Confidential transfers are being introduced to the XRP Ledger. The link to the detailed protocol specification titled “Amendment XLS: Confidential Transfers for MPTs on the XRPL” is provided for community feedback on the means of providing encrypted balances and hidden transaction amounts for Multi-Purpose Tokens (MPTs).
This new feature also ensures that there are no issues related to “stale proofs” since there will be a separate merge transaction that consolidates the funds into an account in a deterministic manner.
How Confidential Transfers on XRPL Would Work
The proposed design, authored by Ripple cryptographers Murat Cenk and Aanchal Malhotra, introduces a new set of transaction types and ledger objects to support Confidential Transfers on XRPL. It leverages EC-ElGamal encryption, a public-key encryption scheme based on elliptic curves, and a partially homomorphic cryptosystem, to keep individual balances encrypted on the ledger, while Zero-Knowledge Proofs (ZKPs) validate that transactions are legitimate without revealing the amounts.
The innovative aspect of this design is what they refer to as the “second account model,” whereby the issuer provides a somehow designated holder account to fund this confidential supply. This allows for the existing XLS-33 token semantics of validators to be used to place an enforcement cap on a supply (OutstandingAmount ≤ MaxAmount) on the holder account without having to decrypt any private information.
Why Should Institutions Care About This?
This XRPL update could make it more conducive to use by financial institutions. While the XRPL has strong benefits in terms of providing public verification of transactions, there are many financial institutions that need privacy for their clients before they can provide those clients with any type of transaction services across XRPL.
Flexible compliance audit capabilities are included in the following specifications:
- On-Chain Selective Disclosure: Balances can be dually encrypted under an auditor’s public key, allowing independent, trust-minimized verification.
- Issuer-Mediated View Keys: A simpler, trust-based alternative where issuers control read-only keys for on-demand disclosure.
Finally, the design also provides issuer control mechanisms such as the ability to freeze users’ balances and a dedicated clawback transaction to forcefully return/reclaim funds directly to the issuer’s reserve account, therefore incorporating built-in regulatory compliance solutions.
Performance and Next Steps
The current proposal has established performance benchmarks for various ZKP methods, and the benchmarks show that Bulletproofs are a realistic option with an approximate total cryptographic payload of around 1.1kB per confidential send transaction. Bulletproofs reduce the payload to provide a significant improvement over previous linear sized proof implementations to allow for practical use of confidential send on a high performance ledger.
The specification is currently in the discussion phase on GitHub. Its approval is not just another development step, but ratherits publication marks the first concrete step toward bringing institutional-grade privacy to the XRP Ledger’s tokenized asset layer.
What’s with the XRP price…
In the meantime, Ripple’s XRP token surged over 4% int he last 24 hours, trading at USD 1,40 at the time of writing. So far, XRP is 65% below its all-time-high (ATH). For some, this could be an opportunity; for others, a warning. This surge has also been a consequence of the mixed signals from Trump to the crypto space and his announcements that the U.S.-Israel is close to finishing the war with Iran with a “positive outcome” for the U.S.
