Shielded Bitcoin: A Zcash-Style Overlay for Bitcoin
A team of researchers from Alloc Init has proposed a new system called Shielded Bitcoin that would bring Zcash-style private transfers to the Bitcoin network without requiring any changes to its consensus rules.
The metaprotocol, outlined in a 56-page proposal, treats Bitcoin as little more than a bulletin board and relies on external indexers to verify zero-knowledge proofs and rebuild the shielded state from data posted to the blockchain.
Shielded Bitcoin would hide senders, recipients, and amounts by treating value as encrypted notes, each transfer carrying a proof that the sender controls the notes being spent and inputs and outputs balance.
The system has drawn scrutiny over its structural weakness: anonymity set size. Zcash has accumulated years of shielded activity, giving its users a large crowd to hide in, whereas Shielded Bitcoin would start from zero.