Bitcoin holders can now hide more of their activity, but only by trusting new middlemen

Starknet has launched strkBTC, an ERC-20 token that enables shielded Bitcoin transactions by locking BTC on the Bitcoin base layer. While in public mode, it acts like any other wrapped Bitcoin. In shielded mode, users can hide selected balances and transfers from public view. To maintain selective disclosure for regulatory or counterparty needs, Starknet routes viewing keys to an independent third-party auditor. A five-member federation manages BTC movement between Bitcoin and Starknet, with plans for greater trust minimization. This development highlights that significant Bitcoin privacy advancements are occurring in faster-iterating environments outside the Bitcoin protocol itself. Other privacy solutions include Liquid's L-BTC using Confidential Transactions, WBTC paired with RAILGUN for DeFi privacy on Ethereum, and Fedimint and Cashu which build privacy through custody. Each model trades privacy for different trust assumptions, with strkBTC requiring trust in its federation, bridge, smart contracts, and auditor. Bitcoin-native privacy, like Silent Payments (BIP 352), offers receiver-level privacy with minimal new trust but a narrower scope. The strkBTC architecture aims to provide auditable privacy for institutions, balancing compliance needs with transaction privacy, though the multiple trust layers introduce risks.

(Source：CryptoSlate)