Zcash recently announced that it has started work on a new wallet designed to enhance user privacy and security by enabling shielded transactions. In an official notice on October 31, the company revealed that the reference wallet project is intended to demonstrate that it is possible to carry out shielded transactions on mobile devices and to build reusable infrastructure to enable transactions shielding.
Using the unique capability of zero knowledge cryptography under the Zerocash protocol which it is built on, Zcash is able to offer a range of transaction privacy options ranging from transparent transactions to shielded transactions. In the case of a transparent transaction, all information about the sender, recipient and amount is published publicly on the blockchain, as is the case with other cryptos.
Shielded Transactions and Reference Wallet
With shielded transactions, however, all such information is hidden by encrypting it on the blockchain, which makes them a very effective method of conducting private transactions free from prying eyes. The problem until recently, however, was that the process of running shielded addresses was too CPU-heavy for mobile devices to realistically support, meaning that shielded transactions could only be carried out using a full node client.
The Zcash Sapling network upgrades implemented on October 28 took care of this problem by streamlining the performance of shielded transactions, making it possible for the first time for mobile devices to support shielded addresses. This is where the reference wallet comes in. According to Zcash, the wallet was designed to be a light client that focuses on delivering the functionality of shielded transactions and works as a design prototype for a single-currency application making use of features unique to Zcash that multi-crypto wallets do not have.
Within this context, a significant privacy challenge exists without a current solution at the moment. If a light client interacts with a server by revealing its private key, that defeats the entire purpose of transaction shielding because the server will then be able to link specific wallets to specific transactions.
The company says it is working on finding a solution to this problem by exploring several approaches. In the meantime, it also remains at work on the reference wallet and it says that the Zcash community will be kept updated on progress periodically.