Alloc Init offers Zcash-style privacy for Bitcoin

Alloc Init researchers proposed Protected Bitcoina metaprotocol that would allow users to transform regular BTC into private notes, transfer them privately, and eventually convert them back to regular Bitcoin, all without modifying Bitcoin itself.

What’s the scoop?

• Zcash Privacy, but for Bitcoin: Protected Bitcoin explicitly borrows from Zcashusing encrypted notes and zero-knowledge evidence to hide who sent BTC, who received it, and how much was moved. Unlike Zcash, however, it would operate as a metaprotocol on Bitcoin rather than as a separate blockchain.

• How it works: Deposit 1 BTC and that leaves your available balance normal, while you receive a private note representing 1 BTC in Shielded Bitcoin. Send 0.2 BTC and this note is replaced by two new encrypted notes: 0.2 BTC for the recipient and 0.8 BTC for you. Bitcoin records proof that a valid ticket was spent without revealing which one, thereby breaking the normal path of public transactions.

• More Use, More Coverage: The notes are in a shared global set, so that as more users and transactions accumulate, each payment can hide among more possible histories. The document warns, however, that timing, unusual amounts, fees or known considerations may further restrict this privacy package.

• There is still a lot to build: The paper focuses on transfers once BTC is inside the shielded system. Peg-ins and peg-outs are still unfinished, and the authors do not explicitly claim that entry or exit will be private or free from any transaction links.