What is Shielded Transaction?
Let's find out Shielded Transaction meaning, definition in crypto, what is Shielded Transaction, and all other detailed facts.
Cryptocurrency transactions (that have two types of addresses) can go a few ways.
A transparent address to a transparent address would result in an unshielded transaction, a transparent address to a shielded address would result in a shielded transaction, a shielded address to a shielded address would result in a shielded transaction, and a shielded address to a transparent address would result in an unshielded transaction.
Furthermore, a shielded address uses a zero-knowledge protocol (a way of proving that the statement is true) to enable the exchange of information to be encrypted by the remaining verifiable network nodes.
To be exact, a transaction that takes place between two shielded addresses is called a shielded transaction. This means that all of the information such as the transaction volume, and users' addresses are shielded from outsiders. However, the exception is transferring funds from Sprout to Sapling shielding addresses, and vice versa.
Zcash, for example, distinguishes between transparent and shielded addresses. Shielded addresses are not the same as transparent addresses. They're similar to the Bitcoin protocol's public addresses though. Transparent addresses cooperate with the Transparent Value Pool. It controls the exchange data that is publicly shown, also enabling it to be seen on the Zcash blockchain at any given time.
Senders to a shielded address can also select whether or not to include an encrypted note. The sender's address is hidden on the transaction receipt in their wallet, and the receivers can only see the amount or an encrypted memo delivered to their address.
Additionally, shielded addresses are obligated to generate zk-SNARKS, to make sure the transaction is valid.
All in all, shielded addresses successfully achieve a higher level of privacy and security, differently than transparent ones.