New Design Proposal for Protecting Bitcoin Transfer Information

A cryptographic research firm, Alok Init, has proposed a design called 'Shielded Bitcoin' that conceals the amount of Bitcoin (BTC) transferred as well as the sender and recipient information. According to a paper released on the 24th, this design uses encryption to secure transaction information and verifies the validity of transactions through zero-knowledge proofs without changing Bitcoin's consensus rules. The Bitcoin blockchain records encrypted transaction data and organizes it, while proof verification and state management are handled by separate software called an 'indexer.' This means that a soft fork to change Bitcoin's consensus rules is not necessary. However, this design is limited to transfers made within a private transfer system, and not all Bitcoin transactions will become private. Some information, such as transaction timestamps, fees, and the number of inputs and outputs, will remain on the public ledger. Developer Vadim Zabotin raised concerns about the effectiveness of this design, pointing out that if there are few users, it becomes easier to infer transaction counterparts, thus limiting privacy protection. Pierre-Luc Dallerdemere criticized the design for lacking quantum resistance, while Eli Ben-Sasson, a co-author of Zcash, expressed hope that privacy and scalability through zero-knowledge proofs will be implemented in Bitcoin's base layer.