At first, there was a sense of privacy. In his whitepaper, Satoshi Nakamoto managed to solve the privacy issue by creating random public addresses that could not be linked with the real-world identities. Soon though, the cryptocurrency world realized what Nakamoto created was, in fact, a kind of pseudo-anonymity. As a result, new projects focusing on better privacy emerged. Projects like Monero or ZCash.
But what if we could bring those privacy features implemented in Monero or ZCash to Bitcoin or Ethereum?
Ethereum stroke first with its Byzantium hard fork. The upgrade introduced the necessary code alterations for the ZK-Snarks protocol to be implemented. ZK-Snarks protocol is the main feature that makes ZCash a viable solution for the Dark Web.
And now Bitcoin is preparing to make a decisive move that could make the blockchain not only anonymous but also confidential. How? By implementing Bulletproofs ‘a new non-interactive zero-knowledge proof protocol with very short proofs and without a trusted setup.’
To address the confidentiality of transaction amounts, Maxwell introduced confidential transactions (CT), in which every transaction amount involved is hidden from public view using a commitment to the amount.
This new technology is presented at length in a whitepaper written by Benedikt Bunz, Jonathan Bootle, Dan Boneh, Andrew Poelstra, Pieter Wuille, and Greg Maxwell.
Bulletproofs try to solve two major privacy issues that both Bitcoin and Ethereum currently have:
- Anonymity: hiding the public addresses of the parties involved in a transaction;
- Confidentiality: hiding the amount transferred.
According to the paper, “to address the confidentiality of transaction amounts, Maxwell introduced confidential transactions (CT), in which every transaction amount involved is hidden from public view using a commitment to the amount.”The team improved upon the privacy features of Monero and ZCash and manage to come up with a solution that could also partially solve the scalability of the Bitcoin network.
Blockstream CEO Adam Back first introduced the notion of CT in 2013 but the major downside was the size. A confidential transaction was 16 times larger than a regular Bitcoin transaction. Four years later, the team behind the Bulletproofs seem to have solved the problem. Not only that but, according to the paper, a CT could occupy much less space in a block than a regular transaction.
The developers explain: “At the time of writing, Bitcoin has roughly 50 million UTXOs (unspent transaction outputs) from 22 million transactions (see statoshi.info). Using a 52-bit representation of bitcoin that can cover all values from 1 Satoshi up to 21 million bitcoins, this results in roughly 160GB of range proof data using the current systems. Using aggregated Bulletproofs, the range proofs for all UTXOs would take less than 17GB, about a factor 10 reduction in size.”
The applications are not ONLY limited to Bitcoin, according to the whitepaper. Bulletproofs can also be applied to smart contracts or confidential provisions for cryptocurrency exchanges (proof they are solvent without revealing additional information).
You can read all about it here.