Confidential Tokens

Confidential tokens are the encrypted versions of regular ERC20 tokens. They're what make private payments possible.

How They Work

When you wrap regular USDC into confidential USDC:

1. Deposit: Your regular USDC goes into the wrapper contract
2. Mint: You receive an equal amount of confidential USDC
3. Encryption: Your balance is stored as encrypted data

The confidential token mirrors the value 1:1, but the amounts are hidden.

100 USDC → [Wrap] → 100 Confidential USDC (encrypted)

The Wrapping Process

Step 1: Approve

Before wrapping, you approve the wrapper contract to move your tokens:

// User approves wrapper to spend their USDC
usdc.approve(wrapperAddress, amount);

This is standard ERC20 behavior — nothing special here.

Step 2: Wrap

Then you call wrap with your amount:

// Wrap 100 USDC into confidential tokens
wrapper.wrap(100_000000); // 100 USDC with 6 decimals

Behind the scenes:

1. Contract takes your USDC
2. Contract encrypts the amount
3. Contract adds to your encrypted balance

Step 3: Receive

Your confidential balance updates. In the UI, you'll see your new balance after a brief decryption delay.

The Unwrapping Process

When you want regular tokens back:

// Unwrap 50 confidential USDC back to regular USDC
wrapper.unwrap(encryptedAmount);

The process:

1. Contract verifies your encrypted balance is sufficient
2. Contract subtracts from your encrypted balance
3. Contract sends regular USDC to your wallet

Privacy Properties

What's Encrypted

• Your confidential token balance
• Transfer amounts
• The total supply (sum of all balances)

What's Visible

• That you hold some confidential tokens
• Token transfer events (without amounts)
• The wrapper contract address

Two-Step Transfer Pattern

Because FHE operations can be complex, Aruvi uses a two-step pattern for some operations:

Step 1: Initiate

Create the transfer with encrypted amount:

gateway.send(recipient, encryptedAmount, proof);

Step 2: Execute

After FHE processing, complete the transfer:

// Usually automatic, but can be manual if needed
gateway.executePendingTransfer(transferId);

This separation ensures reliability even with network issues.

Balance Decryption

Your encrypted balance is just bytes on-chain. To see actual numbers:

1. Request: Your wallet asks the Zama Gateway for decryption
2. Prove: You sign a message proving you own the address
3. Decrypt: Gateway decrypts and returns the value
4. Display: Your browser shows the balance

This happens automatically in the Aruvi app. You just see your balance.

Supported Tokens

Currently, Aruvi supports:

Token	Contract	Status
USDC	Confidential wrapper	✅ Live

More tokens coming:

• USDT
• DAI
• WETH

The wrapper architecture makes adding new tokens straightforward.

Comparison to Regular Tokens

Feature	Regular ERC20	Confidential Token
Balance visible	✅ Public	❌ Encrypted
Transfer amounts	✅ Public	❌ Encrypted
Standard wallets	✅ Yes	✅ Yes
DeFi compatible	✅ Yes	⚠️ Limited
Transfer speed	Fast	Slightly slower
Gas cost	Lower	Higher

Technical Details

Confidential tokens implement a modified ERC20 interface:

// Standard ERC20 balance is always 0
function balanceOf(address) returns (uint256);

// Encrypted balance for FHE operations
function balanceOfEncrypted(address) returns (euint64);

// Transfer with encrypted amount
function transferEncrypted(address to, einput amount, bytes calldata inputProof);

The contract maintains both interfaces for compatibility, but real balances live in the encrypted mapping.

Best Practices

1. Keep some unwrapped: For easy spending at services that don't support confidential tokens
2. Batch your wrapping: Reduce gas costs by wrapping larger amounts less frequently
3. Understand the delay: Decryption takes a moment — don't panic if balance shows 0 briefly
4. Check allowances: Make sure you've approved enough for your intended wrapping amount