A Confidential Asset is a blockchain privacy technology that uses cryptographic commitments, such as Pedersen Commitments or zero-knowledge proofs, to conceal both the asset type (e.g., USD stablecoin, gold token, equity) and the transaction amount on a public ledger. Unlike basic privacy coins that only hide sender/receiver addresses, confidential assets extend privacy to the very nature of the financial instrument being transferred. This creates asset fungibility, where all units of a token are indistinguishable, preventing chain analysis from tracing specific asset flows or determining an entity's portfolio composition.
LABS
Glossary
Confidential Asset
A token or digital asset on a blockchain where the asset type and transaction amounts are cryptographically hidden from public view.
Chainscore © 2026
definition
BLOCKCHAIN PRIVACY
What is a Confidential Asset?
A cryptographic protocol that hides the type and amount of assets transacted on a blockchain, providing enhanced financial privacy beyond simple transaction anonymity.
The core mechanism involves issuing each distinct asset type with a unique asset tag that is cryptographically blinded. When a transaction occurs, the amounts and asset tags are hidden within commitments. Only the transacting parties, and any designated auditors with a view key, can decrypt and verify the details. This allows for the public validation of transaction correctness—ensuring no assets are created or destroyed—without revealing sensitive information. Protocols like Confidential Transactions (CT) often form the basis, with added layers to mask the asset identifier.
Major implementations include Blockstream's Liquid Network sidechain, which uses Confidential Assets for Bitcoin-based security tokens and stablecoins, and Mimblewimble-based protocols like Grin and Beam. These systems enable diverse use cases such as private securities trading, confidential corporate treasury management, and discreet payroll transactions. By separating auditability from public disclosure, confidential assets address critical needs in both decentralized finance (DeFi) and traditional finance, where transaction details are commercially sensitive.
how-it-works
CONFIDENTIAL ASSETS
How Confidential Assets Work
Confidential Assets is a cryptographic protocol that enables the creation and transfer of multiple distinct asset types on a blockchain while keeping the asset type and amount of each transaction hidden from public view.
A Confidential Asset is a digital token whose type (e.g., USD, gold, stock) and amount are cryptographically concealed on a public ledger, visible only to the transacting parties. This is achieved using advanced cryptographic primitives like Pedersen Commitments and range proofs. Unlike standard blockchain transactions where asset details are transparent, Confidential Assets use cryptographic commitments to hide the specific asset identifier and the value being transferred, while still allowing the network to verify the transaction's validity—ensuring no new assets are created and the sender has sufficient balance.
The core mechanism relies on blinding factors and asset tags. Each asset type is assigned a unique, confidential asset tag. When a transaction is created, the amounts are replaced with commitments, which are mathematical constructs that bind a value to a secret blinding factor. Range proofs are attached to demonstrate that the hidden amounts are non-negative, preventing overflow attacks. The network nodes can validate the cryptographic proofs without learning the underlying asset type or value, maintaining the privacy of the transaction's financial details while preserving the integrity of the ledger's consensus rules.
This technology enables complex, multi-asset financial systems on a blockchain. For instance, a single transaction can privately transfer a mix of stablecoins, security tokens, and loyalty points between parties. The protocol ensures fungibility within each asset class, as individual units are indistinguishable on-chain. It also supports confidential issuance, where the creation of a new asset type can be kept private. This functionality is foundational for enterprise adoption, allowing for confidential payroll, private securities trading, and compliant financial instruments that require data minimization under regulations like GDPR.
key-features
PRIVACY-ENHANCING TECHNOLOGY
Key Features of Confidential Assets
Confidential Assets are blockchain-based tokens that utilize cryptographic techniques to obscure sensitive transaction data, enabling privacy for both the asset type and the amount transacted.
01
Asset Type Confidentiality
The specific type of asset being transferred (e.g., USDC, a stock token, a loyalty point) is hidden on-chain. Observers can verify a valid transaction occurred but cannot distinguish between different asset types within the same protocol. This is achieved using cryptographic commitments and range proofs.
02
Amount Confidentiality
The precise transaction amount is concealed. The protocol uses Pedersen Commitments and Bulletproofs to cryptographically prove that a transaction is valid (e.g., no new tokens are created, sums balance) without revealing the actual numerical values. This protects commercial and personal financial data.
03
Selective Disclosure
Asset issuers and holders can provide cryptographic proofs to authorized third parties (e.g., auditors, regulators, counterparties) to reveal specific transaction details. This enables compliance and auditability without sacrificing default privacy for all other network participants.
04
Core Cryptographic Primitives
Relies on a stack of zero-knowledge proofs and commitments:
- Pedersen Commitments: Hide amounts while remaining additively homomorphic.
- Confidential Transactions (CT): Framework for hiding amounts.
- Asset Tags: Unique, blinded identifiers for each asset type.
- Range Proofs (e.g., Bulletproofs): Prove committed amounts are non-negative without revealing them.
05
Comparison to Privacy Coins
Distinct from monolithic privacy coins like Monero or Zcash:
- Monero: Privacy is mandatory and applies only to its native XMR token.
- Zcash: Offers optional privacy (zk-SNARKs) for its native ZEC.
- Confidential Assets: A framework for making any asset issued on a supporting blockchain (like Liquid Network) confidential, enabling private stablecoins, securities, and more.
examples
CONFIDENTIAL ASSET
Examples & Implementations
Confidential assets are implemented through various cryptographic techniques that hide transaction amounts and asset types. These are the leading protocols and technologies enabling this privacy feature.
05
Pedersen Commitments
The fundamental cryptographic building block for most confidential asset schemes. A Pedersen Commitment is a homomorphic encryption scheme that allows a prover to commit to a secret value (like an amount) without revealing it. The commitment is binding (cannot be changed later) and hiding (the value is secret), enabling verifiable, private arithmetic on blockchain.
06
Application: Private Stablecoins & Securities
Confidential assets enable real-world financial use cases on public blockchains:
- Private stablecoin transfers where transaction values are hidden.
- Confidential security tokens for private equity or bond trading.
- Institutional settlement where large OTC trade sizes remain opaque. This addresses regulatory compliance needs (like GDPR) by keeping sensitive commercial data off a public ledger.
COMPARISON MATRIX
Confidential Assets vs. Other Privacy Methods
A technical comparison of privacy-enhancing technologies for digital assets, focusing on their core mechanisms and properties.
| Feature | Confidential Assets (e.g., Liquid) | CoinJoin (e.g., Wasabi) | zk-SNARKs (e.g., Zcash) | Mimblewimble (e.g., Grin) |
|---|---|---|---|---|
Core Privacy Mechanism | Blind Issuance & Surjection Proofs | Coin Mixing / Transaction Graph Obfuscation | Zero-Knowledge Proofs (zk-SNARKs) | Confidential Transactions & Cut-Through |
Asset Type Privacy | ||||
Transaction Amount Privacy | ||||
Sender/Receiver Identity Privacy | ||||
On-Chain Data Footprint | Medium (Selective disclosure) | Large (Multiple UTXOs) | Small (Proof only) | Very Small (Aggregated) |
Trust Model | 1-of-N Asset Surjection | Coordinator or Peer-to-Peer | Trusted Setup (for some parameters) | Peer-to-Peer |
Native Multi-Asset Support | ||||
Auditability / Selective Disclosure |
security-considerations
CONFIDENTIAL ASSET
Security & Privacy Considerations
Confidential Assets are a cryptographic protocol that enables the issuance and transfer of digital assets with hidden amounts and types, enhancing financial privacy on public blockchains.
01
Asset Type Confidentiality
The protocol uses Pedersen Commitments and range proofs to hide the specific type of asset being transacted. While the transaction is public, observers cannot distinguish between a transfer of Bitcoin, a security token, or a stablecoin on the same ledger. This prevents external parties from mapping transaction graphs to specific asset classes, a common form of financial surveillance.
02
Amount Confidentiality
Transaction amounts are cryptographically hidden using confidential transactions. The system employs Pedersen Commitments to encrypt the amounts, with Bulletproofs or similar zero-knowledge range proofs to mathematically verify that:
- Output amounts are positive (no creating money).
- Inputs equal outputs (conservation of value). This prevents counterparties and network observers from deducing balances or the value of individual transactions.
03
Selective Disclosure & Auditability
A critical feature is the ability for asset issuers or regulators to perform selective disclosure. Using a view key, authorized parties can decrypt transaction details for audit and compliance purposes without exposing data to the public. This enables:
- Regulatory compliance (e.g., for security tokens).
- Proof of reserves for institutions.
- Tax reporting by sharing data only with relevant authorities.
04
Implementation: Mimblewimble & Others
Confidential Assets are a core feature of protocols like Mimblewimble (e.g., Grin, Beam) and Elements sidechains. Key mechanisms include:
- Blinding factors to obscure transaction data.
- Cut-through to aggregate and remove intermediate transaction data, enhancing scalability and privacy.
- Asset Tags that are committed to, not revealed, to identify asset types only for participants in the transaction.
05
Privacy vs. Regulatory Tension
The technology creates a fundamental tension between financial privacy and regulatory oversight. Key considerations:
- FATF Travel Rule: Transmitting sender/receiver info for VASPs is complicated by hidden amounts and assets.
- AML/CFT: Monitoring for illicit finance requires new cryptographic tools for lawful access.
- Jurisdictional Variance: Some regions may restrict or mandate backdoor access, impacting protocol adoption.
06
Security Assumptions & Risks
Security relies on specific cryptographic assumptions and implementations:
- Trusted Setup: Some implementations require a one-time trusted setup ceremony for parameters, introducing a potential risk if compromised.
- Cryptographic Break: A break in the underlying elliptic curve cryptography or zero-knowledge proof system could reveal historical data.
- Side-Channel Attacks: Implementation flaws, not the math, can leak information via timing or power analysis.
CLARIFYING THE TECHNOLOGY
Common Misconceptions About Confidential Assets
Confidential assets are a powerful privacy-enhancing technology, but their core mechanisms are often misunderstood. This section addresses the most frequent points of confusion, separating cryptographic fact from common fiction.
No, confidential assets and anonymous cryptocurrencies like Monero are distinct privacy paradigms. Confidential assets, as implemented in protocols like Mimblewimble or using zero-knowledge proofs (ZKPs), hide the amount and asset type of a transaction on a public ledger, while the sender and receiver addresses may still be visible or pseudonymous. In contrast, Monero uses ring signatures and stealth addresses to obfuscate the transaction graph itself, hiding the sender, receiver, and amount. The key difference is the privacy model: confidential assets often provide transaction amount confidentiality on a transparent ledger, while anonymous coins aim for full network-level anonymity.
CONFIDENTIAL ASSET
Frequently Asked Questions (FAQ)
Confidential Assets are a privacy-enhancing technology that obscures the type and amount of tokens being transferred on a blockchain. This section answers common technical and practical questions about their implementation and use cases.
A Confidential Asset is a cryptographic protocol that hides the specific type (e.g., USDT, BTC) and amount of a token being transacted on a public blockchain, while still allowing for public verification of the transaction's validity. It works by using Pedersen Commitments and range proofs (like Bulletproofs). The commitment acts as a cryptographic 'lockbox' that conceals the asset type and amount, and the range proof cryptographically guarantees that the hidden amount is a non-negative number and won't cause inflation, all without revealing the actual value. This allows nodes to verify that no new tokens were created out of thin air (conservation of value) without knowing what was transferred.
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall