Layer 1 proof-of-stake blockchain Solana SOL -6.29% ’s somewhat under-the-radar version 1.16 update introduced “Confidential Transfers,” enhancing user privacy with encrypted SPL token transactions.

The update to developer Solana Labs’ validator client recently reached a super-majority of validator adoption following ten months of development and an audit by blockchain security firm Halborn, according to a blog post from Solana infrastructure provider Helius Labs. The v1.16 release has been running on testnet since June.

One of the most anticipated updates is the addition of Confidential Transfers — introduced by Token2022 — a new token program designed to enhance Solana's current token functionality. This allows for people to make blockchain transactions without revealing key details of the transaction, such as the transaction amount.

"Version 1.16 of the Solana Rust client introduces multiple performance optimizations and stability improvements, and addresses implementation inconsistencies identified in versions 1.14 and lower," Halborn Director of Enterprise Security Piotr Cielas told The Block via email. "The most significant update however brings enhanced Zero-Knowledged Proof capabilities to the blockchain. Now, Solana natively supports a highly efficient elliptic curve (BN-128) which significantly decreases proof generation and verification costs, and can be interoperable with Ethereum smart contracts."

“Solana just shipped a native privacy option for SPL tokens, not quite getting the attention it deserves yet,” pseudonymous Delegate founder and CEO Foobar posted on X (formerly Twitter). “These are big improvements — I don't think enough people are aware,” Helius co-founder and CEO Mert Mumtaz added.

The feature utilizes zero-knowledge proofs to encrypt the balances and transaction amounts of Solana Program Library (SPL) tokens. These are Solana-compatible tokens, similar to ERC-20 tokens on Ethereum. It improves user privacy by focusing on confidentiality rather than anonymity, Helius pseudonymous contributor 0xIchigo wrote.

Confidential Transfers use a mathematical operation called Twisted ElGamal Encryption on the encrypted amounts, with transfers confirmed through Sigma Protocols — a type of zero-knowledge proof where one party (the prover) shows another (the verifier) that they possess a specific secret without revealing the secret itself.

The introduction of native privacy features may have implications for exchange listings as regulations in certain jurisdictions have forced privacy coins to be delisted. For instance, Binance delisted privacy coins in Belgium, France, Italy, Poland and Spain due to local laws.

Other benefits from the update

The v1.16 update also improves Solana's zero-knowledge support, introducing a feature to generate proofs more efficiently. This streamlines Solana’s verification of zero-knowledge proofs, offering better security and privacy features and helping to bridge the compatibility gap with Ethereum, 0xIchigo noted.

Additionally, the upgrade significantly reduces RAM usage hardware requirements for validators. Yanshu Yadav, growth lead at staking service provider Luganodes, noted that since the v1.16 release, its validator is running on approximately 39 GB of RAM, compared to around 120 GB on previous versions.

Furthermore, the update introduces a refined gossip pull-requests peer sampling system, improving bandwidth constraint issues that could slow down validators and a new repair request feature — helping validators who fall behind the current network state to catch up faster.

Finally, Solana’s introduction of resizable data accounts allows for better resource allocation, enabling developers to deploy programs with a smaller size and expand them later as needed.

Not all features in the update are live yet, instead being slowly rolled out via a feature gate system, Helius noted. Features will be activated at certain Solana epochs, depending on relative priority. An epoch is a predetermined period during which validator rotations, reward distributions and other network operations occur.

Updated with comment from Halborn.