Ethereum enters the era of privacy; your payment address will no longer expose your privacy.

Written by: Vaidik Mandloi

Translated by: Luffy, Foresight News

Have you ever opened Etherscan to look up your wallet address—not to check transactions, but just to see what it looks like in the eyes of others?

Your current balance, every token you’ve ever held, NFTs you’ve purchased, protocols you’ve interacted with, those late-night DeFi attempts, every claim or ignored airdrop… everything is there, completely public.

Imagine sending this address to a freelancer who’s paying you, a DAO funding you, or even just someone you just met at a meeting. You’re not just giving out a payment address; you’re exposing your entire on-chain financial life.

The reason is simple: like most public blockchains, Ethereum addresses are essentially open ledgers.

Most people have felt this awkwardness. Hesitating for a second before pasting their wallet; some even create a “new wallet” specifically for receiving payments; others move funds around first to avoid revealing too much about their balance.

This instinct isn’t limited to native crypto users. A 2023 global survey by Consensys covering 15,000 people showed that 83% value data privacy, but only 45% trust existing internet services.

ERC‑5564 was created to address this address-privacy issue. It brings native privacy addresses into Ethereum: a standard that allows you to receive payments without exposing your main wallet every time.

What exactly does ERC‑5564 bring?

The core issue is that one address permanently records all your actions. So why should you keep reusing the same address?

Think about how you receive payments in the real world: someone transfers money to your bank account, which doesn’t change every time. Over time, your bank account becomes a complete record of your income, expenses, and savings. The difference is: only you and the bank see it.

On Ethereum, wallet addresses are structurally the same: they are permanent accounts in the global network state. When someone sends you money, they need your address; the address doesn’t change, and all transactions are recorded under the same public address.

Researchers call this the “Glass Bank Account” problem. The issue isn’t that transactions are visible, but that all actions are automatically bound to a nearly unchangeable address.

In early crypto, this only exposed basic transfer records. But as blockchain evolved into lending markets, NFT platforms, governance systems, payments, and identity layers, the information exposed by a single address has become much richer than a few years ago.

A common analogy in privacy research: imagine playing “Battleship” on the blockchain, with every move visible. The rules are correctly enforced, and the system faithfully records everything. But when both players see each other’s ship positions, strategy disappears.

The system operates as designed, but the experience is completely different because transparency eliminates privacy.

Financial collaboration is similar. Not every payment needs to carry the entire history of an address.

ERC‑5564 doesn’t try to eliminate Ethereum’s transparency, nor does it introduce complex designs like balance encryption or privacy pools. It focuses on a narrower, more practical problem: reducing automatic address linkage at the payment layer.

The core logic is simple: instead of giving your counterparty your wallet address directly, you give a “secret meta-address.” This meta-address isn’t the recipient target; it contains cryptographic information that generates a unique, temporary receiving address for you.

In other words, when someone pays you, the funds aren’t sent to your public main wallet but to a brand-new address generated solely for that transaction. On-chain, it looks like the money was sent to a never-before-used new account.

For the network, everything remains the same. The change is that each payment goes to a different address, not continuously recorded under a single permanent account.

Does Ethereum really need this?

Just look at user behavior.

Take Tornado Cash as an example: a mixing protocol where users deposit funds into a public pool and withdraw to a new address, breaking the link between sender and receiver. Despite sanctions and strict scrutiny, Tornado Cash processed over $2.5 billion in funds by 2025. This shows users are willing to take legal and reputational risks to keep transactions separate from their main wallets.

Similarly, Railgun uses zero-knowledge proofs to enable private transactions, hiding balances and transfer details. By 2025, Railgun’s locked value remained around $70 million, with over $2 billion in total transaction volume.

In terms of private receiving, Umbra has implemented application-layer private payments on Ethereum: users publish confidential info and receive payments to one-time addresses. By 2026, Umbra had generated over 77,000 active private addresses.

While these figures aren’t huge relative to the entire market, they demonstrate a strong user demand for “isolation.”

However, all these tools involve compromises:

Mixers require entering and exiting separate contracts, increasing friction, harming composability, and operating in regulatory gray areas.

ZK privacy tools are additional layers; users must actively choose to use them.

Umbra proves private payments are useful but remains an independent application, not a wallet standard.

On Ethereum, achieving privacy always involves an extra step.

ERC‑5564 takes a different approach: instead of building new privacy protocols, it standardizes private payments at the wallet layer.

Where does Ethereum stand in the privacy space?

Crypto privacy isn’t black-and-white; it’s a spectrum of trade-offs.

At one end are protocols like Monero, which embed privacy directly into the protocol. Transaction amounts are hidden, and sender and receiver addresses are obscured. Privacy isn’t optional but enforced by design. Users don’t need to opt-in because confidentiality is the default.

Zcash introduces shielded transactions using zero-knowledge proofs. It allows users to choose between transparent and private transactions, but these operate within dedicated shielded pools rather than the entire system. This supports privacy but remains a separate mode rather than a core network feature.

Ethereum, by contrast, has prioritized transparency and composability from day one.

This openness has fueled the rapid growth of DeFi, NFTs, and DAOs. The cost is structural linkage—privacy ecosystems can only be built outside the protocol.

ERC‑5564 signals a shift: instead of adding privacy as an external layer, it embeds privacy as a fundamental component within Ethereum’s existing design, especially at the payment layer.

If Monero considers privacy a fundamental feature, and Zcash treats it as an optional mode, ERC‑5564 makes privacy a core infrastructure in wallet standards—not through separate chains or applications.

The industry narrative is evolving: the debate is no longer “should public chains be fully transparent or fully private,” but rather: “where should privacy be located, how much is needed, and how can it coexist with verifiability and composability?”

What can privacy truly unlock for users and markets?

Privacy isn’t just about hiding transactions; it fundamentally alters incentives and power distribution in financial systems. In this sense, privacy unlocks three core elements, which we can explore one by one.

On transparent blockchains, all operations are visible. This may seem trivial, but it’s not.

When all transaction data is public, the biggest beneficiaries aren’t ordinary users but those with the best data analysis tools—hedge funds, MEV bots, analytics firms, and AI models. Ordinary users’ actions are exposed, while seasoned participants observe, model, and extract value.

This creates structural asymmetries.

The issue isn’t transparency itself but that transparency turns every economic action into a public signal, enabling strategies that develop around these signals and profit from them.

When transactions can’t be easily abused, competition shifts from who has better monitoring tools to who manages price and risk better. This leads to healthier, fairer markets. That’s the first step of privacy: limiting value extraction based solely on transaction visibility.

The second, more significant unlock is that privacy can facilitate capital formation, which transparent systems cannot.

Retail investors might tolerate full transparency, but institutional users never will.

If every position can be monitored in real-time, funds can’t effectively deploy capital into DeFi. If a fund holds an asset, the market might react unfavorably; if it hedges, competitors can track the hedge. Strategy protection becomes impossible. The same applies to corporations: if supplier relationships are visible, they can’t tokenize invoices publicly; if salary structures are transparent, payroll cannot be on-chain. Transparent systems are good for experimentation but hinder autonomous decision-making.

This confirms the saying: “Token cross-chain is easy; key cross-chain is hard.”

On public chains, all information is open, making cross-network asset transfers straightforward. In private systems, once you leave the privacy domain, historical transaction records are exposed, creating friction. Privacy-conscious users prefer environments where transaction history isn’t leaked upon exit.

This creates a new network effect.

Traditional blockchain competition focuses on throughput, fees, and developer tools. Privacy introduces competition in information isolation. Larger private, anonymous pools hold more value. Liquidity begins to concentrate in these areas because confidentiality scales with size.

The third unlock is what we might call selective disclosure.

Today’s systems are binary: either everything is public or everything is private. Cryptography introduces a third option: you can prove certain facts without revealing underlying data.

Protocols can demonstrate solvency without revealing all holdings. Exchanges can prove reserves without exposing account balances. Users can prove compliance with rules without revealing all transaction history.

This reduces systemic data hoarding and lowers the trade-offs between privacy and regulation, opening doors to new financial applications.

For example, private lending markets can enforce collateral and liquidation rules while hiding borrower identities. Platforms like Aleo and Secret Network are experimenting with confidential DeFi designs.

On-chain dark pools can match trades without revealing order size or direction beforehand—like what Renegade is building to prevent front-running based on intent visibility.

Regulated stablecoins can provide authorities with access under legal procedures while preventing the public from tracing user behavior through transaction graphs. Private stablecoin projects like Paxos and Aleo, and Zcash’s selective disclosure via viewing keys, explore this concept.

Trade finance platforms can tokenize invoices and prove they haven’t been used for double financing without revealing supplier relationships. Enterprise networks like Canton are piloting such confidential infrastructure, enabling companies to share ledgers without exposing sensitive commercial data.

All these will have long-term behavioral impacts.

Transparent systems permanently link identities and financial actions. Over time, this reduces users’ willingness to experiment because actions can’t be decoupled from their long-term identity. Privacy restores the separation between participation and permanent exposure. It allows users to act without recording every decision in an immutable public record.

Conclusion

The original goal of transparency was verifiability. Native privacy encryption, while maintaining verifiability, supports institutional capital and selective disclosure. ERC‑5564 isn’t about turning Ethereum into a privacy chain but about enabling native, programmable, lightweight privacy for payments within Ethereum.