The race to build private financial infrastructure on Ethereum has taken a major step forward with the launch of Payy, a Layer 2 network designed specifically for shielding stablecoin transactions from public view.
Built by Polybase Labs and spearheaded by former Apple iOS engineer Sid Gandhi, the network went live this week with a bold promise: make digital payments as private as cash while keeping regulators satisfied.
Privacy Infrastructure Meets Regulatory Reality
Payy addresses a fundamental tension in crypto adoption. While blockchain transparency serves important security functions, it creates obvious problems for financial privacy. Every transaction amount, wallet balance, and payment flow remains permanently visible on public ledgers.
The network tackles this through zero-knowledge proofs that mask transaction details without compromising the underlying security model. Unlike privacy-focused cryptocurrencies such as Monero or Zcash, Payy was architected from the ground up with compliance frameworks in mind.
“All the other existing privacy technologies don’t have this idea of compliance baked in,” Gandhi explained during the network’s launch. “We’ve been thinking about compliance and privacy for a very long time, and realized that you have to continue doing the existing AML and compliance operations, even if you have a privacy network.”
The approach routes standard ERC-20 tokens through private pools automatically. Users can add Payy as a custom chain in MetaMask without migrating wallets or fragmenting liquidity across different platforms.
Complete Product Ecosystem
Beyond the core infrastructure, Polybase Labs launched a full consumer stack alongside the network. The Payy Card operates as a non-custodial Visa card that enables private stablecoin spending in real-world transactions.
When users tap the card for payments, zero-knowledge proofs authorize transactions while the Payy Network handles settlement with Visa’s payment rails. Transaction amounts never appear on public blockchain records.
The company’s wallet application already serves 100,000 users who will bootstrap network activity at launch. Fresh address generation ensures that DeFi interactions don’t compromise transaction privacy through address reuse patterns.
Private transaction data gets stored in offchain “privacy vaults” that maintain zero-knowledge proof verification while keeping sensitive information away from public blockchain explorers.
Institutional Focus and Market Timing
Gandhi frames the privacy problem in stark terms for institutional adoption. Current stablecoin payment systems expose every transaction to public analysis, creating significant operational security risks for businesses moving substantial value.
“Either I’m crazy or everyone else is crazy, because you just can’t build a financial system without the core pillar of confidentiality,” he stated. “I firmly believe privacy is the final barrier to critical mass adoption. By removing it, we’re unblocking the path for the $2 quadrillion global payments economy to move onchain.”
The concern extends beyond theoretical privacy violations. Existing self-custodial card providers generate transaction data that appears in real-time on blockchain analytics dashboards. Combined with location timestamps and spending patterns, this visibility creates substantial surveillance risks.
Payy targets two distinct user segments: institutions and fintech companies seeking to bring payment workflows onchain without exposing transaction metadata, and crypto-native users who want financial privacy without managing multiple wallet systems.
Funding and Industry Support
Polybase Labs has secured backing from Robot Ventures, DBA Crypto, 6th Man Ventures, Orange DAO, and Protocol Labs. The funding reflects growing investor interest in privacy infrastructure that can bridge Web3 technology with traditional financial systems.
Robert Leshner, partner at Robot Ventures and founder of Compound Protocol, endorsed the approach directly: “Payy finally built a real alternative to consumer banking. You can now save and spend self-custodied stablecoins privately without ever knowing they’re on a blockchain. And it just works.”
The team indicates that partnerships with major stablecoin issuers will be announced in coming weeks, though specific collaborations remain undisclosed.
Broader Privacy Movement
Payy’s launch coincides with renewed focus on blockchain privacy across the industry. Monero and Zcash have experienced significant price appreciation throughout 2025 as privacy concerns have intensified.
The Ethereum Foundation published a privacy roadmap in September 2025, explicitly stating goals to prevent Ethereum from becoming “the backbone of global surveillance.” The roadmap outlines technical improvements to enable private transactions at the protocol level.
Privacy-focused development activity has accelerated across multiple blockchain networks as regulatory frameworks evolve. The challenge remains building systems that satisfy both user privacy requirements and compliance obligations for institutional adoption.
Payy represents one approach to this balance: maintaining full regulatory transparency for authorized parties while shielding transaction details from public surveillance. The zero-knowledge proof architecture enables selective disclosure based on legal requirements rather than blanket transparency.
Technical Architecture and User Experience
The network’s technical implementation prioritizes seamless integration with existing Ethereum tooling. Users interact with Payy through standard wallet interfaces without learning new transaction processes or managing additional private keys.
Private ERC-20 pools handle the complexity of shielding transactions automatically. When users send stablecoins through the network, the protocol generates fresh receiving addresses and masks transaction amounts through cryptographic proofs.
MetaMask compatibility ensures that existing DeFi users can access private payment functionality immediately. The approach avoids the user experience fragmentation that has limited adoption of earlier privacy solutions.
DeFi protocol integrations withdraw funds to newly generated addresses, preventing transaction graph analysis from compromising user privacy over time. This architectural choice addresses a key weakness in mixing services that rely on address reuse patterns.
The privacy vault system stores sensitive transaction metadata in encrypted, offchain storage while maintaining zero-knowledge proof verification on the main network. This hybrid approach balances privacy protection with the transparency requirements for regulatory compliance.
Network fees remain competitive with other Ethereum Layer 2 solutions while adding privacy functionality. The economic model relies on transaction volume rather than premium pricing for privacy features.
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