Zama Awards Developers for Innovating Confidential RWA Tokenization with ERC-3643

ERC-3643 is the token standard for compliant Real-World Asset (RWA) tokenization. Since most RWA business cases involve financial instruments, issuers must follow legal requirements to identify investors and apply regulatory rules onchain. ERC-3643 enables issuers to control who can invest and manage how and when tokens can be transferred. 

It uses a built-in decentralized identity framework, open-source ONCHAINID, that connects ownership to onchain identities, not wallets, ensuring that investors are identifiable onchain. Through ONCHAINID, Investor privacy is protected by only storing verified proofs, aka verifiable claims, in the onchain identities, no personal data is kept onchain. Although investor privacy is maintained, there may be a need for the confidentiality of transactional privacy on the blockchain. Zama’s fhEVM technology helps to address this.

ERC-3643 Adds fhEVM to Enhance Confidentiality

Earlier this year, Zama joined the ERC-3643 association as part of its mission to bring confidentiality to the tokenization of RWA. Zama views ERC-3643 as the most mature standardized framework for tokenization, particularly for funds that require strict compliance in their transactions. By combining Zama's fhEVM and ERC-3643, issuers can benefit from enhanced confidentiality on public blockchains. This allows for a range of use cases, such as:

• Confidential claims, which ensures compliance without exposing sensitive data. Instead of storing actual KYC data onchain, only encrypted verifiable claims are recorded. When a token transfer is initiated, the ERC-3643 smart contract checks if the sender’s onchain identity has a valid “KYC approved” claim. If the claim exists, the transfer is allowed; if not, it’s denied. 
• Confidential settlements, where balances and transaction values are encrypted but remain on-chain. Validators are not even made aware whether the balance was sufficient and the transaction was executed, as they can't distinguish between a zero and the transaction value.
• Confidential escrows, where the conditions for releasing deposits are securely hidden. For example, in a token swap, a cash token deposit will only be released when the corresponding equity token transfer has occurred, but validators will not be able to identify which equity transfer has triggered the cash transfer.
• One-off trading addresses, which can be linked anonymously to identity addresses and their associated claims, ensuring privacy while maintaining verifiability.

Bounty Program Highlights

Zama’s bounty program incentivizes developers to integrate confidentiality features into ERC-3643 tokens. In the latest round, two exceptional projects were each awarded $5,000:

• Confidential Delivery vs Delivery (DvD) Solution: Developed by GitHub user QiteBlock, this solution facilitates secure token exchanges with enhanced privacy.
• Confidential Delivery vs Payment (DvP) Protocol: Created by GitHub user 0xalexbel, this protocol enables confidential settlements, protecting transaction details while ensuring compliance.

Both projects utilized Zama’s fhEVM to encrypt transaction values and balances, preserving onchain functionality and transparency.

The Impact of Standardization

This initiative highlights the power of standardization. By leveraging the shared ERC-3643 token standard, developers can ensure control and identification of owners onchain. fhEVM’s addition of a confidential layer atop the ERC-3643 framework effectively conceals onchain data, meeting institutional demands for compliance alongside enhanced data privacy.

Future Developments

Building on these advancements, Zama will propose a confidential settlement template and framework. This framework aims to assist financial institutions in protecting transaction data in an interoperable way while adhering to compliance requirements, facilitating secure and confidential RWA tokenization on public blockchains.

“Standardization through ERC-3643, combined with Zama’s fhEVM technology, empowers developers to create innovative, compliant, and confidential tokenization solutions. This collaboration exemplifies how shared frameworks can drive industry-wide progress,” said Rand Hindi, CEO at Zama

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About ERC3643 Association 

The ERC3643 Association is a non-profit organization uniting industry leaders to promote the adoption of the ERC-3643 standard and develop a standardized, secure, and compliant tokenization framework. By fostering collaboration and innovation, the association seeks to create a more inclusive, efficient, and secure financial landscape.

About Zama

Zama is a leader in Fully Homomorphic Encryption (FHE) technology, dedicated to enhancing privacy and security in blockchain applications. As an active member of the ERC3643 Association, Zama is committed to enabling innovation in compliant tokenization and advancing the tokenization of Real-World Assets.