Author: Alea Research
Compiled by Deep潮 TechFlow
DeepChaohao Summary: In the public chain ecosystem, the complete transparency of all Ethereum transfers and fund holdings is becoming a core pain point for corporate payroll, institutional treasury management, and whale traders protecting their positions. Alea Research’s in-depth report tracks Railgun’s micro-level fund flows: stablecoins have replaced Ethereum as the absolute dominant asset, with monthly inflows and outflows exceeding $117 million—a historic high.
By upgrading the underlying protocol to EIP-7702, the protocol expanded anonymous interactions to complex DeFi scenarios such as Aave lending and Morpho vaults within just seven days, and rigorously calculated the actual risk-free cash flow distribution for stakers using precise mathematical models.
On the Ethereum network, every stablecoin transaction exposes the sender, recipient, and exact amount on a blockchain explorer. This presents a critical pain point for businesses paying employee salaries, institutional treasury teams managing fund allocations, or traders who urgently need to conceal their positions to avoid being targeted by counterparties.
In September of this year, a record $117 million in stablecoins flowed in and out of Railgun’s privacy pool, marking the highest monthly volume in the protocol’s history. Currently, stablecoins account for 77.2% of all assets flowing through the pool, significantly up from 33.7% at the same time last year.
Chart: Trends in stablecoin and ETH liquidity pools on Ethereum, Arbitrum, BSC, and Polygon
Key Points
Stablecoins have officially become Railgun’s core business pillar. The volume of stablecoin transactions flowing through this privacy pool surged 93.6% within a year, rising from $60.7 million in September 2025 to its current peak. USDC, USDT, DAI, and fxUSD can all be seamlessly transferred between Railgun addresses, with both parties’ identities and transfer amounts fully concealed.
Within just seven days, all major wallet ecosystems fully migrated Railgun’s DeFi interaction traffic to one-time accounts. After the new version was released on September 30, weekly operations unshielding to the old shared contract on Ethereum dropped sharply from 612 to 21, while unshielding calls to one-time accounts surged from zero to 559.
Privacy users can now securely hold on-chain lending positions and vault shares. DeFi positions initiated from a one-time, standalone account will remain permanently tied to that account, with no traceable link between the account and the owner’s public wallet address on-chain.
The governance token RAIL surged 35.3% this year against the market trend, while ETH declined by 21.7% during the same period. In September, monthly privacy transaction volume across Ethereum, Arbitrum, BSC, and Polygon reached a record 13,918 transactions, a significant 65.2% year-over-year increase.
Token stakers have accumulated 524 ETH this year, with exactly half of that coming from after July. A community proposal passed on July 22 increased the stakers' biweekly payout share to 4.2% of treasury funds. The browser wallet Ambire is set to officially integrate with Railgun via the Ethereum Foundation’s Kohaku development suite.
Chart: RAIL vs. ETH performance relative to the closing price on January 1
Shift in business focus to stablecoins
In September, stablecoin trading volume at the edge of the liquidity pool exceeded three times that of ETH, at $117 million compared to $34.8 million.
Railgun consolidates all shielded tokens into a smart contract pool. Users interact with assets from this pool using zero-knowledge proofs (ZK Proofs), which validate transaction validity on-chain without revealing the asset owner, account balance, or token type. In September, the f(x) protocol officially enabled users to directly mint their synthetic stablecoin, fxUSD, into shielded balances.
Peer-to-peer transfers between two Railgun addresses incur no protocol fees whatsoever. Additionally, each wallet can optionally run "Private Proofs of Innocence," a voluntary on-chain screening mechanism that verifies each new deposit for compliance against sanctions oracles and fraud blacklists without exposing user identities.
The Seven Key Days in October
Before October of this year, all DeFi contract interactions for Railgun were executed through a single shared relay contract called Adapt Relay. The pool transferred tokens to the relay, which then called external DApps and re-shielded the execution results back into the pool, completing the entire process within a single transaction.
This model works well for instant token swaps, but it completely fails for any operation tightly bound to the deposit address—such as Aave lending collateral—because the publicly shared contract cannot deliver specific positions individually to the underlying users who provided the initial funds.
Diagram: Architecture of a single Railgun DeFi call flow under Wallet SDK version 11.2.0
The Railgun Wallet Toolkit version 11.2.0, released on September 30, completely transforms the traditional model. The new version leverages the Ethereum EIP-7702 protocol upgrade to replace conventional relays, enabling ordinary externally owned accounts (EOAs) to directly execute smart contract code.
Now, each DeFi call is initiated from a brand-new, one-time account dynamically derived by the wallet from the user’s private key. All wallets direct these accounts to the same delegated contract, RelayAdapt7702. Because all users on the network share the same delegated proxy, the on-chain path cannot distinguish which specific wallet application initiated the transaction.
Chart: Weekly Unblocking Comparison Between Shared Relay and Delegated Relay, Categorized by On-Chain Code
The weekly volume of unblocking requests directed to traditional shared relays plummeted from 612 to 112 in the week of September 28, then further declined to 21. Meanwhile, total network interaction volume remained steadily high, hovering around 600 requests per week: 612, 618, 580, and 522 respectively over the consecutive weeks.
Between October 5 and October 25, up to 89.5% of the unblocking calls were directed to one-time independent accounts, with these 1,539 operations precisely distributed across 1,368 entirely unique addresses. Nearly every interaction utilized a brand-new, standalone account.
The third-party wallet ecosystem has been the greatest contributor to the successful implementation of this technological upgrade, with Terminal Wallet’s code serving as the reference standard for the new interaction flow. On September 23, Railgun’s official documentation version 3.0.2 added a routing solution for private deposits to any Morpho lending vault. The mobile wallet Anon integrated Railgun into its mobile platform in September, and community stakers have officially voted to approve protocol deployment on the Base network.
Record-breaking on-chain traffic across four public blockchains
Railgun processed a total of 13,918 privacy transactions in September, making it the busiest month in its history. Of these, 8,089 transactions occurred on Ethereum Mainnet and 3,348 on Arbitrum. From January to September this year, the total number of privacy transactions across the network reached 94,685, representing a 57.6% increase compared to the same period in 2025.
Chart: Monthly number of privacy transactions on Ethereum, Arbitrum, BSC, and Polygon
What do stakers actually earn?
Every two weeks, the Railgun on-chain treasury directs a portion of its WETH, DAI, and RAIL reserves to the staking reward distribution contract. Prior to July, the total distribution per period remained approximately between 14 and 21 ETH.
However, after stakers voted on July 22 to significantly increase the reward share from 2.0% to 4.2%, each biweekly distribution surged to 35 to 40 ETH. As of October 21, the total annual distribution reached 524.4 ETH, with as much as 262.9 ETH generated solely after the passage of this governance proposal.
Chart: Single dividend payment record of WETH transferred from the vault to the RAIL reward contract
Railgun charges a fixed fee of 0.25% on every shield and unshield operation, which is directly deposited into the on-chain treasury. Relay nodes that submit on-chain transactions on behalf of users may charge an additional gas premium, but this revenue goes solely to the relay nodes and does not enter the protocol treasury.
Every two weeks, 4.2% of the treasury’s WETH, DAI, and RAIL will be available for claim, distributed according to users’ staked RAIL weight. The entire reward distribution process is fully automated by smart contracts, with no multisig or core team signature pathways involved. Any mechanism changes must be enacted through on-chain governance proposals. The RAIL token itself has no buyback or burn mechanism. During the payout cycle on October 21, the treasury distributed a total of 35.0 WETH, 15,730 DAI, and 88,849 RAIL. USDC and USDT reserves held in the treasury are not included in this dividend cycle.
Scenario Simulation: Protocol Fees and Validator Rewards
Currently, a total of 42.53 million RAIL tokens are staked across the network, accounting for 70.9% of the current circulating supply of 60 million tokens. Based on the price of approximately $2.41 per RAIL on October 27, the market capitalization amounts to $144.5 million; if calculated against the total supply cap of 100 million tokens in the token contract, the fully diluted valuation is $241 million. In September alone, protocol fee capture reached $385,507, setting a new all-time high since 2026.
Chart: Monthly fees and scenario projections through September 2026, based on different growth rates
Assuming the measurement baseline remains stable at September levels, the total protocol capture fees for a full year would equate to 4.5% of the total value of staked RAIL (at a price of $2.41 per coin). If monthly protocol fees grow steadily at 3%, by September 2027, monthly fees will reach $549,641, increasing the annualized return to 6.4%; if monthly fees grow at 6%, monthly fees will exceed $775,716, and the annualized yield will rise to 9.1%.
In addition, the treasury continues to distribute dividends from its own held RAIL tokens. Based on asset deposits as of October 27, the combined annualized yield for current stakers remains at approximately 7.6% of the total locked value.
Railgun anchors core liquidity on the Ethereum mainnet while using cryptographic techniques to obscure asset ownership and flow. This year, stablecoin transactions have accounted for three-quarters of its total network volume. The integration of EIP-7702 has seamlessly extended privacy protection—previously limited to token swaps—to complex lending and vault scenarios, with the entire wallet ecosystem completing the transition within seven days.
All protocol fees are distributed to token stakers on schedule according to established rules, and the July proposal doubled the single-period ETH rewards. With the full launch of the Ambire wallet and the implementation of the RailOxide cross-chain privacy transaction protocol announced on October 24, a new wave of wallet ecosystems is rapidly integrating into this next-generation privacy infrastructure.
