What is Shielded Address?

A shielded address is an alternative method of executing financial transactions that are secure and confidential. Cryptocurrencies and blockchain technology have prompted the interest for methods of doing secure transactions to skyrocket. That’s where shielded addresses come in handy.

To be more specific, a shielded transaction is a type of transaction that uses "mixing" as a cryptographic approach in order to keep both the sender's and receiver's addresses completely private.

In order to do this, a new address must be formed particularly for the transaction. Additionally, the funds must be sent from the initial sender address to this newly produced address, while equal amounts must be transferred from another newly generated address back to the receiver's initial address.

A mixer service only works externally from blockchain and is typically only utilized for every transaction, hence the two newly produced addresses are, in fact, generated by a mixer service. Therefore, this ensures that it would be impossible to figure out the exact location a specific transaction came from or ended up in. So, complete anonymity is a guarantee for senders as well as receivers.

Because only these two addresses are used and no one can tell who owns them or where their funds came from or went to.

The Main Advantages of Shielded Transaction

It is preferable not to link your transactions on the blockchain for overseas payments or purchases if you want to distinguish your spending patterns from others.

Furthermore, the shielded transaction allows for greater fungibility on the blockchain by enabling users to transmit payments without disclosing their transacting partners, quantities sent, or even the transaction records. This is accomplished by generating a new address for each transaction that can only be spent with the user's private key.

Since Zcash transactions are not completely visible, the quantity of information that can be extracted from the blockchain is restricted. This makes it harder for outside spectators to establish how much overall revenue is being invested in certain use cases, such as gambling websites.

What is Zcash?

Zcash was the first to use zero-knowledge proofs. Additionally, it's considered to be the first "miner-friendly" proof-of-work (PoW) coin with no founders' reward.

Furthermore, Zcash transactions are broadcast on a public blockchain, but the sender, receiver, and transaction amount stay confidential. This is done by the use of zk-SNARK, a zero-knowledge proof structure.

There are two types of addresses on the Zcash protocol: transparent and shielded.

Transparent addresses work in the same way as Bitcoin addresses.