Shielded Addresses: Ensuring Privacy in Zcash

Shielded Address is used for an encrypted transaction when a payment is made using the blockchain network, keeping information confidential.

What is a Shielded Address?

Due to new trends in cryptocurrencies and blockchain technology, interest in secure payment methods has grown more than ever. This interest has led to a growing demand for alternative methods of financial transactions that can be both secure and anonymous. One such alternative method is the shielded transaction, which uses an encrypted address to make payments.

An encrypted transaction is a type of transaction that uses a cryptographic technique called mixing to anonymize the sender address and the recipient address. In this case, it uses a new address that is specifically created for the transaction and then sends funds from the original sender address to this new address at the same time as sending equivalent funds back to the original recipients mailbox. The new address is generated by an off-blockchain mixer service and is used only once for each transaction.

Such measures make it impossible to determine when and where exactly a particular transaction occurred or ended, thereby ensuring anonymity for both sender and recipients. If only those two unique addresses are used, no one can tell who owns them or where the funds went.

Zcash is the best implementation of encrypted transactions. Zcash is the first cryptocurrency to implement zero-knowledge proof-of-work, and the first miner-friendly proof-of-work coin with no founder fees.

Zcash requests are published on the public blockchain, but the recipient and transaction amount remain private. It uses a zero-knowledge proof construct called zk-SNARK.

Benefits of an encrypted transaction

An encrypted transaction is a way to provide greater interchangeability in the blockchain, allowing its users to send funds without revealing their transaction partners, the amounts sent, or even their transaction history. This is done by creating a new address for each transaction, which can only be spent using the recipient’s private key.

This is done for two reasons:

  • For some uses, such as international payments or purchases, when you want to hide your spending of funds from others, it is advantageous not to connect your transactions in the blockchain.
  • Since Zcash transactions are not completely transparent, the amount of data that can be collected from the blockchain is limited. This will make it difficult for outside observers to determine how much money is invested in specific use cases, such as gambling sites.
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