Bitcoin and Cryptocurrency Technologies

The only thing that the ledger records publicly is the existence of these transactions, along with proofs
that allow the miners to verify all the properties needed for the correct functioning of the system.
Neither addresses nor values are revealed on the block chain at any point. The only users who need to
know the amount of a transaction are the sender and the receiver of that particular transaction. The
miners don't need to know transaction amounts. Of course, if there is a transaction fee, the miners
need to know that fee, but that doesn't really compromise your anonymity.
The ability to run as an entirely untraceable system of transactions puts zerocash in its own category
when it comes to anonymity and privacy. Zerocash is immune to the side-channel attacks against
mixing because the public ledger no longer contains transaction amounts.
Setting up Zerocash. ​In terms of its technical properties, Zerocash might sound too good to be true.
There is indeed a catch. Just like Zerocoin, Zerocash requires “public parameters” to set up the
zero-knowledge proof system. But unlike Zerocoin, which requires just one number ​N​which is only a
few hundred bytes, Zerocash requires an enormous set of public parameters — over a gigabyte long.
Once again, to generate these public parameters, Zerocash requires ​random and secret inputs​, and if
anyone​knows these secret inputs, it compromises the security of the system by enabling
undetectable double-spends.
We won’t delve any deeper into the challenge of setting up a zk-SNARK system here. It remains an
active area of research, but as of 2015 we don't know exactly how to set up the system in practice in a
sufficiently trustworthy way. To date, zk-SNARKs have not been used in practice.
Putting it all together. ​Let’s now compare the solutions that we have seen, both in terms of the
anonymity properties that they provide and in terms of how deployable they are in practice.
System Type Anonymity attacks Deployability
Bitcoin pseudonymous transaction graph analysis default
Manual
mixing
mix
transaction graph analysis,
bad mixes/peers
usable today
Chain of mixes
or coinjoins
mix
side channels, bad
mixes/peers
bitcoin-compatible
Zerocoin
cryptographic
mix
side channels (possibly)
altcoin, trusted setup
Zerocash untraceable none known altcoin, trusted setup
​Table 6.14: A comparison of the anonymity technologies presented in this chapter
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