Imagine sending a paycheck through the mail and taping the envelope to a public bulletin board. That’s how public blockchains currently work. Every transfer, tip, or token payout is etched into an open ledger for all to see. Transparent? Yes. Private? Absolutely not.

For blockchains to be viable in the real world, financial confidentiality must become the rule, not the exception. Because let’s face it when your salary, investment moves, and onchain balances are visible to anyone with a block explorer, you’re not just using open finance. You’re living in a financial panopticon.

Enter confidential tokens ERC20 tokens cloaked in zero-knowledge. They're not just about privacy they're about reclaiming dignity in digital finance.

Let’s explore what it takes to build a private-by-default ERC20 token using Inco Lightning, an SDK that brings privacy to Ethereum smart contracts without reinventing the chain. If Tornado Cash was a one-time privacy tool, this is programmable stealth, composable with DeFi.

Transparency might be a virtue in governance, but when it comes to payments, it’s a liability. Think about it:

• Would employees want their crypto salaries publicly traceable?

• Should your DeFi farming strategy be visible to competitors?

• Is it acceptable that wallet balances become a public résumé?

Even traditional finance offers more opacity. Your bank statements aren’t pasted onto the town square.

Compare this to Monero or Zcash two pioneers in privacy but both operate in silos. What Ethereum lacks is first-class privacy primitives inside the composable EVM world. That’s where Inco steps in.

Think of Inco as the stealth layer Ethereum never had. Instead of anonymizing after-the-fact, it lets developers bake confidentiality directly into the logic of smart contracts.

With Inco Lightning, you can create a token where:

• Balances are encrypted

• Transfers are opaque

• Approvals happen without revealing amounts

And all of it runs inside Ethereum's existing ecosystem, using familiar tools like Hardhat, Solidity, and MetaMask. The heavy lifting encryption, access controls, and zero-knowledge validation is handled behind the scenes.

We’ll walk through launching a confidential version of an ERC20 token let’s call it cUSD on Base Sepolia, a testnet built for Ethereum scalability.

The token behaves like USDC, but with a twist: every balance, transfer, and allowance is encrypted.

You won’t need to write privacy logic from scratch. Inco offers a library of encrypted data types (like euint256) and utilities to manage decryption requests, access permissions, and confidential events.

Just like preparing for a journey, you’ll need some tools. Here’s your backpack:

• Node.js and pnpm for managing dependencies

• Hardhat as your development environment

• MetaMask with Sepolia testnet tokens

• A cloned Inco project template to start from

git clone https://github.com/Inco-fhevm/inco-lite-template.git cd inco-lite-template pnpm install

Fill out the .env file with your wallet keys and RPC endpoints, and you’re ready to compile:

pnpm hardhat compile

Think of this like assembling parts for a stealth drone. Every line of code is a blade, every library a motor.

In a normal ERC20, balances[address] reveals your holdings. In a confidential ERC20, it's encrypted:

mapping(address => euint256) internal balances;

You also replace simple math with secure encrypted operations:

balances[msg.sender] = e.add(balances[msg.sender], e.asEuint256(amount));

Want to allow someone to spend on your behalf?

e.allow(balances[msg.sender], spender);

Events are emitted just like in standard tokens, but without revealing the numbers:

event Transfer(address indexed from, address indexed to);

It’s like sending a sealed envelope everyone sees it passed from hand to hand, but only the recipient knows what’s inside.

There are two ways to mint tokens:

1. Plain minting (for testing): Use this when you don’t care about concealing the amount.

2. Encrypted minting: Feed in ciphertext directly and update encrypted balances.

function _mint(bytes calldata encryptedAmount) public onlyOwner { balances[msg.sender] = e.add( balances[msg.sender], e.newEuint256(encryptedAmount, msg.sender) ); }

This isn’t new territory. Zcash's shielded pool operates on similar principles but Inco lets you stay on Ethereum and write standard Solidity.

Two transfer methods let you interact as either a human or a contract.

• For EOAs, you pass an encrypted value.

• For smart contracts, you pass the encrypted euint256 directly.

function transfer(address to, bytes calldata encryptedAmount) public returns (bool); function transfer(address to, euint256 amount) public returns (bool);

Even approve() and transferFrom() follow the same logic, keeping delegated spending just as private.

Sometimes, you’ll want to reveal a balance perhaps for auditing, compliance, or debugging.

Only the contract owner can request a balance decryption:

function requestUserBalanceDecryption(address user) public onlyOwner returns (uint256);

This triggers a callback once the decryption is complete. It’s like asking the vault to show you a single safety deposit box, with the owner's permission.

Once everything is wired up, deploying to Base Sepolia is just a few commands away.

pnpm hardhat ignition deploy ./ignition/modules/ConfidentialToken.ts --network baseSepolia

Congratulations you’ve launched a confidential ERC20 token on Ethereum. It looks like any other token… but reveals nothing.

This isn’t just a novelty. Confidential tokens are the building blocks of an entirely new paradigm:

• Payroll platforms that protect employee privacy

• Confidential DAOs where votes and stakes remain anonymous

• Private DeFi where your alpha strategy doesn’t get frontrun

Other projects are already moving in this direction:

• Aztec is working on encrypted DeFi protocols.

• Noir (by Polygon) offers ZK language support.

• Aleph Zero is building privacy-preserving infrastructure.

But Inco offers something rare: plug-and-play privacy in Solidity.

Privacy is not the enemy of decentralization. It’s its natural companion.

We’ve grown used to the idea that everything onchain must be public- but just like HTTPS changed the web from a surveillance state to a secure platform, confidential contracts will change how we use Ethereum.

Your token doesn’t need to shout. Sometimes, the most powerful technologies are the quietest.

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