Bitcoin Gets Private Transfers Without a Soft Fork

A new research paper proposes a way to send Bitcoin without broadcasting who paid whom or how much changed hands. The design, titled 'Shielded Bitcoin: Private Transfers on Bitcoin L1,' aims to bring private transfers to the base layer of Bitcoin's network without altering its underlying consensus rules.

The protocol, developed by researchers at Alloc Init, uses encrypted notes and zero-knowledge proofs to hide transfer details. It does not require a soft fork or separate blockchain and ensures that no trusted operator holds users' funds.

Shielded Bitcoin is built on top of Bitcoin's existing infrastructure and relies on indexers to verify transfers without having special power over the system. The protocol allows for selective disclosure, enabling users to share specific transfer details with auditors or counterparties without granting them spending power.