A new protocol proposes shielded transactions like Zcash on Bitcoin

• The authors clarify that the design encompasses internal privacy, not the entry of funds.
• The design aims to allow private transfers on the main layer without altering its consensus.

A group of developers presented on September 24, 2026, Shielded Bitcoin, a protocol for conducting shielded transactions over the Bitcoin network. The proposal operates without a soft fork, without a centralized operator, and without creating a parallel network.

The white paper, titled Shielded Bitcoin: Private Transfers on the Bitcoin L1 and signed by Clara Shikhelman, Mikhail Komarov, and Aleksei Moskvin, takes as a reference the privacy model used by the Zcash network and adapts it to the Bitcoin network.

In the document, the authors state: "This article introduces Shielded Bitcoin, a protocol for the private transfer of bitcoin directly on Bitcoin's L1, without requiring changes to the consensus."

The system hides amounts and addresses using zero-knowledge proofs or zk proofs (ZK Proof), a mathematical tool that validates an operation without revealing its data. For an external observer, only a non-readable data wrapper is recorded on the blockchain.

Regarding the validation of operations compared to other developments, the official text details: "Shielded Bitcoin does not introduce a dedicated consensus chain: all protocol data is published on Bitcoin."

The private information of transactions is not directly reconstructed on Bitcoin, but each user processes it off-chain. To do this, the protocol uses a mechanism of "deterministic replay": users review the valid Bitcoin history and, following the same rules, reconstruct the state of shielded transfers. According to the white paper, this process allows everyone to reach the same state without needing to store all private information on the network.

This process also does not give control over the funds to the indexers or the layer responsible for reconstructing the state. The researchers clarify that none of these parties are authorized to spend the notes, that is, the units of BTC represented within the shielded transfer system.

The mechanism described in the white paper also does not explain how BTC enters or exits the system. The authors point out that the peg-in and peg-out processes, used to introduce BTC into the shielded transfer system and withdraw them from it, are part of a broader system and fall outside the scope of this proposal.

Furthermore, the researchers warn that the proposal does not guarantee absolute invisibility to the network. A public identifier "reveals that some note spending was accepted in a particular Bitcoin block, but it should not reveal which previous note was spent."

This technical approach responds to a recurring debate within the community about privacy risks in consensus. Mid-year, a bug in Zcash's Orchard pool forced an emergency hard fork to avoid node desynchronization. In light of this, developer Peter Todd argued that incorporating complex cryptography directly into Bitcoin's base layer creates an unacceptable attack surface for a reserve asset, as reported by CriptoNoticias.

Finally, the proposal includes in its Appendix D voluntary audit options for identity compliance. In its presentation, the lab [[alloc] init] synthesizes its proposal: "No soft forks. No operators. No bridges."

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