Zerocoin: Anonymous Distributed E-Cash from Bitcoin

TLDR

Bitcoin is the first widely adopted e‑cash system, yet its fully public ledger limits privacy to pseudonyms, creating significant privacy concerns. This paper proposes Zerocoin, a cryptographic extension that enables fully anonymous Bitcoin transactions. Zerocoin relies on standard cryptographic assumptions, introduces no new trusted parties, and integrates into Bitcoin through a novel cryptographic construction that preserves the existing security model. The authors demonstrate that Zerocoin maintains Bitcoin's security guarantees while providing full anonymity, and its computational overhead and protocol impact are modest.

Abstract

Bitcoin is the first e-cash system to see widespread adoption. While Bitcoin offers the potential for new types of financial interaction, it has significant limitations regarding privacy. Specifically, because the Bitcoin transaction log is completely public, users' privacy is protected only through the use of pseudonyms. In this paper we propose Zerocoin, a cryptographic extension to Bitcoin that augments the protocol to allow for fully anonymous currency transactions. Our system uses standard cryptographic assumptions and does not introduce new trusted parties or otherwise change the security model of Bitcoin. We detail Zerocoin's cryptographic construction, its integration into Bitcoin, and examine its performance both in terms of computation and impact on the Bitcoin protocol.