[STRK20, a privacy framework optimized for institutions]
In the previous session we examined StrkBTC, a gateway that can facilitate institutional inflow.
This week, we go beyond traditional ERC20 to explore why STRK20's privacy framework on Starknet is optimized for institutions!
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1. What is STRK20?
In short, STRK20 is a ‘native privacy standard’ implemented at the Starknet protocol level.
It is not merely a ‘wrapping’ approach that encases assets in another token.
It preserves the intrinsic nature of the asset while allowing users to choose between a public state and a private (Shielded Mode) state, forming a privacy‑infrastructure asset structure.
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2. Differences between STRK20 and ERC20
The biggest reason institutional investors could not move large amounts on‑chain was the structural limitations of legacy ERC20.
(ERC20 Characteristics)
Legacy ERC20 records explicit balances on wallet addresses, much like a bank account.
When assets move from address A to address B, the sender, receiver, and amount remain on‑chain.
With sophisticated on‑chain analytics today, this structure exposes an institution’s entry/exit timing, asset flow, and trading strategy to competitors in real time, posing a risk.
These risks have acted as a barrier preventing large institutional capital from entering.
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(STRK20 Characteristics)
STRK20 represents assets not as account balances but as encrypted “Notes.”
Because balances are not directly recorded on‑chain but stored in encrypted form,
external observers cannot determine what assets a particular address holds or in what quantity.
Only encrypted Notes and ZK‑Proofs (validity) are exposed on‑chain, fully mitigating the risk of exposing asset size and transaction flow.
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3. How STRK20 Operates
STRK20’s core is:
- Keeping state private,
- Executing off‑chain,
- Receiving only mathematical verification on‑chain.
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1. Deposit
When a public‑state ERC20 token is deposited into the Starknet Privacy Pool, the asset is transformed into a private “Note.”
2. Off‑chain execution and ZK‑Proof generation
During a transaction, rather than deducting an existing balance, the original Note is wholly consumed (destroyed) and a new Note is created.
3. Transaction submission
The ZK‑Proof is submitted on‑chain via a relayer instead of the actual wallet address, minimizing exposure of user identity.
4. On‑chain verification and double‑spend prevention
Only the validity of the Proof is checked.
+ After verification, a consumption marker corresponding to the spent Note is recorded to prevent double‑spending and update the state.
The transaction flow operates largely as described above.
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4. “The US is shocked, the world is stunned, and applause follows”
Why institutions are enthusiastic about Starknet, and my thoughts
As discussed last week, privacy that merely hides data cannot be used by institutions due to regulatory constraints.
However, STRK20 allows users to submit their “Viewing Key” for selective disclosure when regulators or tax auditors require it.
Moreover, by integrating public DeFi liquidity, STRK20 resolves the chronic “liquidity shortage” of privacy chains through an Open Note structure.
Consequently, it hides user identities while fully absorbing Starknet’s abundant public DeFi liquidity.
Thus, I believe STRK20 will become the core of institutional‑grade BTCFI, not just an anonymity tool, but one that simultaneously ensures liquidity, regulatory compliance, and strategy protection.
Thank you!
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Reference research (Created by @jundeu00)
https://t.co/RYHN72PLdF