Starknet launches Shadow Accounts to hide DeFi trades

Starknet has launched a new wallet privacy feature called Shadow Accounts that lets users hide the link between their main wallets and DeFi trades, while the transactions remain publicly visible on the blockchain. The move was announced on Tuesday and applies to all users of the Layer‑2 network that runs on Ethereum. With a Shadow Account, a user can move funds from their primary wallet to a separate address that interacts with smart contracts, keeping the original wallet’s activity separate from the on‑chain record.

The feature comes as privacy concerns grow in the DeFi space. Regulators in the United States and Europe are tightening rules around money‑laundering and know‑your‑customer requirements. At the same time, many users want to keep their investment strategies private from competitors and market analysts. Starknet’s team said the change is driven by both user demand and a desire to reduce the risk of targeted attacks on high‑profile wallets. The Shadow Accounts use a simple mechanism: a user’s main wallet pays a small fee to create an alias address that can hold and move funds. Because the alias is not linked to the main wallet on the public ledger, observers cannot easily trace the flow of assets, although the underlying transactions still appear on the chain.

The introduction of Shadow Accounts could reshape how people use Starknet for trading, lending and yield farming. Protocol developers are already looking at ways to integrate the feature into their dApps, and early adopters are testing it on popular liquidity pools. If the privacy tool proves popular, other Layer‑2 networks may follow suit. The move also signals that Starknet is positioning itself as a user‑friendly platform that balances transparency with privacy. Regulators will likely keep a close eye on the rollout, but the company says it remains compliant with existing anti‑money‑laundering laws. As the feature rolls out, developers will need to update documentation and users will have to decide whether the extra privacy is worth the small cost.