Necessities Solved with Privacy

Privacy on Avalanche is not only about hiding information, it’s about unlocking use cases that would otherwise be impossible in a fully transparent blockchain environment.
By combining confidentiality with auditability, privacy-enabled tokens can meet both business and regulatory requirements.

1. Sensitive Transactions

Certain payments and transfers must remain confidential to protect business interests and personal security:

• Enterprise payments: Salaries, supplier payments, and investment deals that should not be visible to competitors.
• Strategic asset moves: Acquisitions, treasury management, or cross-company settlements.
• Personal financial data: Protecting individuals from profiling or targeted attacks based on on-chain activity.

2. Enterprise Use

Organizations building on Avalanche, whether on C-Chain or a dedicated L1, may require privacy for:

• Internal token economies: Reward points, access tokens, or employee incentives where transaction history should remain private.
• Corporate NFT strategies: Membership passes, certifications, or asset ownership records that could reveal strategic information.
• Supply chain confidentiality: Tracking goods on-chain without exposing trade volumes and partner relationships.

3. Regulated Financial Products

Financial institutions can benefit from privacy without sacrificing compliance:

• Tokenized securities or bonds: Keeping investor details and trade sizes private while allowing regulator access.
• Private lending protocols: Concealing borrower data while enabling repayment verification.
• Confidential DeFi: Yield farming or liquidity provision without revealing exact positions to the public.

Why Privacy is a Business Enabler

Without privacy, many organizations avoid blockchain entirely due to:

• Risk of data exposure: Competitors analyzing public activity to gain market advantage.
• Regulatory conflicts: Inability to comply with privacy laws while using transparent ledgers.
• Security concerns: Public transaction data can make users targets for scams or hacks.

By enabling selective transparency — where only authorized entities can see sensitive details, Avalanche projects can:

• Attract enterprise and institutional adoption.
• Expand into regulated markets.
• Create safer, more competitive ecosystems.

In the next section, we will introduce Encrypted Tokens, starting with eERC (Encrypted ERC) — Avalanche’s privacy-focused token standard that brings encrypted balances, private transfers, and compliance-ready auditability to the EVM ecosystem.