Privacy Dollars Skyrocket: Why Has Railgun’s Monthly Capital Volume Hit an All-Time High?

Author: Alea Research

Translated by: TechFlow

TechFlow Summary: Within the public chain ecosystem, the complete transparency of all Ethereum transfers and fund holdings has become a core pain point for enterprises handling payroll, institutional treasury management, and whale traders protecting their positions. This in-depth research report from Alea Research tracks the micro-level capital changes in Railgun: stablecoins have replaced Ethereum as its absolute mainstay, with monthly inflow and outflow volumes surpassing $117 million to set a historical record.

By upgrading its underlying infrastructure to EIP-7702, the protocol expanded anonymous interactions to complex DeFi scenarios such as Aave lending and Morpho vaults within just seven days, and used rigorous mathematical models to calculate the actual risk-free cash flow distribution for stakers.

On the Ethereum network, any stablecoin payment will completely expose the sender, recipient, and exact amount in blockchain explorers. For enterprises that need to distribute employee salaries, institutions managing fund allocations, or traders who urgently need to hide their positions to avoid being targeted by counterparties, this constitutes a fatal pain point.

In September this year, stablecoins worth up to $117 million flowed into and out of Railgun's privacy pools, setting a single-month high record for the protocol. Currently, stablecoins account for 77.2% of all assets flowing through these pools, significantly higher than the 33.7% recorded at the same time last year.

Chart: Trend of stablecoin and ETH pool movements on Ethereum, Arbitrum, BSC, and Polygon

Key Takeaways

Stablecoins have officially evolved into Railgun's most core business pillar. The transaction volume of stablecoins flowing through these privacy pools surged by 93.6% over the past year, jumping from $60.7 million in September 2025 to a current peak. USDC, USDT, DAI, and fxUSD can all flow seamlessly between Railgun addresses, with both parties' identities and transfer amounts kept in complete concealment.

Mainstream wallet ecosystems fully drove the migration of Railgun's DeFi interaction traffic to one-time accounts within just seven days. After the release of the new version on September 30, the weekly number of unshielded operations to the old shared contract on Ethereum plummeted from 612 to 21, while the call volume for unshielding to one-time accounts surged from zero to 559.

Privacy users can now safely hold on-chain lending positions and vault shares. DeFi positions initiated from a one-time independent account will permanently reside within that account, and there are no traceable links on-chain between this account and the owner's public wallet address.

The governance token RAIL rose against the trend by 35.3% year-to-date, while ETH fell by 21.7% during the same period. The single-month privacy trading volume across Ethereum, Arbitrum, BSC, and Polygon reached a record-breaking 13,918 transactions in September, a significant year-over-year increase of 65.2%.

Token stakers have cumulatively received 524 ETH this year alone, with exactly half coming after July. The community proposal passed on July 22 raised the bi-weekly profit-sharing ratio for stakers to 4.2% of the vault funds. Browser wallet Ambire is set to formally integrate with Railgun via the Ethereum Foundation's Kohaku development kit.

Chart: Comparison of RAIL and ETH price trends based on January 1 closing prices

Strategic Shift Toward Stablecoins

In September, the trading volume of stablecoins at the edge of the pool exceeded three times that of ETH, with figures of $117 million compared to $34.8 million.

Railgun stores all tokens under shield protection uniformly in smart contract pools. Users manage assets from this pool through Zero-Knowledge Proofs (ZK Proofs), which verify the validity of funds on-chain without exposing the asset owner, account balance, or token type. In September, the f(x) protocol officially supported users minting their synthetic stablecoin fxUSD directly into shielded balances.

P2P transfers between two Railgun addresses incur absolutely no protocol fees. Additionally, wallets can opt to run "Private Proofs of Innocence," an optional on-chain screening mechanism that conducts compliance checks on each new deposit against sanctions oracles and fraud tracking blacklists without exposing user identities.

The Crucial Seven Days in October

Before October this year, all of Railgun's DeFi contract interactions were executed through a single shared relay contract called Adapt Relay. The pool transferred tokens to the relay, which was responsible for calling external DApps and re-shielding the execution results back, completing the entire process in a single transaction loop.

This model works well for instant token swaps (Swap), but fails completely for any operation tightly bound to the depositing address (such as Aave lending collateral), because the public shared contract cannot deliver specific positions exclusively to the underlying user providing the initial funds.

Architecture Diagram: Single Railgun DeFi Call Flow Under Wallet SDK v11.2.0

The Railgun Toolkit v11.2.0 released on September 30 completely overturned the old model. The new version leverages the Ethereum EIP-7702 protocol upgrade to replace traditional relays, enabling standard Externally Owned Accounts (EOAs) to directly execute smart contract code.

Now, every DeFi call is initiated by a brand-new one-time account dynamically derived by the wallet from the user's private key. All wallets uniformly route these accounts to the same delegated contract, RelayAdapt7702. Since all users across the network share the same delegated proxy, on-chain paths cannot distinguish which specific wallet application the initiator is running.

Chart: Weekly Comparison of Unshielding to Shared Relay vs. Delegated Relay Categorized by On-Chain Code

The weekly unshielding call volume routed to the traditional shared relay plummeted cliff-wise from 612 to 112 during the week ending September 28, then further contracted to 21. Meanwhile, the total network interaction volume remained firmly maintained in the high range of approximately 600 calls per week: 612, 618, 580, and 522 for each respective week.

Between October 5 and October 25, as high as 89.5% of unshielding calls were directed to one-time independent accounts, with these 1,539 operations precisely distributed across 1,368 entirely different addresses. Almost every interaction utilized a brand-new independent account dedicated to it.

The third-party wallet ecosystem played the largest role in implementing this technology upgrade, with Terminal Wallet's code serving as the reference benchmark for the new interaction flow. On September 23, Railgun Official Manual v3.0.2 added routing solutions for private deposits into any Morpho lending vault. Mobile wallet Anon integrated Railgun into its mobile platform in September, and community stakers have also officially voted to approve protocol deployment on the Base network.

Record-Breaking On-Chain Traffic Across Four Public Chains

Railgun processed a total of 13,918 privacy transactions in September, making it the busiest month in its history. The Ethereum mainnet handled 8,089 transactions, while Arbitrum handled 3,348. From January to September this year, the cumulative network-wide privacy transaction count reached 94,685, representing a substantial 57.6% increase compared to the same period in 2025.

Chart: Monthly Privacy Transaction Count Statistics on Ethereum, Arbitrum, BSC, and Polygon

What Stakers Actually Receive

Every two weeks, the Railgun on-chain vault redirects portions of its reserves of WETH, DAI, and RAIL into the staking reward distribution contract. Before July, the total payout per period hovered around 14 to 21 ETH.

However, after stakers voted on July 22 to significantly raise the profit-sharing ratio from 2.0% to 4.2%, every bi-weekly payout jumped to 35 to 40 ETH. As of October 21, the full fiscal year cumulative payout has reached 524.4 ETH, with as many as 262.9 ETH generated solely after this governance proposal passed.

Chart: Single Payout Record of Vault Transferring WETH to RAIL Reward Contract

Railgun charges a fixed 0.25% fee on every shielding and unshielding operation, directly injecting it into the on-chain treasury. The relay broadcast nodes responsible for submitting on-chain transactions for users charge an additional gas premium, but this revenue belongs to the broadcast nodes and does not enter the protocol treasury.

Once every two weeks, 4.2% of the WETH, DAI, and RAIL in the treasury become available for claiming based on the weight of RAIL staked and locked by users. The entire revenue pipeline is executed autonomously by smart contracts, with no intervention paths for multisig or core team signatories; any mechanism changes must pass through on-chain governance proposals. The RAIL token itself has no buyback or burn mechanism. In the payout cycle on October 21, the treasury distributed a total of 35.0 WETH, 15,730 DAI, and 88,849 RAIL. The USDC and USDT reserves accumulated in the treasury have not yet been included in this dividend cycle.

Scenario Analysis: Protocol Fees and Staker Payouts

Currently, stakers across the network have locked a total of 42.53 million RAIL, accounting for 70.9% of the current circulating supply of 60 million tokens. At approximately $2.41 per RAIL on October 27, its circulating market capitalization stands at $144.5 million, corresponding to a Fully Diluted Valuation of $241 million based on the token contract's total supply cap of 100 million. Protocol-captured fees reached $385,507 in September, setting a new record for 2026.

Chart: Monthly Fees Through September 2026 and Scenario Projections Based on Various Growth Rates

Assuming the measurement baseline remains flat at September levels, a full year of protocol-captured fees would equate to 4.5% of the total value of staked RAIL (calculated at a $2.41 coin price). If the protocol's average monthly fees grow steadily at 3%, single-month fees will reach $549,641 by September 2027, raising the annualized return rate to 6.4%. If the average monthly fee growth reaches 6%, single-month fees will exceed $775,716, pushing the annualized payout yield to jump to 9.1%.

Furthermore, the treasury continues to distribute dividends from its own held RAIL tokens. Based on asset accumulation as of October 27, the current comprehensive annualized payout yield for stakers hovers around 7.6% of the total locked value.

Railgun anchors core liquidity on the Ethereum mainnet while relying on cryptographic algorithms to obscure asset ownership and flows. This year, stablecoin funds have captured three-quarters of its total network transaction value. The integration of EIP-7702 smoothly extends privacy protection, previously limited to token flash swaps, into complex lending and vault scenarios, with the entire wallet ecosystem completing a full transition within seven days.

Every protocol fee is returned to token stakers on schedule according to established rules, with the July proposal directly doubling the single-period ETH payout. With the full launch of the Ambire wallet and the deployment of the RailOxide cross-chain privacy transaction protocol announced on October 24, a new wave of wallet ecosystems is accelerating its integration into this brand-new privacy infrastructure.