I recently used NEAR confidential swaps to swap ETH for USDC. The confidentiality feature worked as advertised, but the execution cost came out to around $6. That is roughly three times what I pay when doing a swap of the same volume through Rabby Swap, a DEX aggregator in my favorite wallet. While $6 might sound small in absolute terms, it represents a steep overhead for routine transfers.

Why Execution Costs Spike in Shielded Environments

When you swap on a public DEX, you execute against pooled, visible liquidity depth in an open market.

NEAR Confidential Mode routes transactions through a private shard to conceal your wallet address, asset amounts, and routing paths from public mempools. To maintain that privacy, it replaces public AMM pools with an off-chain Request-For-Quote (RFQ) solver network. Solvers quote prices on your trade, and settlement occurs through a Verifier contract. Because solver inventory in private shards is isolated from main public pools, solvers price inventory risk and wider bid-ask spreads directly into their quotes, leading to higher transaction costs.

When Is the 3x Privacy Premium Worth It?

A $6 execution cost creates a clear trade-off depending on transaction size and intent:

• Small transfers & routine operations: For small to medium amounts, a $6 fee represents a 1% to 6% hit to execution efficiency. For standard operational swaps or personal transfers, public aggregators offer vastly better capital efficiency.

• Large treasury rebalancing & strategic trades: For sizeable DAO treasury movements, corporate payroll funding, or automated AI agent rebalancing, leaking metadata like wallet balances, swap size, and execution timing to public mempool trackers and MEV bots can cost far more than $6 in slippage or frontrunning.

Liquidity Mechanics: User Deposits Are Not Used for Liquidity

It is worth being explicit about where liquidity actually comes from in this setup. When you deposit assets into the NEAR app, one of the first steps in making a swap, your funds sit in an internal ledger managed by the Verifier contract (intents.near). They are not pooled into an AMM or rehypothecated to serve as market maker liquidity. Taking user deposits and lending or pooling them to back trades would introduce counterparty and liquidity risks that intent-based systems are specifically designed to avoid.

Execution liquidity comes entirely from off-chain solvers. These professional market makers bring their own balance sheet inventory across public chains and private shards to compete for orders on the message bus. When you sign a swap intent, solvers bid using their own capital to fulfill your requested payout.

Why TVL (Total-Value-Locked) Matters to Solvers

If user deposits do not act as trading liquidity, why does the system care about TVL?

Solvers allocate capital where order flow is predictable. High user balances inside the Verifier contract serve as a demand beacon. When market makers see tens of millions of dollars sitting in user balances, it guarantees a steady stream of trade requests. That predictable volume draws more competing solvers into the private shard. As solver competition grows, bid-ask spreads compress, which is the primary mechanism that will drive the $6 execution fee down toward standard DEX rates over time.

Conclusion

At $6 per swap compared to $2 on Rabby, paying a 3x premium for a routine ETH-to-USDC payroll transfer isn't practical or worth it on privacy alone. While shielding transaction details, wallet balances, and routing from public block explorers and observers is valuable for large treasury moves, paying that level of friction for day-to-day operations is a tough sell for any practitioner.

Frankly, I wouldn't be executing these routine operational swaps on near.com right now if not for the NEAR@3.33 Milestone Incentive Program. By keeping a time-weighted confidential balance of $100+ in the NEAR app, I should qualify for the 333,333 milestone token pool once private shard TVL hits $70M. That allocation will hopefully recoup my execution costs and make testing the protocol net-positive.

Over time, higher Confidential TVL and broader order flow should attract more competing solvers, compressing bid-ask spreads and bringing execution costs down naturally. But until that private liquidity flywheel fully matures, incentive programs remain the essential bridge that makes early participation viable for users like myself.