Shielding

As alluded to earlier, privacy is both necessary and missing in Web3. Like with many complex systems, there are two broad approaches to adding privacy to Web3:

1. Since the current tech stack lacks privacy, build a completely new system from scratch—using fresh technology and new cryptographic tools. The old one can be considered deprecated.

2. Enhance existing blockchains with privacy features.

From a technical or purely academic standpoint, the first approach is preferred. It's generally easier to build something new than to retrofit privacy into an existing system. There are also several well-known ways to design blockchains with much stronger native privacy than what we currently see in public chains like EVM, Solana, or Sui.

However, we firmly believe this is not the right path forward. Blanksquare is pursuing the second approach: bringing privacy to systems that lack it but already enjoy significant adoption.

Here’s why:

• Building new ecosystems is time-consuming and slow to gain adoption. Attracting users—and especially developers—to new blockchain stacks is a long process, especially given how dominant EVM is and how mature the existing DeFi ecosystem has become.

• The timeline for delivering usable privacy to real users varies drastically between the two approaches. With approach 2, we can ship privacy features immediately. Approach 1 is inherently slower to gain traction.

• Even if approach 1 is the better long-term path, it still makes sense to introduce privacy gradually—starting with where the users already are. This isn’t just a technical challenge; it’s also about education and helping users develop good privacy practices over time.

Shielded Pools

The technical core of Blanksquare's privacy stack are Shielded Pools deployed as smart contracts on public blockchains. Without going into much detail — they allow users to create "shielded" variants of their on-chain assets. When moving shielding assets, the transaction origin is not recorded on-chain, which makes tracking impossible. If you are interested in how they work, we refer to Simplest Explanation of Shielder for a non-technical explanation of how shielding works, and to subsequent sections in Protocol Details for technical details.

Note, importantly, that the developers integrating Blansquare via Integration guides don't need to know how Shielded Pools exactly work, as the Shielder-SDK that is provided abstracts out the inner workings of zk-cyrptography, so that the integrators can focus on UX, and end-users, in turn, can enjoy the good experience.

Using Shielded Pools

The goal of Blanksquare is to let users stay private while keeping the experience of interacting with blockchains smooth. Even though, at the core layer, users hold or transact with shielded assets, we want the experience to match that of using regular assets, such as ERC20 tokens. To make this possible, we designed the Shielder-SDK to hide as much complexity as possible—both from the developer integrating Blanksquare into their solution (be it a wallet or a dApp) and, as a consequence, from the end user.

Composability

The main advantage of Shielded Pools is that they are perfectly compatible and composable with existing DeFi protocols. Virtually everything that happens in DeFi is about holding or transferring tokens. Even providing liquidity in AMMs (you get LP tokens in return) or lending tokens in lending protocols (you receive share tokens) can be cast as a single or multiple swap transactions between different kinds of tokens (typically ERC20). Since any ERC20 tokens can be shielded, it is possible to integrate Blanksquare with any DeFi protocol. We provide some concrete examples and details in subsequent sections: Shielded Yield and Shielded Trading.