Stellar: The proving ground for real-world privacy

Our privacy strategy is guided by the principles that blockchains should be open and transparent by default, while privacy should be configurable and compliance-ready from the start.

Being open and transparent is fundamental to what makes Stellar trustworthy. Public visibility into the ledger ensures accountability, verifiability, and auditability. It gives users confidence that the network works as intended. It also levels the playing field so that everyone, from developers to global institutions, has equal access to and visibility into the network.

Other chains treat privacy as all-or-nothing. Stellar is taking a different path: privacy will be opt-in and configurable at the application layer, like any other asset-specific feature. This gives developers the flexibility to innovate and institutions the ability to safeguard confidential information where it matters, where it matters.

Finally, privacy must be compliance-ready from the start. We see time and time again that solutions that ignore illicit finance safeguards cannot be adopted by regulated financial institutions and won’t scale. What compliance looks like for privacy on blockchains is still unanswered — but it’s clear that administrative tooling must be built from the ground up to help define it.

To make this a reality, we are working with the ecosystem on three work streams that both guide current work and lay the foundation for a long-term strategy:

1. Supporting research and innovation

SDF funds academic research into privacy-preserving applications, backing ecosystem builders, and convening experts across disciplines to move the best ideas from theory to practice. The Stellar Community Fund (SCF) and Academic Research Grant Program are two ways we do this.

Moonlight, for example, is a UTXO-based privacy layer on Stellar funded by the Stellar Community Fund. It works by splitting accounts into many discrete addresses and breaking payments into smaller bundled transactions. It’s just one example of many promising privacy projects coming from the Stellar ecosystem, in addition to others like Amon Privacy and human.tech.

And this year alone, the Academic Grant Program funded privacy related research related to homomorphic commitments, private smart contracts, censorship-resistant anonymous publishing, and non-interactive zero-knowledge (ZK) proofs. If you’re a developer or researcher working in the space, apply for funding or reach out to collaborate. We won’t solve this alone.

2. Investing in core privacy infrastructure

SDF will help bring foundational ZK infrastructure to Stellar and evaluate new technologies as they mature. The goal is simple: make privacy primitives as easy to use as any other building block on the network.

To that end, we recently partnered with Nethermind to add the Risc Zero zkVM verifier to Sorobon, enabling users to verify zkVM-proven programs. Primitives like this give developers the foundation to create the next generation of privacy applications on Stellar.

Looking ahead, the next Stellar protocol release will focus on privacy. Proposals under discussion would introduce building blocks for tokens with confidential properties, ZK proof verification, and efficient privacy-preserving applications. These proposals include new host functions to support homomorphic encryption, bulletproofs, the BN254 elliptic curve, and various ZK-friendly hash functions. More soon.

3. Building open-source solutions

SDF is also supporting privacy solutions by directly contributing to privacy prototypes like Confidential Tokens that the ecosystem can extend, refine, and deploy. As part of this, we are exploring administrative tools such as viewing keys for selective disclosures that can help institutions address illicit finance obligations while preserving privacy.

SDF recently joined the Confidential Token Association alongside founding members OpenZeppelin, Zama, and Inco. Through this collaboration, we will help develop a framework to add confidentiality to widely used token standards such as ERC-20 and prototype the first Stellar-native confidential tokens.

We’re also working with Nethermind to explore private payment solutions and innovative anti-abuse mechanisms like association sets based on the privacy pools proposal by Vitalik Buterin et al. This effort will advance open-source tools that strengthen the foundational standards and practical applications of privacy. In the long-run, privacy on Stellar will be ecosystem-driven and community-owned.

The time for best-in-class privacy solutions on public blockchains is now. A more favorable regulatory environment is already drawing more participants onchain at the same time that there’s more choice than ever before. The enterprises and institutions using the Stellar network today need best-in-class privacy solutions, and the ones coming tomorrow expect it. Delivering that takes developers, researchers, and innovators ready to push boundaries

If you're working on something privacy-related, that's your cue to spark a discussion on Discord, apply to the Stellar Community Fund, or pursue a research grant. Together, let’s define what real-world privacy looks like on a public, permissionless network.