Shielding Tokens (Wrapping)

Shielding converts regular ERC-20 or ETH into confidential tokens (cTokens). This is how users obtain encrypted balances while preserving ERC-20-like functionality.

Although technically a “wrap,” shielding better conveys the privacy aspect.

How Shielding Works: Step-by-Step

1. Check if a wrapper exists for your token

   • Each token has a dedicated wrapper contract.

   • If it exists → use it.

   • If not → anyone can deploy one (see Section 6).

2. Approve the wrapper (for ERC-20 only)

   • Grant the wrapper permission to transfer your tokens

   • token.approve(wrapperAddress, amount)

3. Call the shield function

   • wrapper.wrap(recipientAddress, amount)

   • For ETH: Include the amount as msg.value

   • For ERC-20: Tokens are transferred from you

4. Pay shield fee

   • Fees are paid in the original token (eg, USDC, ETH…), not in cTokens. This ensures accurate protocol revenue accounting and avoids circular dependencies.

   • The fee is calculated as a percentage (basis points) of the amount

   • All fees are sent to the protocol fee recipient address (configured in the FeeManager contract). This address is publicly visible on-chain.

5. Receive confidential tokens

   • Wrapper mints cTokens to your address

   • Your balance is encrypted as euint64

   • Amount is immediately usable for confidential transfers

Shield Flow Diagram: