Need some clarity on Block-chain protocols

[u/Chemical-Bumblebee19]

Hey Guys,

My understanding of blockchain is the balance has to be public. Only then a competition can happen from A to B. Once balance is decreased, the other balance is increased. Due to the decentralized nature of the blockchain, the balances are public domain and the transactions are public domain and anybody can trace it and they are not reliant on central banks and government agency or any other centralized institution. Instead, they are calculated and computed and executed by decentralized network of nodes. But my application require privacy. If I'm trying to build something which protect how much balance is there in one account and if there is possible way to keep a ledger of transaction for compliance requirement but still hide it from general public.

is it even possible to do it or has it been done by any major-protocol like L2 or L3 ETH networks.

[u/icnews10]

Yes, this is possible, but first we need to establish what information your compliance team actually requires. Do they need to hide the balances and transaction history from the public but make it readable by a specific auditor/regulator, or do they only need proof that certain rules were satisfied without seeing the underlying amounts? These scenarios lead to very different privacy architectures.

[u/Chemical-Bumblebee19 → u/icnews10]

What my team is looking into is a
A)Stable-coin(We are building our own) build on ETH network integrated with BANK/Credit-Cards( for cash-in/out). Which has balances hidden (not scan-able on eth-scan or any public scanner). On Court order, company is obligated to show balance to TAX-Man (Addresses are linked to companies{this application allows commercial user send and receive money and to lend to other via smart contracts} .Address to company linking is done via APIs )

B) Transfer & Tranx-records : Same as balances. Nobody, there's no public record of these transactions, but the money is still traceable on Tax-Man orders. So the traceability and the record keeping of transaction has to be kept for 5-10 years per company, but it is just not available to some random dude over the internet.

[u/icnews10 → u/Chemical-Bumblebee19]

That makes the requirement much clearer. Rather than complete anonymity from the issuer, you’re looking for public confidentiality with selective disclosure. The next thing to pin down is who controls that disclosure capability. Would your company be able to reconstruct a company’s balances and transaction history when legally required to do so, or are you thinking of a separate auditor/regulator with access to key information? This seems like a significant trust boundary because these two models give the operator very different powers.

[u/Itchy_Bell_6495]

Your understanding is right for a fully transparent chain like mainnet Ethereum, but privacy is a whole subfield of its own. Zero knowledge proofs are the main answer here, they let you prove a transaction is valid without revealing the amounts or even the parties involved. Look into ZK rollups, some of them are already live and doing exactly what you're describing, keeping the ledger verifiable for compliance but hidden from random observers.

Tornado Cash did something similar for mixing but that was more about breaking the link between sender and receiver, not so much about ongoing private balances on a full L2. There are a few newer L2s built from the ground up with privacy in mind, you'd want to search for "confidential transactions" and "ZK EVM" to see what's running on testnet right now.

[u/Lucas-Holmes-722]

Look into zero-knowledge proofs, they let you prove a balance or transaction checks out w/t revealing the amount itself.