Researchers want to make Bitcoin as confidential as Zcash

Three researchers from the crypto company [alloc] init published a 56-page paper on Thursday called “ Shielded Bitcoin ». Their promise is to hide the amount, sender and recipient of a Bitcoin transaction, without touching a single line of the protocol. The mechanism is directly inspired by Zcash, but one detail is missing: no one yet explains how to bring real BTC into or out of the system.

Bitcoin transactions as confidential as Zcash

The principle, we will say, is simple. In the system imagined by [alloc] init, the bitcoin value would be kept in “notes” encrypted. Spending one of these notes releases a marker proving that it was used, accompanied by mathematical proof that its owner actually held the funds. And at that moment, the amount, the sender, and the recipient remain invisible.

According to the plan, bitcoin would keep its role as a safe and clock but would forego verifying anything. This work would therefore amount to separate software, which anyone could run, via a technique called PIPEs v2. In other words, a Bitcoin confirmation would no longer guarantee that the private payment it contains is valid. And discretion has a price because according to Mikhail Komarov, a private transfer would weigh around 700 vBytes, compared to 100 to 200 for an ordinary transaction. Bitcoin would therefore become discreet, but not free.

Why Copy Zcash Privacy?

If [alloc] init copy Zcash, this is no coincidence as its protected pools now hold 4.9 million ZEC, or approximately 29% of the issued supply. This, compared to 7.6% five years ago and 23.3% a year ago. At current prices, that represents almost $7.8 billion stashed away. Last week, Zcash recorded around 63,000 protected transactions, its best week since 2022. All for a transferred volume exceeding $23 billion, unheard of since 2021.

A little historical nod for those who don’t know, Zcash’s roots go back to Zerocoin, a privacy extension proposed for Bitcoin in 2013. The project eventually became independent and became Zcash in 2016. And twelve years later, Bitcoin is trying to recover what it let slip away. Except that the little beast in the 56-page document is that it does not explain how real BTC would enter the system, nor how it would exit upon withdrawal. These mechanisms are referred to a future paper using PIPEs to lock a Bitcoin signing key.

BTC enters an unprecedented phase of accumulation

This plan on the confidence of bitcoin falls while the market is agitated for other reasons. On

So the narrative “privacy” of bitcoin falls at a time when eyes are already turning towards a possible new cycle. And if Zcash has seen its price multiplied by more than 23 in one year on this theme, it is difficult to believe that BTC is launching this type of research by pure coincidence of timing.

What to learn from the Bitcoin confidentiality proposal, inspired by Zcash?

• Shielded Bitcoin, a proposal copying the Zcash architecture to make Bitcoin transactions confidential, without affecting consensus.
• The mechanism for depositing and withdrawing bitcoins remains to be defined, and transactions would cost more.
• Zcash already hides 29% of its supply ($7.8 billion) and has seen its price rise by more than 2,300% in one year.
• The technical analysis of the market reminds us that the privacy narrative arrives at a pivotal moment for BTC which is in the accumulation phase.

Bitcoin promises discretion according to the Shielded Bitcoin proposal. So it remains to be seen whether the protocol will keep its word before the next cycle is already completed. In your opinion, is this confidentiality good or bad for BTC?