Bitcoin startup Blockstream has unveiled new technology for shielding data on a blockchain.
Expanding on an old technique used to hide transaction amounts, the company has developed a new scheme dubbed 'confidential assets' to conceal the types of assets in a transaction. Revealing just how the tech works, the startup has released a new paper today, co-authored by Blockstream developers Andrew Poelstra, Adam Back, Mark Friedenbach, Greg Maxwell and Pieter Wuille.
Using confidential assets, viewers of a blockchain would be able to see a transaction's senders and receivers, but not what kind of asset is traded – whether bitcoin, stocks, gold, or something else.
So why is hiding asset types important?
Banks have made it known that they aren't thrilled that blockchains make certain information public, and have been increasingly exploring various ways of making their holdings private while still taking advantage of the ability to share the database of transactions with others.
Against that backdrop, Blockstream CEO Adam Back framed confidential assets as a technology to help enterprises overcome what he called this "awkward tradeoff".
Tokyo-based marketing company Digital Garage has been revealed as the first partner to use the new tech, as a part of Blockstream's Elements sidechains initiative, with plans to use it to shield loyalty points.
Blockstream core tech engineer Greg Sanders described confidentiality as a "key requirement" for Digital Garage, as well as other companies using blockchain tech.
He told CoinDesk:
"The companies care a lot about their privacy. You don't want that [transaction data] out in the open because it's basically showing your books to everyone. Confidential assets allows companies to move these assets on a publicly verifiable blockchain, but hide the amounts and the types of assets being moved around at the same time."
However, the tech is not yet being used in a production setting.
Verifiable but private
Blockstream has been exploring the enterprise blockchain world over the past couple of years, including joining the Hyperledger consortium and deploying private blockchains on top of bitcoin.
It's also been testing privacy features on Elements sidechains, including using ‘confidential transactions’ – a technique first proposed by Back – to shield transaction amounts from non-participants in the system.
In a nutshell, the system uses cryptography to prove that people are getting their money, even while the details aren’t revealed to everyone. Yet anyone, including nodes, can verify that the transaction is valid.
Confidential assets extends this concept to shield multiple assets.
However, there is a downside of both confidential transactions and confidential assets – they require much more space on the blockchain than standard transactions.
Boon to privacy
Confidential assets is currently being tested on a Blockstream Elements sidechain, though it can potentially be ported elsewhere.
According to Back, though, while the system works on a sidechain, it's is not suitable for bitcoin proper, since the digital currency's code doesn’t support other asset types.
However, some other projects now use confidential transactions, including MimbleWimble and the privacy project ValueShuffle. And if developers of such projects chose to, they could effectively upgrade to support confidential assets instead.
In conclusion, Back described the new technology as a part of a larger push for adoption of bitcoin and blockchain technology, saying:
"And to the extent that confidentiality would be an impediment to companies adopting the technology, and just user privacy rights as well, it’s important that we be able to provide confidentiality so that the industry can adopt blockchain technology and start deploying the advantages without being held back by confidentiality concerns."
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