Shielded Bitcoin: [alloc] init Brings Zcash-Grade Privacy to BTC

New York-based cryptography firm [alloc] init has created 'Shielded Bitcoin,' a metaprotocol that brings Zcash-grade transaction privacy to Bitcoin's base layer without changing its consensus code. The system uses encrypted notes, nullifiers, and zero-knowledge proofs on the Bitcoin blockchain to create shielded transfers.

The technical foundation is PIPEs v2, which introduces witness encryption to Bitcoin using Arithmetic Affine Determinant Program (AADP)-based witness encryption scheme. This allows for complex conditions about transactions to be verified without exposing underlying data.

[alloc] init's proposal mirrors Zcash's shielded pool architecture and aims to bring private transactions to Bitcoin users without leaving the network effects, liquidity, and security model. However, it comes with a storage cost of approximately 330 TB, which is currently being optimized to around 100 GB.