Researchers propose Zcash-style private Bitcoin transfers without a soft fork
Shielded Bitcoin would use zero-knowledge proofs and encrypted notes to hide transaction details without changing Bitcoin consensus, but researchers have raised questions about anonymity and quantum resistance.
Researchers at cryptography firm Alloc Init have introduced a new system called Shielded Bitcoin, aiming to bring Zcash-style private transactions to the Bitcoin network without requiring a soft fork. The proposal, published by researchers Clara Shikhelman, Mikhail Komarov, and Aleksei Moskvin, utilizes encrypted notes and zero-knowledge proofs to conceal transaction amounts, senders, receivers, and links to previously spent funds.
By leveraging Bitcoin as a neutral publication and ordering layer, Shielded Bitcoin would rely on separate software called "indexers" to oversee the verification of zero-knowledge proofs and ensure funds have not been double-spent. The design of Shielded Bitcoin is based on Zcash's architecture, employing similar concepts such as encrypted notes, public nullifiers, and zero-knowledge proofs.
However, unlike Zcash, Shielded Bitcoin does not create its own blockchain or consensus mechanism. Nevertheless, critics argue that the initial privacy of the new system would be limited due to the lack of an established anonymity set.
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