Researchers have published a design for private transfers on Bitcoin that would hide the sender, recipient, and transaction amount while operating on the existing Bitcoin network.
The 56-page specification, dated September 24, 2026, was written by Clara Shikhelman, Mikhail Komarov, and Aleksei Moskvin. The protocol, called Shielded Bitcoin, borrows design elements from Zcash, the privacy-focused cryptocurrency, and uses zero-knowledge proofs to verify transactions without revealing sensitive details.
How Shielded Bitcoin Works
Value in the system is held as encrypted "notes," with each transfer accompanied by a zero-knowledge proof confirming that the sender controls the notes being spent and that transaction inputs and outputs balance. A public marker called a nullifier prevents double spending without revealing which specific note was used.
Unlike Zcash, which enforces privacy rules through its own blockchain, Shielded Bitcoin publishes transfers as data on Bitcoin itself. Separate software called indexers then verifies the proofs and reconstructs the shielded state, while Bitcoin records the transfers without checking them.
The designers note that timing, fees, and the number of transaction inputs and outputs remain public. The protocol preserves privacy regarding who paid whom and transaction amounts, but not that a shielded transfer occurred.
Technical Details and Trade-offs
The current design uses the Groth16 proof system, whose security depends on an honestly conducted trusted setup ceremony. Each transfer is published in an OP_RETURN output, requiring 625 vbytes for a transaction with two inputs and two outputs.
This approach relies on Bitcoin Core v30's larger OP_RETURN default, which node operators can modify. The paper notes that relay depends on sufficient nodes and miners maintaining this setting.
An optional compliance layer outlined in the specification would allow a "Trust Authority" to certify approved deposits, enabling institutions to verify a note's origins without exposing the full transfer graph.
Scope and Future Work
The paper focuses only on transfers within the shielded system. Mechanisms for moving Bitcoin into and out of the protocol are not covered and will be addressed in a separate paper, built on Bitcoin PIPEs v2, earlier research that encrypts a Bitcoin signing key for recovery only with a valid proof.
