Avalanche just introduced the new  eERC20 standards, which is going to change how custom privacy features   can be introduced on a  public L1 chain. Due to this rollout, for the first time institutions and enterprises building on top of the Avalanche ecosystem could experience privacy at the protocol level . 

In this blog, we shall find out what is eERC20, why is it needed and  how it will level up building on top of L1 to give rise to simplifying launching use-cases, which were complex in the past.

What is eERC20? Why Is It Needed?

eERC-20 token standard is Avalanche’s innovative token model which is smarter, faster, absolutely modular to  allow  performing  privacy preserving transactions and modularity on layer 1s. Due to its light weight interface,  compliant architecture, this token standard would allow  applications to meet  high performance outputs that traditional ERC20 token standards couldn’t allow due to their restrictive operations. 

The need for eERC20 was felt because there are certain aspects that went missing with ERC 20 standards like; ; 

• Native Privacy Support
• Native Modularity
• Low Overhead on Development
• Better Composability Across chains 
• Fortified Security

How eERC20 Standard Level Up Building an Avalanche L1 Chain?

eERC20 levels up building an L1 chain for applications by fixing the above mentioned drawbacks by; 

1. Optimizing  Customization 

Traditional ERC-20 offer limited customization, making it difficult to abstract functions like staking, governance, minting, burning, and rewards. For enterprise apps, DAOs, or DeFi, building on top of them often means complex workarounds that can bloat state, increase attack surfaces, and degrade UX, security, and compliance.

eERC20 changes that. It simplifies Layer 1 development by integrating advanced features natively. That said, you do not need to write custom smart contracts for deploying any additional feature on your L1. 

For example, ZK-proof-based transfers enable private transactions by encrypting amounts and participant identities. So, if you want a privacy preserving transaction, you can use the native built-in interface.  With the native built in interface, you can even hide transaction metadata—like memos or tags without writing any extra code.

This is just the beginning for L1 builders on Avalanche. Because from KYC to compliance, eERC20 handles the heavy lifting so that projects can focus on important things instead of spending time only on building

2. Expediting Development 

Slow development can kill trend-driven projects like DeFi or gaming or maybe AI Agents. On traditional Layer1s, adding features like custom gas, governance, or cross-chain ops often breaks compatibility, forcing teams to build extra relayers or modules, which might result in spending  months to complete it. 

With eERC20, you get plug-and-play capabilities. Need privacy, role-based access, encrypted memos, or upgradable logic? It’s all built-in where you need no custom contracts for the same. Due to this, you can take a fast launch approach for GTM for your enterprise app, and while doing the same,  stay on the tract  catching the trend while  building  directly on Layer1.

3. Amplifying  Security 

Security is by far  a key concern when you are going for  ERC-20 standards. Why? Because reusing legacy code often introduces hidden vulnerabilities which might be hard to observe and fix. And due to  limited expert auditors for Solidity or Vyper, risk assessment becomes tough for DeFi apps and institutions handling user funds.

But the introduction of eERC20 changes this with battle-tested templates and built-in audit support, allowing secure, fast deployment on Layer1 without the usual risks and drawbacks of using and re-using existing codes. .

4. Simplifying  Usability

Complex UX is a major hurdle for apps when they are hosting on traditional L1s because they need   multiple bridges, native tokens, and messaging tools for interaction. eERC20 flips this.  

How? By using Avalanche Warp Messaging, tokens launched with eERC20 follow a universal path across the Avalanche ecosystem enabling seamless communication across Avalanche L1s without the need for bridges or relayers.

5. Assuring  Privacy

ERC-20  has an innate privacy problem due to their design standards. As a result of lack of privacy,  institutional adoption for app-specific L1s is limited at the moment. This is where eERC20 makes a difference. With eERC20, private applications can solve their privacy concerns through  built-in privacy preservation interfaces   via FHE and TEEs, enabling granular controls, custom rules, and abstracted logic. But while doing all of these, preserving the  L1 composability with the Avalanche ecosystem for optimizing the liquidity access.

Due to these tradeoffs,  a whole pack of new institutional use cases previously impossible with older standards could be brought into existence.

What are the New Use-Cases Avalanche eERC20 Opens for L1s?

1. Payments 

With the traditional layer1s showing account balances, transaction amount and more, they expose the users to phishing and other scams. Due to the same, there are many financial institutions which are not eager to use public blockchain despite their battle tested security nature and super high liquidity. But with the new eERC-20 token standards, payments can now be encrypted using the eERC-20 tokens. 

Nicholas Mussallem, CEO of AvaCloud says, 

“We are committed to providing solutions that empower users and enterprises to leverage the benefits of blockchain technology while maintaining the highest levels of data confidentiality. This will unlock novel use cases for blockchain, driving increased user adoption and ushering in a new era of secure, decentralized applications.”

2. Payroll Processing 

Every month enterprises/ corporations have to bear  from as low as $1 to as high as $100 per employee to transfer payments. Now, blockchains can bring the cost down to 90%.  But due to their inability to meet compliance clearance, it becomes hard to operate within specific geographical locations. 

But by implementing the eERC-20 compliant chains for  payroll, now enterprises can ensure upfront that they can handle the privacy risks, and any unwanted threats that employees might be subjected through  eERC-20 privacy preserving tokens. 

3. RWAs

RWAs want efficient transfer, automated settlement, and transparent auditing for authorized parties. But the existing Layer 1s are not designed in that manner to do so without exposing the privacy. Due to this, many RWA projects are losing because L1s need very high liquidity, branding, trust and network effects.  

Through the eERC-20 privacy preserving tokens, RWAs can have their own L1s to experience efficient transfer, automated settlement, and transparent auditing, making the way to include new asset classes like private equity & venture capital shares, high value art and collectibles, financial instruments, institutional bonds and debts  as products within their ecosystem. 

4. Strategic Economic Models 

Many projects are not able to integrate different engagement models like reward programs because  they are building on top of a traditional Layer1. 

But these programs can amplify the ecosystem impact of the project by doing this. However, they refrain from it  because it could lead to front running by sequencers or even compromising their ecosystem’s economic/ engagement  logics. 

But through the eERC-20 privacy preserving tokens, now such projects can undertake reward programs, token drops and more to create a better community impact while using an L1 for the same. In this way, they can even integrate more advanced use-cases when they have privacy backing their pursuits. 

For Ava Labs, this is just the beginning because new integration will soon follow that would provide complete privacy preserving tooling for developers to launch their purpose-built Layer 1s. If you are someone who is looking forward to building new applications around DeFi, DAO, reward programs, enterprise grade adoption or more, you need experts to help you. That’s where the role of Zeeve begins for launching your L1 chain. 

Launch Your Avalanche eERC20 Integrated L1  Chain with Cogitus

With Cogitus (by Zeeve), now you can launch your purpose-built Layer 1s eERC 20 enabled chain on Avalanche where you  don’t have to struggle with assembling complex lego blocks like highly-optimized infrastructure, a series of nodes, wallets, explorers, and a lot of other components. Rather, with Cogitus’s enterprise ready Web3 stack, which includes faucets, explorers, scalable nodes, blockchain indexing solutions, you can quickly launch your purpose built Layer1. 

With us, you can be rest assured that after the creation of the Layer1, the complex process of monitoring the Layer1 24*7 would be going smoothly. For all your pursuits to either migrate to an Avalanche L1 or build an Avalanche L1 from scratch, Cogitus (by Zeeve) is here to help you. 

Discuss all your project requirements by setting up a one-on-one call with our experts today.