Starknet Integrates EY’s Nightfall to Bring Institutional‑Grade Privacy to Ethereum‑Aligned L2s
April 30 2024 – Cointelegraph
StarkWare, the team behind the zk‑Rollup L2 solution Starknet, announced on Tuesday that it has incorporated EY’s open‑source Nightfall privacy protocol into the network. The move is aimed at giving banks, corporates and other regulated entities the ability to run confidential payments and DeFi operations on a public, Ethereum‑compatible blockchain while retaining the auditability demanded by regulators.
What the integration means
Nightfall, developed by the Big‑Four auditor Ernst & Young, uses zero‑knowledge proofs to verify transactions without exposing the underlying data. By embedding this layer on top of Starknet, the combined stack can:
- Enable private B2B settlements, cross‑border payments and treasury movements that are hidden from the public ledger.
- Offer “selective disclosure” – the ability for involved parties to reveal transaction details to auditors or compliance officers when required.
- Support standard KYC and AML checks, allowing institutions to meet regulatory obligations without sacrificing confidentiality.
- Allow seamless interaction with the broader Ethereum DeFi ecosystem (lending, swaps, yield farming), with privacy enforced by default.
StarkWare positions the solution as a shared, open alternative to the closed, permissioned networks that many banks currently use for digital asset transfers. Because EY already audits a large portion of the targeted corporate client base, the partnership brings an extra layer of regulatory credibility to the privacy stack.
Statements from the teams
Eli Ben‑Sasson, StarkWare’s co‑founder and CEO—and a founding scientist of the privacy‑focused cryptocurrency Zcash—described the development as a step toward turning public blockchains into “private superhighways” for stablecoins and tokenized deposits.
Alex Gruell, StarkWare’s global head of business development, highlighted Nightfall’s readiness for institutions that need immediate KYC verification as part of their blockchain onboarding. He also noted that while the crypto community has built extensive ZK infrastructure, EY’s system adds a “regulatory fluency” that could accelerate institutional adoption.
How it fits into the broader L2 landscape
Starknet is already one of the larger zk‑Rollup networks, with total value locked around $280 million, driven largely by DeFi protocols and native applications. The integration comes at a time when other L2 solutions—Arbitrum, Optimism, Base—are also expanding privacy features and grappling with the trade‑off between scalability, security and regulatory compliance.
Unlike permissioned blockchains such as the Canton Network, Nightfall on Starknet remains permissionless and fully interoperable with the public Ethereum ecosystem. Gruell framed the combined stack as an “interoperability layer” that could bridge siloed institutional environments, which often struggle to connect with open‑source Web3 tools.
Recent challenges and the road ahead
Starknet’s rapid growth has exposed reliability concerns. In 2025 the network experienced several significant outages linked to sequencer and infrastructure failures, prompting public post‑mortems and a commitment to harden the platform before courting larger institutional flows.
The Nightfall deployment will be staged. The first phase will focus on private payments and transfers with built‑in compliance gating and secure sequencing. Subsequent upgrades are expected to broaden verifier capabilities and introduce additional private DeFi functionalities as the system scales.
Analysis
- Regulatory bridge – By pairing a ZK privacy layer with a firm that already provides audit services to many target institutions, Starknet addresses a key barrier to entry: the need for both confidentiality and verifiable compliance.
- Competitive differentiation – Most L2s are still emphasizing transparency for composability. Starknet’s privacy‑first approach may carve out a niche for high‑value, institution‑focused use cases that are currently handled by siloed, permissioned networks.
- Network resilience required – Institutional participants will likely demand higher uptime guarantees than retail users. Starknet’s recent outages underscore the importance of delivering a rock‑solid infrastructure before large‑scale corporate onboarding can succeed.
- Interoperability advantage – Maintaining a permissionless, Ethereum‑compatible design ensures that private transactions can still interact with the broader DeFi ecosystem, a flexibility that closed networks cannot easily match.
Key takeaways
- Privacy‑focused stack: EY’s Nightfall adds ZK‑based confidentiality to Starknet, enabling private payments, treasury management and DeFi interactions for regulated entities.
- Regulatory credibility: The partnership leverages EY’s audit experience, offering institutions a familiar compliance framework.
- Staged rollout: Initial focus on private transfers with compliance controls; later phases will expand functionality and verifier upgrades.
- Network reliability: Recent outages highlight the need for improved stability before the platform can handle sizable institutional traffic.
- Strategic positioning: By staying permissionless and interoperable, Starknet aims to become a bridge between private, corporate finance and the open Web3 ecosystem.
If the upcoming phases deliver on their promises and Starknet can reinforce its reliability, the integration could become a cornerstone for the next wave of institutional participation in Ethereum’s public blockchain environment.
Source: https://cointelegraph.com/news/starknet-taps-ey-nightfall-institutional-grade-privacy?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
