Stablecoins have revolutionized digital payments by offering fiat-pegged stability in a blockchain-native format. Yet, despite their rapid growth, now accounting for about 30% of all crypto transaction volume, nearly every stablecoin transaction today is fully visible on public ledgers. This radical transparency limits their potential for real-world commerce, enterprise applications, and even personal use.
The Privacy Problem in Digital Money
Public stablecoins expose every transaction detail, from counterparties to payment sizes, to anyone analyzing the blockchain. This lack of confidentiality poses major risks:
Businesses risk revealing supplier contracts and transaction volumes.
Consumers lose basic financial privacy with every purchase.
Employers cannot securely pay salaries without broadcasting payroll data.
Just as physical cash offers both trust and privacy, digital currencies must evolve to include confidentiality as a core design principle. Without it, stablecoins will struggle to meet the privacy standards users expect.
What Does It Take to Build a Private, Compliant Digital Dollar?
A truly private, scalable, and compliant stablecoin system must balance privacy with performance and regulation. The goal is to ensure transactions remain confidential from the public while giving compliance regulators the ability to audit when necessary, a concept known as “compliant privacy.”
Key requirements include:
End-to-end encryption of transaction data.
Optional disclosure mechanisms for compliance and auditing.
High throughput and low transaction costs suitable for everyday use.
Multi-party computation capabilities that protect data across participants.
What Privacy Technologies are Suitable for Digital Currencies?
The blockchain privacy landscape includes various cryptographic approaches to deliver privacy on public ledgers. Each addresses specific use cases with different trade-offs in speed, complexity, and cost:
Zero-Knowledge Proofs (ZKPs) have enabled important privacy features in blockchain with mathematical proofs, though they can be computationally expensive for high-frequency payment applications.
Fully Homomorphic Encryption (FHE) has opened new possibilities for computation on encrypted data, though current implementations are resource-intensive and not yet optimized for real-time payments.
Garbled Circuits (GC) offers a different performance profile with fast, cost-effective confidentiality and deterministic performance, making it particularly well-suited for payment applications requiring both speed and privacy.
While each technology has advantages, Garbled Circuits stand out for confidential payments (PayFi) due to its unique combination of efficiency and multi-party computation capabilities.
GC enables encrypted transaction processing without revealing sensitive data, up to 3000x faster than FHE and 250x lighter in computational requirements, a crucial advantage for confidential stablecoins operating at scale. As systems scale up, GC workloads remain stable, unlike other solutions that need increasing compute power.
COTI: The Ethereum Layer 2 for Confidential Stablecoins
COTI Network provides purpose-built infrastructure for confidential stablecoins based on Garbled Circuits. As an Ethereum Layer 2 secured by Ethereum’s infrastructure, COTI’s ‘GC Layer’ is able to deliver scalable private transaction processing with compliance-ready transparency.
COTI enables developers to build PayFi applications using familiar Solidity code, simply adding privacy parameters to smart contracts.
Optimized for high-frequency, low-cost payments with lightweight computation that runs on any device.
Fully EVM-compatible, allowing easy integration for existing Ethereum developers.
Designed for interoperability with stablecoins across the ecosystem.
Built with compliant privacy as a core principle, offering both confidentiality and transparency, not just anonymity.
COTI’s enterprise-grade focus makes it particularly suited for real-world use cases in trade finance, identity management, and regulated financial applications where privacy, performance, and compliance must coexist.
The future of money will not just be digital, it will be private, scalable, and built on infrastructure like COTI that unites cryptographic innovation with enterprise requirements. As the ecosystem matures, privacy-preserving payment layers will become essential infrastructure for the next generation of digital currencies.
About COTI
COTI is the programmable privacy layer for Web3. Powered by high-performance Garbled Circuits, COTI brings fast, low cost, flexible, and compliant privacy to any blockchain. With privacy that’s programmable by design, COTI enables the next generation of DeFi, payments, identity, governance, and AI.
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