Researchers propose Zcash‑style private Bitcoin transfers without a soft fork

Researchers at the cryptography firm Alloc Init have introduced a proposal called Shielded Bitcoin that aims to bring Zcash‑style private transfers to the Bitcoin network without requiring a soft fork. The design would conceal amounts, sender and receiver addresses, and links to previously spent funds using encrypted notes and zero‑knowledge proofs.

How Shielded Bitcoin works

Instead of altering Bitcoin’s consensus rules, the system treats Bitcoin as a neutral publication and ordering layer. Separate software components, referred to as indexers, would verify the zero‑knowledge proofs, ensure that notes are not double‑spent, and maintain the state of the shielded pool.

Comparison with Zcash

The architecture mirrors Zcash’s use of encrypted notes, public nullifiers, and zero‑knowledge proofs, but it does not create a separate blockchain or consensus mechanism. This distinction allows the protocol to operate on top of the existing Bitcoin chain.

Critiques and limitations

• Developer Vadim Zavodil noted that privacy depends on the size of the anonymity set, which a new shielded pool would lack initially.
• The researchers acknowledged that a small number of participants could make it easier to link transactions.
• Post‑quantum cryptography expert Pierre‑Luc Dallaire‑Demers warned that the construction is not quantum‑resistant and suggested exploring a post‑quantum version.

Community response

Eli Ben‑Sasson, co‑author of the original Zerocash paper and CEO of StarkWare, expressed support for the direction of applying zero‑knowledge proofs to Bitcoin, noting the original intent was to add privacy to the network.