Researchers at Alloc Init have proposed "Shielded Bitcoin," a metaprotocol that hides transfer amounts and counterparties on Bitcoin's base layer without a soft fork or trusted bridge. The design borrows Zcash's encrypted-note model and splits spending rights from viewing rights, letting users share transaction details without handing over control of funds.
Researchers behind Alloc Init have proposed "Shielded Bitcoin," a metaprotocol designed to hide BTC transfer amounts and counterparties without changing Bitcoin's consensus rules, without a soft fork, or relying on trusted bridge operators. The design borrows the encrypted-note approach Zcash made known, but builds it directly on Bitcoin's existing base layer, using cryptographic proofs instead of a trusted intermediary to move value privately.
How the Privacy Layer Works
Presented by Clara Shikhelman, Mikhail Komarov and Aleksei Moskvin, the proposal starts with a simple limitation: Bitcoin's ledger is public, so amounts, transaction timing and links between transactions can often be examined and associated with known wallets.
Shielded Bitcoin would place value into encrypted "notes," with each note containing an amount and its owner's receiving information. So, for example, when Alice pays Bob, her wallet would publish encrypted notes to Bitcoin alongside a zero-knowledge proof. The proof confirms that the notes being spent exist and that Alice is authorized to spend them. It also confirms that the amounts balance, without exposing those details publicly.
Indexers Verify Without Controlling the Ledger
Software called indexers would then read these transfers, verify the proofs, and track nullifiers, which are unique serial numbers that prevent the same note from being spent twice. According to the researchers, anyone can run indexers, meaning no single party can control the ledger.
The design also distinguishes spending from viewing, letting a wallet split into separate keys: one that spends funds and another that is read-only and detects incoming transfers. A third key detects incoming transfers, and another recovers a user's own history, letting people share limited details with others without handing over spending power.
Source: CryptoPotato
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