Alloc Init proposes private Bitcoin transfers without a soft fork

Alloc Init researchers have proposed Shielded Bitcoin, a research design for private transfers using encrypted notes and zero-knowledge proofs without changing Bitcoin’s consensus rules or requiring a soft fork. The proposal, published September 24 by Clara Shikhelman, Mikhail Komarov and Aleksei Moskvin, would use Bitcoin to publish and order transaction data while separate software verifies the privacy system. The design adapts elements associated with Zcash, including encrypted notes, nullifiers and zero-knowledge proofs. It aims to conceal transfer amounts, senders, recipients and links to previously spent funds. Nullifiers would identify spent notes without revealing which note was used, while proofs would allow indexers to check that transactions follow the system’s rules and do not create value from nothing. Bitcoin nodes would not enforce those rules. Instead, independent programs called indexers would read the published data, verify proofs and reconstruct the shielded system’s state. Invalid data could still be recorded on Bitcoin, but indexers would reject it from that system.