ShieldUSD Demo Shows Private Transfers and Compliance Controls on Midnight

W3i Software CTO Andrew Westberg has demonstrated how ShieldUSD is designed to operate through private transfers, public balance conversion, and contract-level compliance controls. Westberg presented the system in an episode of Cardano: NerdOut using Perdix, a demonstration wallet he created to display ShieldUSD’s current functionality.

ShieldUSD is being developed as a USD stablecoin for Midnight, Cardano’s privacy-focused partner chain. Moneta Digital and Norwegian Block Exchange are expected to co-issue the asset, while W3i is building the technology stack, integrations, and implementation infrastructure. The project has identified payroll, B2B settlement, real-world payments, and institutional DeFi as target use cases.

Andrew Westberg Demonstrates Private ShieldUSD Transfers

The Perdix demonstration used separate accounts for two users, Alice and Bob, alongside dedicated issuer, auditor, and compliance accounts.

Alice began with 10,000 ShieldUSD in a private balance and transferred 5,000 units to Bob. The contract consumed Alice’s original private note and created two new notes, one holding Bob’s 5,000-unit balance and another returning the remaining 5,000 units to Alice.

The structure operates similarly to a UTXO system, with private notes representing spendable balances inside the ShieldUSD contract. Wallets scan the blockchain for notes they can decrypt, while external observers are not shown the balances, recipients, or transferred amounts displayed inside the wallet.

The transaction process included proof generation, signing, submission to the blockchain, confirmation, and contract-state synchronization. Westberg said the complete process currently takes approximately 40 seconds to one minute.

Perdix used a locally operated proof server during the demonstration. Westberg said other wallet implementations could connect to remote proof servers or secure computing environments, depending on how developers balance performance with protection of the proving process.

ShieldUSD’s public materials describe the asset as a privacy-first stablecoin with selective disclosure. No independent privacy assessment or public security audit was presented during the demonstration, and the official ShieldUSD website continues to list the product as “Coming soon.”

Private and Public Balances Create a Route Into DeFi

ShieldUSD is designed to support both private and public balances inside the same contract system.

During the demonstration, Alice converted 300 ShieldUSD from her private balance into a public balance. The transaction consumed her previous private note and created a new private note containing 4,700 units, while the remaining 300 units became available on the public side of the contract.

The public balance is intended for decentralized exchanges and other applications that require transparent contract state. Under the demonstrated model, a user could move part of a private balance into the public layer, interact with a DeFi application, and later convert the funds back into a shielded balance.

The demo confirmed the conversion mechanism but did not include a swap, lending position, liquidity deposit, or interaction with a live DeFi protocol. No Cardano or Midnight DEX integration was demonstrated during the session.

Unlike the public Cardano model used by $USDM, ShieldUSD is being built around protected transfers and selective disclosure on Midnight. W3i’s original announcement said the stablecoin would allow transaction validity and compliance to be verified without publishing sensitive financial information by default.

Westberg classified ShieldUSD as a programmable shielded token. Midnight also supports native shielded tokens, but those assets do not provide the same contract-level controls. ShieldUSD remains inside a programmable contract, allowing the system to combine private notes, public balances, issuance rules, and compliance actions.

The Perdix interface also displayed $NIGHT, Midnight’s native token, separately from ShieldUSD balances during the demonstration.

Separated Roles Define the ShieldUSD Compliance Model

The ShieldUSD contract shown in Perdix divides operational authority among an issuer, an auditor, and a compliance officer.

The issuer is the only account authorized to mint and burn ShieldUSD. Newly created units are first assigned to the issuer, which can then distribute them to users. Moneta Digital and Norwegian Block Exchange are listed as the planned co-issuers for the production stablecoin.

The auditor has read-only visibility across the contract. In Westberg’s demonstration, the auditor could review private notes, associated addresses, conversions, and the activity history of the system. The auditor could not independently freeze balances or take control of user funds.

The compliance officer can freeze private or public balances but does not have the same contract-wide visibility. A targeted action therefore requires information from the auditor identifying the relevant shielded address or note.

A frozen account can continue receiving funds but cannot spend them. Seizure requires specific frozen notes to be identified, and seized funds are transferred to the issuer rather than the compliance officer. The contract also includes an emergency pause function that can stop all activity during a major network failure, exchange breach, or other security incident.

Westberg described cooperation between the three roles but did not state that every intervention requires a three-party multisignature transaction. The freeze and seizure functions were not executed during the session, as testing remained focused on transfers, note management, and private-to-public conversion.

Perdix has not been released as a public wallet, and no production ShieldUSD contract address, independent audit report, or mainnet launch date has been announced. Westberg’s demonstration provides a working view of how shielded balances, public application access, auditing, and targeted compliance actions can operate within the same contract architecture.