buterin has explored the possibility of zk-SNARKs, another type of zero-knowledge proof, as a second-layer solution for the network. Further, a zk-SNARK-based DAI transaction framework called ZkDai was developed at the ETHSingapore hackathon this past December.
Williamson's recently published EIP marks another move toward privacy for Ethereum transactions, though the AZTEC team is currently building a suite of tools to further make its flavor of zero-knowledge cryptography available to other developers.