A group of researchers floated a way to make bitcoin payments more private without changing the network’s rules, as privacy-focused cryptocurrencies led by Zcash attract renewed investor interest.
The Shielded Bitcoin paper, published on Thursday by Clara Shikhelman, Mikhail Komarov and Aleksei Moskvin of cryptography firm [alloc] init, borrows the encrypted payment design used by Zcash.
Inside the proposed system, bitcoin-denominated value would be held in encrypted records called notes. Spending one would publish a marker showing it had been used, along with a mathematical proof that the sender owned the funds and had not created new ones. The amount, sender and recipient would remain hidden.
Zcash’s blockchain checks those proofs itself. Shielded Bitcoin would publish the transfer data on Bitcoin and leave the checks to separate software that anyone could run. A Bitcoin transaction could therefore be confirmed while the private payment recorded inside it failed Shielded Bitcoin’s checks.
Privacy has become a practical concern in recent months as developers try to make cryptocurrencies useful for payroll, business payments and everyday spending. Ordinary bitcoin transactions permanently expose amounts and addresses, but once an address is linked to a company or person, other payments associated with it become easier to follow.
Ethereum is also reviewing a proposal for a shared private pool that would let people transfer ether and other tokens without publicly revealing payment details. Its authors cite payroll, treasury management and donations among the uses poorly served by fully public transactions.
Zcash lets users choose between transparent payments, whose addresses and amounts are public, and shielded payments that encrypt those details.
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