Shielded Bitcoin Proposal
Researchers Propose Forkless Privacy Layer to Enable Private Bitcoin Transfers Without Consensus Changes
Anonymous
Alloc Init researchers have proposed Shielded Bitcoin, a metaprotocol intended to enable private transfers on Bitcoin without a soft fork or changes to its consensus rules. The design publishes encrypted notes, nullifiers and zero-knowledge proofs to Bitcoin, concealing transaction amounts and counterparties while allowing separate software called indexers to verify transactions and reconstruct the system’s state. Its proposed witness-encryption mechanism is intended to enforce spending conditions through cryptography, without trusted operators or a separate blockchain. The proposal could broaden Bitcoin’s appeal to users seeking transaction privacy; one market commentator has argued that shielded transfers on Bitcoin could put pressure on dedicated privacy coins, though the design remains a proposal rather than a deployed Bitcoin feature.
Key Points
1
The proposal is designed so shielded transfers appear on-chain like ordinary Schnorr-signature transactions.
2
The researchers say a valid transfer must prove three things: the spender is authorized to spend the notes, the notes exist in the system’s state, and the value entering and leaving the transaction balances.
3
The design rules out multisig arrangements, BitVM-style fraud proofs, and trusted setup ceremonies; verification and recovery are described as requiring a Bitcoin node and an indexer.
4
Market analyst André Dragosch characterized Bitcoin shielded transfers on layer 1 as a direct headwind for privacy coins.
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