Researchers from Alloc Init have introduced Shielded Bitcoin, a proposal to add Zcash-like private transfers to BTC without requiring a soft fork. The system conceals amounts, senders, recipients, and links to previously spent funds using encrypted notes and zero-knowledge proofs. The article was published by Clara Shikhelman, Mikhail Komarov, and Aleksei Moskvin.

Validation by Indexers, Bitcoin as a Publication Layer

Instead of relying on miners to enforce privacy rules, Bitcoin serves as a "neutral publication and ordering layer." Separate software—indexers—verifies ZK-proofs, prevents double-spending, and restores the state of the encrypted subsystem.

Zcash-Inspired Architecture Without a Separate Blockchain

The design replicates key elements of Zcash: encrypted notes, public nullifiers to mark spent notes, and ZK-proofs for transaction correctness. Unlike Zcash, Shielded Bitcoin does not launch its own blockchain or consensus mechanism.

Concerns About Anonymity in the New Pool

Developer Vadim Zavodil criticized the idea, noting that the new encrypted pool starts without the broad anonymity set accumulated by Zcash. The authors acknowledge this limitation: large deposits alone do not create significant anonymity; observers may narrow connections if a few participants generate most notes or if wallets display recognizable patterns.

Quantum Resistance in Question, Interest in PQ Version

Pauli Group founder Pierre-Luc Dallaire-Demers described the construction as not quantum-resistant and is exploring what a fully post-quantum version might look like if Bitcoin adopts a post-quantum signature scheme. Zerocash co-author and StarkWare CEO Eli Ben-Sasson supported the chosen direction and expressed interest in seeing privacy and scalability implemented at Bitcoin’s base layer using ZK-proofs.