Zcash-style Privacy Technology Lands on Bitcoin

Bitcoin privacy researchers at Alloc Init proposed a new metaprotocol for private BTC transfers on Sept. 24. Shielded Bitcoin would hide transaction amounts and counterparties without changing Bitcoin’s consensus rules. The design remains a research proposal and has not been deployed on the Bitcoin network.

Researchers Clara Shikhelman, Mikhail Komarov and Aleksei Moskvin developed the system around encrypted notes and zero-knowledge proofs. Bitcoin would store and order the underlying transaction data without interpreting the private transfer itself. Separate indexers would verify the Shielded Bitcoin rules using data published on Bitcoin.

Shielded Bitcoin Proposal Still in Theoretical Stage

Alloc Init published the proposal today, stating that its implementation will not require any soft fork or bridges and will address a major issue with Bitcoin, the public nature of transactions.

They noted that the lack of privacy on Bitcoin is a major limitation for the network, both for individuals and institutions. However, Shielded Bitcoin is meant to achieve that through a privacy architecture built into the network.

Users will be able to deposit BTC into the metaprotocol and receive a private note inside Shielded Bitcoin representing the value of their deposit.

They can then send part of the BTC as an encrypted note to the recipient, while the balance is sent as an encrypted note to the sender. This way, the Bitcoin network records that a note has been spent, but there is a public record of which one.

An accompanying blog post with the technical paper explained that Notes are not visible on Bitcoin in a readable form. So when someone initiates a transaction, Bitcoin only stores the data and orders it, but cannot read it.

“Think of Bitcoin as a public bulletin board: Bitcoin publishes and orders the data, while anyone can independently apply the Shielded Bitcoin rules to determine the resulting state,” it stated.

The idea remains theoretical, with the researchers noting that limitations could still allow a transaction to be identified. They are now planning to publish another paper on how Bitcoin can enter or exit the shielded protocol.

Privacy Dominates Crypto Conversations as Zcash Rises

Despite the proposal’s current theoretical nature, it has already attracted some interest from the Bitcoin community. Attempts to introduce privacy to Bitcoin are not new, with existing options including CoinJoin, Silent Payments, and PayJoin.

However, the paper noted that the Shielded Bitcoin approach is closer to what Zcash currently offers. This has led some people to describe the proposal as marketing for Zcash.

Zcash has enjoyed a surge in interest over the past year, translating into a massive rise in its token value. ZEC is one of the best performers this year, with the token up 192% year to date.

It is currently trading above $1,500 and has risen by more than 3% today. By comparison, Bitcoin is down slightly in the last 24 hours. The flagship asset is trading around $84,000 and is down almost 4% year-to-date.

This article is for informational purposes only and does not constitute financial, investment or cybersecurity advice. Shielded Bitcoin remains an experimental research proposal.