Bitcoin could soon get Zcash-style 'shielded' privacy without changing its rules
A new paper, "Shielded Bitcoin," proposes a method to bring Zcash-style privacy to Bitcoin without altering its core rules. The system would hold bitcoin value in encrypted "notes," allowing for hidden amounts, senders, and recipients, with transfers recorded on the Bitcoin blockchain but checked by separate software. This development addresses growing concerns about privacy in cryptocurrency transactions for business and everyday use.
Why it matters
This innovation could significantly enhance privacy for Bitcoin users, potentially broadening its adoption for sensitive transactions and addressing a key limitation compared to privacy-focused cryptocurrencies, all while maintaining Bitcoin's foundational integrity.
The Shielded Bitcoin paper , published on Thursday by Clara Shikhelman, Mikhail Komarov and Aleksei Moskvin of cryptography firm [alloc] init, borrows the encrypted payment design used by Zcash.
Inside the proposed system, bitcoin-denominated value would be held in encrypted records called notes. Spending one would publish a marker showing it had been used, along with a mathematical proof that the sender owned the funds and had not created new ones. The amount, sender and recipient would remain hidden.
Under Bitcoin's current system, every node checks every transaction against one shared rulebook. A payment that breaks those rules never makes it into a block, so a confirmation is proof the network agreed the money was real and the sender owned it.
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