Technology Behind eERC

Understanding the cryptographic tools and architecture that power eERC on Avalanche.

The eERC (Encrypted ERC) standard combines modern cryptography with Avalanche’s high-performance infrastructure to deliver confidential transactions while remaining compatible with the EVM ecosystem.
In this section, we will break down the key technologies and architecture that make this possible.

Core Privacy Technologies

1. Zero-Knowledge Proofs (zk-SNARKs)

Used to prove that a transaction is valid without revealing its details.
Ensures the sender has enough balance and the transaction respects the rules, without disclosing amounts or balances.
Highly gas-efficient when deployed on Avalanche due to its low base fees.

2. Homomorphic Encryption

Allows operations on encrypted values without decrypting them.
Enables balance updates and validations while keeping amounts hidden.
Balances remain encrypted on-chain at all times.

3. BabyJubJub Elliptic Curve

A twisted Edwards elliptic curve optimized for zk-SNARKs.
Offers fast signature verification inside zero-knowledge circuits.
Used in eERC for efficient key generation and proof validation.

4. ElGamal Encryption

Public-key encryption scheme adapted for elliptic curve cryptography.
Used to encrypt token balances and transfer amounts on BabyJubJub.
Supports homomorphic addition so encrypted balances can be updated without decryption.

5. Poseidon Ciphertext Hashing

Poseidon hash is a ZK-friendly hashing algorithm designed for use inside proof circuits.
Optimized for minimal gas cost and high efficiency in zk-SNARK verification.
In eERC, used for commitments and ciphertext integrity checks.

Auditability Module

Built directly into the eERC architecture.
Enables selective decryption of transactions for authorized auditors or regulators.
Permissions can be rotated or revoked without redeploying the contract.
Maintains compliance-readiness without compromising user privacy.

On-Chain Components

Registrar Contract
- Manages the list of authorized auditors.
- Handles public keys for encryption and decryption permissions.
EncryptedUserBalances Contract
- Stores all encrypted balances for token holders.
- Updates balances through zk-SNARK validated operations.
AuditorManager Contract
- Controls access and permissions for auditors.
- Integrates with the Auditability Module.
Proof Verification Circuits
- Specialized zk circuits that verify transactions meet the protocol’s rules.
- Operates without revealing transaction details.
- Optimized for BabyJubJub, Poseidon hashing, and ElGamal operations.

Modes of Operation

Standalone Mode

Token is fully private from the moment it is created.
Total supply can be hidden from the public.
Ideal for enterprise deployments or regulated private markets.

Converter Mode

Wraps an existing ERC-20 token into eERC form for private transfers.
Allows unwrapping back into the original ERC-20 token.
Perfect for projects that want optional privacy without changing their base asset.

Developer Integration

Contracts, circuits and scripts to be used.
Compatible with Avalanche C-Chain Mainnet, Fuji (Testnet), and custom L1s.
Does not require modifying the underlying blockchain protocol.

In the next section, we will cover Usability of eERC, focusing on Standalone vs Converter modes, real-world use cases, and how developers and users interact with encrypted tokens on Avalanche.

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