Bitcoin Researchers Propose Zcash-Style Privacy Feature Without Altered Consensus Rules

Researchers at [[alloc] init] have proposed a system for private transfers on the Bitcoin network, called Shielded Bitcoin. This metaprotocol is designed to conceal transaction amounts, senders, recipients, and links between transfers while still publishing its protocol data through Bitcoin's mainnet.

The design adapts techniques pioneered by Zcash, including encrypted notes, public nullifiers, and zero-knowledge proofs. However, unlike Zcash, Shielded Bitcoin does not introduce a separate blockchain and instead relies on the Bitcoin network to provide the publication and ordering layer.

Users would hold BTC-denominated value as encrypted notes. When funds are transferred, the sender would publish an envelope containing encrypted outputs, public nullifiers marking previously held notes as spent, and a zero-knowledge proof establishing ownership and value conservation.

The amount being transferred and the identities of the counterparties would remain hidden. Bitcoin miners and nodes would not validate the shielded state themselves, but rather implementations following the Shielded Bitcoin rules would scan BTC blocks and replay accepted transfer envelopes in their recorded order.