Shielded Address Definition
A shielded address in the cryptocurrency world refers to a type of address that allows transactions to be completely private. This means the address, the transaction value, and the metadata associated to the transaction are all encrypted and not publicly visible.
Shielded Address Key Points
- Shielded addresses are used for privacy-focused and secure transactions.
- The transaction details are completely encrypted, making all involved data private.
- They were first introduced by Zcash, a privacy-centric cryptocurrency.
- It differs from Transparent Addresses used in Bitcoin, that makes transaction data visible to everyone on the blockchain.
What is a Shielded Address?
A Shielded Address is an encrypted address used for transaction in certain cryptocurrencies. Specifically, it is used to send, receive, or store cryptocurrencies in a secure and privacy-centered manner. Not every cryptocurrency supports shielded addresses, but those that do, such as Zcash, prioritize the privacy of their users’ financial activity.
Why are Shielded Addresses Used?
Shielded Addresses are used to give users maximum privacy with their transactions. In the era of digital currencies where transactions are usually transparent, shielded addresses restore the privacy that comes with traditional cash transactions. They are used for situations where users do not want the transaction amount, the sender and receiver’s identities, or any associated metadata to be visible and accessible to the public.
Where are Shielded Addresses Used?
Shielded Addresses are specifically used within privacy-focused cryptocurrencies. They’ve been originally introduced and are heavily used within Zcash, a cryptocurrency that focuses on offering users privacy and selective transparency of transactions.
When are Shielded Addresses Used?
They are used any time a user within a privacy-centric cryptocurrency network wants to perform a transaction with utmost privacy. Whether the transaction involves sending or receiving digital currency, if a shielded address is used, the details of the transfer remain undisclosed.
Who uses Shielded Addresses?
Primarily, the individuals or organizations that are concerned with maintaining financial data privacy use Shielded Addresses. Such users could be businesses with sensitive financial transactions, individuals who prioritize personal financial privacy, or entities operating in places with authoritarian government structures.
How do Shielded Addresses Work?
Shielded addresses work by using a certain cryptographic protocol called zk-SNARKS (‘Zero-Knowledge Succinct Non-Interactive Argument of Knowledge’). This protocol enables one party to demonstrate the possession of certain information, like a secret key, without revealing that information, and without requiring any interaction between the prover and the verifier.
