Researchers Propose Bitcoin Privacy Without Soft Fork or Trusted Bridge Operators

Researchers from Alloc Init have proposed a new metaprotocol called Shielded Bitcoin that allows users to hide their transaction amounts and counterparties without modifying Bitcoin's consensus rules or relying on trusted bridge operators.

The design, presented by Clara Shikhelman, Mikhail Komarov, and Aleksei Moskvin, builds upon the encrypted-note approach used in Zcash, but uses cryptographic proofs instead of a trusted intermediary to move value privately.

Shielded Bitcoin would place value into encrypted 'notes,' with each note containing an amount and its owner's receiving information. When Alice pays Bob, her wallet would publish these notes alongside zero-knowledge proof to the Bitcoin blockchain.

The proof confirms that the notes being spent exist and that Alice is authorized to spend them, without exposing the amounts publicly. Software called indexers would then read these transfers, verify the proofs, and track nullifiers, which are unique serial numbers that prevent the same note from being spent twice.