Researchers Propose Private Transactions on Unchanged Bitcoin Blockchain

A team of researchers from [[alloc] init], a New York cryptography lab, has proposed a way to bring privacy to Bitcoin's Layer 1 (L1) without changing its underlying rules. The proposal, called Shielded Bitcoin, uses zero-knowledge proofs and encrypted notes to conceal the amounts and counterparties involved in transactions.

The system would work by encrypting transaction data and storing it on the Bitcoin blockchain, while outside software verifies the payments. This approach would allow for private transfers without requiring a soft fork or separate blockchain.

However, there is still one major catch: the researchers have not yet finished developing the mechanism for moving bitcoin in and out of the private system. Until this issue is resolved, Shielded Bitcoin remains more of a research concept than a practical solution.