1
Traditional blockchains like Bitcoin expose source addresses, destination addresses, and transaction amounts in the clear, creating privacy issues for business use cases such as payroll or supply chain transactions.
2
Confidential transactions replace plaintext amounts with cryptographic commitments, allowing users to commit to a specific value without revealing what the value is while preventing them from changing it later.
3
A Pedersen commitment is a standard cryptographic commitment scheme that hides the true value by placing it in an exponent and blinding it with a random value.
4
Zero-knowledge proofs allow network participants to verify that transaction inputs equal outputs (ensuring no money is created or lost) and that all output values are positive without revealing the actual amounts.
5
Advanced privacy-focused blockchains like Zcash and Monero hide not only the transaction amounts but also the identities of the payer and payee.
6
zk-SNARKs (Succinct Non-Interactive Arguments of Knowledge) are advanced zero-knowledge techniques that enable complete transaction privacy while retaining public verifiability.