Creating UTXOs from Encrypted Balance

Deposit funds from an Encrypted Token Account (ETA) into Umbra's Unified Mixer Pool to gain transaction anonymity while keeping amounts confidential.

Depositing from an Encrypted Token Account (ETA) into the Unified Mixer Pool provides the highest level of privacy for entering the shielded pool. Unlike public deposits, the deposit amount remains hidden throughout the entire process.

Overview

When you deposit from an ETA, your funds enter the mixer pool as a UTXO while keeping the amount confidential. External observers can see that a deposit occurred, but they cannot determine how much was deposited.

Privacy Characteristics

Aspect	Visibility
Deposit Amount	Hidden (encrypted)
Depositor Address	Visible (your L1 address)
UTXO After Deposit	Anonymous (indistinguishable in pool)
Withdrawal	Unlinkable to this deposit

Comparison to Public Deposit

Aspect	ATA Deposit	ETA Deposit
Deposit Amount	Visible	Hidden
Depositor	Visible	Visible
UTXO Privacy	Anonymous	Anonymous
Overall Privacy	Good	Better

How It Works

Depositing from an ETA involves the Arcium MPC network to handle encrypted arithmetic:

MPC's Role

The MPC performs several critical operations:

Balance Verification - Ensures your encrypted ETA balance covers the deposit
Balance Update - Decrements your ETA balance (encrypted arithmetic)
UTXO Creation - Helps construct the UTXO with the encrypted amount
Commitment Computation - Computes the UTXO commitment for the Merkle tree

All of this happens without ever exposing the plaintext amount.

UTXO Structure

Same as public deposits, but the amount field handling differs:

Field	Description	Visibility
Amount	The deposit value	Encrypted (only owner knows)
Random Secret	Entropy for unique commitment	Private
Unlocking Address	User Commitment of who can spend	Hidden in commitment
Destination Address	L1 address for burn output	Hidden in commitment
Nullifier Data	For deriving nullifier on spend	Private

Setting the Unlocking Address

Just like public deposits, you have two strategies for the unlocking address:

Strategy 1: Registered Recipient (Maximum Anonymity)

Aspect	Details
Privacy	Maximum-amount hidden, recipient in full anonymity set
Unlocking Address	Recipient's registered User Commitment
Who Burns	Recipient

Strategy 2: Non-Registered Recipient (Ephemeral Keys)

Aspect	Details
Privacy	Amount hidden, but sender knows link
Unlocking Address	Ephemeral commitment
Who Burns	Sender (on recipient's behalf)

For detailed comparison, see Unlocking Address Strategies.

Deposit Flow

Step 1: Prepare Deposit Parameters

Step 2: Submit to MPC

The transaction is routed through the Arcium MPC network:

Step 3: MPC Processing

The MPC performs:

Decrypt your encrypted balance (MPC can do this collectively)
Verify balance ≥ deposit amount
Compute new balance = old balance - deposit
Re-encrypt new balance for your X25519 key
Construct UTXO commitment
Append commitment to Merkle tree

Step 4: On-Chain Updates

Step 5: Wait for Mixing Delay

Same as public deposits-the mixing delay must pass before the UTXO can be burned.

Privacy Advantages

Why ETA Deposits Are Better

Advantage	Explanation
No Amount Correlation	Observers can't use deposit amounts to narrow candidates
No Pattern Analysis	Can't identify "round number" deposits
Uniform Deposits	All ETA deposits look identical (just "a deposit happened")
Preserved Confidentiality	Amount stays hidden from source to destination

Parameter	Description
depositor	Sender's L1 address (signer)
encrypted_amount	Deposit amount encrypted for MPC
utxo_params	Unlocking/destination addresses, random secret
merkle_tree	Target Merkle tree account

On-Chain Effects

Change	Description
ETA Balance	Decremented (encrypted arithmetic)
ETA Nonce	Updated for re-encryption
Merkle Tree	New leaf appended
Merkle Root	Updated

MPC Verification

The MPC verifies several conditions:

Check	Purpose
Balance Sufficiency	Sender has enough funds
Valid Amount	Amount is positive and valid
Correct Encryption	Parameters encrypted correctly

Maximum Privacy: ETA → Mixer → ETA

For the ultimate privacy configuration, combine ETA deposit with ETA withdrawal:

Stage	Privacy
Deposit	Amount hidden (ETA source)
In Pool	Identity hidden (mixer anonymity)
Withdrawal	Amount hidden (ETA destination)

This provides:

Full amount confidentiality - Never exposed
Full anonymity - Unlinkable transactions
End-to-end privacy - No public exposure at any point

Requirements

Sender Requirements

Requirement	Description
X25519 Registered	Must have registered for ETA access
User Commitment Registered	Must be registered for mixer access
ETA with Balance	Must have existing ETA with sufficient encrypted balance
L1 Key	Must sign the transaction

For Recipient (if sending to another)

Requirement	Strategy
Registered Commitment	Use their commitment for max anonymity
Not Registered	Use ephemeral keys, sender burns

Error Conditions

Error	Cause	Resolution
Insufficient Balance	Encrypted balance < deposit	Verify balance first
MPC Rejection	Invalid encrypted parameters	Check encryption
Tree Full	Merkle tree at capacity	Use next tree
Invalid Commitment	Malformed unlocking address	Verify computation

Summary

Aspect	Details
Source	Encrypted Token Account (ETA)
Destination	Unified Mixer Pool (UTXO)
Deposit Visibility	Amount hidden, depositor visible
UTXO Privacy	Anonymous after mixing delay
MPC Required	Yes-for encrypted balance update
Privacy Level	Higher than public deposit
Best For	Maximum privacy-no public amount exposure