Shielded Bitcoin: Researchers Explore Private Transfers Without Soft Fork
A new proposal for private Bitcoin transfers has been outlined by researchers at Alloc Init. Dubbed Shielded Bitcoin, this system aims to bring Zcash-style shielded transfers to Bitcoin without requiring a soft fork of the base protocol.
The design relies on encrypted 'notes' and zero-knowledge proofs to hide transaction amounts, senders, receivers, and linkages to previously spent funds. This approach treats Bitcoin as an 'ordering layer,' rather than enforcing privacy rules at consensus.
Shielded Bitcoin mirrors core Zcash components, including nullifiers to prevent double-spending and zero-knowledge proofs for transaction validity. However, critics argue that early deposits may provide limited crowd-mixing, reducing the effectiveness of the anonymity set.