The project uses zero-knowledge proofs and encrypted notes on Bitcoin
Researchers at Alloc Init, Clara Shikhelman, Mikhail Komarov and Aleksei Moskvin, have published a proposal called Shielded Bitcoin. The system aims to enable transfers that conceal amounts, senders, recipients and links to previously spent funds, without requiring a soft fork of the Bitcoin protocol.
The document describes the use of encrypted notes and zero-knowledge proofs. Bitcoin would retain its role as a neutral publication and ordering layer, while external software called indexers would verify proofs, check double spending and reconstruct the state of the shielded system. Miners would not enforce the privacy protocol.
The architecture adopts elements of Zcash, including public nullifiers that signal a note has already been spent and proofs that attest to a transfer’s validity. Shielded Bitcoin would not operate an independent blockchain or its own consensus mechanism.
Vadim Zavodil challenged the system’s initial ability to provide anonymity on X, noting that a new shielded set would begin without the accumulated base of Zcash. The authors acknowledge in the accompanying text that large deposits do not automatically create a large anonymity set: a small number of entities creating many notes, or wallets with distinctive behaviour, may make it easier to link transfers.
