Stellar Network to Bring Privacy with Protocol X-Ray in Major Network Upgrade

What is Protocol X-Ray?

The Stellar network has long served as a platform for efficient cross-border payments and asset tokenization, processing billions in transactions quarterly through its open-source blockchain. Now, with the introduction of Protocol X-Ray as part of Protocol 25, the network aims to integrate privacy features that allow developers to create applications balancing confidentiality and transparency. 

Announced by the Stellar Development Foundation (SDF), this upgrade marks a step in addressing the growing demand for privacy in blockchain applications, particularly from institutions handling sensitive financial data. 

At the Meridian 2025 conference in Rio de Janeiro, SDF's Chief Product Officer Tomer Weller presented the broader privacy roadmap, emphasizing how such enhancements could support wider adoption without sacrificing the network's core openness.

Stellar's Privacy Strategy and Its Foundations

Stellar's approach to privacy builds on the principle that public blockchains should remain transparent by default to ensure accountability, verifiability, and equal access for all users. However, privacy becomes configurable at the application level, enabling developers to tailor solutions where needed, such as protecting user identities or transaction details in compliance with regulations. 

This opt-in model contrasts with fully private networks and aims to meet the needs of both everyday users and regulated institutions, which often require tools for selective disclosure to auditors or authorities. Weller's presentation at Meridian 2025 highlighted three key work streams guiding this strategy: supporting research and innovation through grants and funds, investing in core infrastructure like zero-knowledge (ZK) tools, and developing open-source solutions for practical implementation. For instance, SDF has funded projects like Moonlight, which explores UTXO-based private payments, and collaborated with Nethermind to integrate Risc Zero zkVM verifiers into Soroban, Stellar's smart contract platform.

These efforts respond to challenges in blockchain adoption, where transparency secures the network but can deter institutions wary of exposing competitive or personal information. By prioritizing compliance-ready features from the outset, such as viewing keys for authorized parties, Stellar positions itself to facilitate institutional use cases like payroll or B2B transfers, which already move significant volumes on the network.

What are the Technical Components of Protocol X-Ray?

Protocol X-Ray introduces two cryptographic primitives to support ZK-based privacy: the BN254 elliptic curve and the Poseidon family of hash functions. BN254, detailed in Core Advancement Proposal (CAP) 0074, adds host functions to Soroban for elliptic curve operations, including addition, multiplication, and multi-pairing checks. This curve is widely adopted in ZK ecosystems, appearing in applications like privacy pools and Starknet, and its inclusion allows Stellar developers to verify zk-SNARK proofs efficiently on-chain. 

Previously, Stellar supported BLS12-381, but adding BN254 provides flexibility, enabling easier migration of projects from Ethereum-compatible environments where similar precompiles exist.

Complementing this, CAP-0075 incorporates Poseidon and Poseidon2 hash functions, optimized for ZK circuits to reduce computational overhead compared to traditional hashes like SHA-256. These primitives expose permutation functions that developers can use to build efficient hashing logic, ensuring consistency between on-chain and off-chain operations. Together, they lower costs for ZK-based smart contracts and unlock capabilities like confidential tokens, where balances and amounts remain hidden while proofs confirm validity.

A related session at Meridian 2025 discussed private transactions using ZK designs inspired by Zerocash, combined with privacy pools and association sets to prove lawful sources without revealing details. This setup supports custom amounts and in-pool transfers, with Merkle trees and nullifiers preventing double-spending.

What is the Timeline for the Upgrade and How Should Users Prepare?

Validators will vote on the upgrade starting with Testnet on January 7, 2026, followed by Mainnet on January 22, 2026. Operators running Stellar Core, Horizon, or related infrastructure should update to compatible releases and monitor the Protocol X-Ray Upgrade Guide for changelog details and testing instructions. The guide includes steps for validating nodes and ensuring smooth integration, emphasizing the need to observe network stability post-Testnet.

What Does it Mean for Developers and the Broader Ecosystem?

With these additions, developers gain tools to build privacy-preserving applications more affordably, such as ZK email verification or lightweight proofs for compliance. This bridges Stellar to the wider ZK landscape, simplifying porting from other chains and fostering interoperability. 

Recent events, including Devconnect Buenos Aires and Stellar House Miami, have featured discussions on privacy's role in interoperability and mass adoption, with SDF executives like Weller underscoring its necessity for institutional growth.

Projects funded through the Stellar Community Fund, such as Amon Privacy, demonstrate practical applications, while partnerships with organizations like the Confidential Token Association advance standards for tokenized assets.

Final Thoughts…

Protocol X-Ray represents an initial milestone in Stellar's privacy roadmap, paving the way for advanced features like homomorphic encryption and recursive proofs. As the network evolves, these enhancements could expand use cases in DeFi and real-world finance, supporting scalable, compliant solutions. 

Developers interested in contributing can engage via the Stellar Community Fund or Discord channels, ensuring the ecosystem drives further innovation. Overall, this upgrade strengthens Stellar's position in blending public blockchain benefits with targeted privacy.

Sources:

• _{Stellar.org: Announcing Stellar X-Ray Protocol 25.}

• _{Stellar.org: Stellar X-Ray Protocol 25 Upgrade Guide.}

• _{YouTube: Meridian 2025 Presentation on Privacy Roadmap.}

• _{Stellar.org: Strategy for Privacy on Blockchain.}