z-Address (Shielded Address)

A z-Address (shielded address) is a type of blockchain address, most notably used in the Zcash network, that enables private transactions by hiding the sender, recipient, and amount using zero-knowledge proofs, specifically zk-SNARKs. Unlike transparent addresses (t-addresses), which broadcast all transaction data on a public ledger, z-addresses encrypt this information, allowing for verification of transaction validity without revealing its contents. This creates a shielded pool of funds where privacy is cryptographically enforced.

The core mechanism enabling z-address privacy is the zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). When funds are sent to a z-address, the transaction generates a proof that the transfer is valid—confirming the sender has sufficient funds and the correct cryptographic signatures—without disclosing the addresses or values involved. This proof is then verified by the network nodes. Consequently, on a public blockchain explorer, a shielded transaction between z-addresses appears only as an encrypted data blob with a valid proof, making the flow of funds opaque.

Using a z-address involves specific actions: shielding (sending from a transparent t-address to a z-address), shielded transactions (sending between z-addresses), and deshielding (sending from a z-address to a t-address). Each of these actions requires generating a zero-knowledge proof, which is computationally intensive but ensures privacy. Users must manage their spending keys and viewing keys securely; the spending key authorizes transfers, while the view key can be shared to allow third-party auditing of incoming transactions without granting spending authority.

The primary use case for z-addresses is financial privacy on a public blockchain, appealing to individuals and institutions requiring confidentiality. However, this privacy can complicate regulatory compliance, leading to tools like view keys for auditability. It's important to distinguish z-addresses from other privacy solutions like confidential transactions (which hide amounts) or coin mixing; z-addresses provide stronger, cryptographic privacy at the protocol level for both metadata and value.

While pioneered by Zcash, the concept of shielded addresses using zero-knowledge cryptography has influenced other protocols. Zcash's Sapling network upgrade significantly improved the performance of z-address operations. Related concepts include t-addresses (transparent addresses), unified addresses (which combine shielded and transparent capabilities), and the broader field of zero-knowledge rollups (zk-rollups) in scaling solutions, which apply similar cryptographic principles for validating batched transactions.

A z-address is a shielded address on the Zcash blockchain that utilizes zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) to enable private transactions. The 'z' prefix directly references Zcash (ZEC), the cryptocurrency that pioneered the integration of this advanced zero-knowledge proof technology for mainstream use. This nomenclature distinguishes it from transparent t-addresses, which function like standard Bitcoin addresses with visible transaction details on a public ledger.

The cryptographic origin of z-address functionality stems from the Zerocash protocol, an academic construction that improved upon an earlier system called Zerocoin. Zerocash introduced the concept of a shielded pool, a private set of unlinkable commitments where z-address balances reside. When funds are sent to a z-address, the transaction details—including the sender, recipient, and amount—are cryptographically obscured, with only a zk-SNARK proof attesting to the transaction's validity being recorded on-chain.

The creation of a z-address involves generating a spending key and a viewing key, derived from a secret seed. The spending key authorizes funds, while the viewing key allows a trusted party to decrypt transaction details without spending power. This dual-key structure is fundamental to the selective disclosure feature, a core innovation that allows users to comply with audits or tax regulations by sharing view-only access without compromising their private spending authority.

While Zcash popularized the term, the underlying concept of a shielded address has been adopted and adapted by other protocols. For instance, the Sapling network upgrade significantly improved the efficiency of creating z-addresses and generating proofs. Furthermore, zcashd, the core Zcash node software, and various wallets handle the complex process of constructing and verifying the zero-knowledge proofs required for any transaction involving a z-address, abstracting the intense cryptography away from the end-user.

A z-address (or shielded address) is a Zcash address that uses zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) to enable fully private transactions where the sender, recipient, and transaction amount are cryptographically hidden on the public blockchain. This stands in contrast to transparent t-addresses, which function like standard Bitcoin addresses with publicly visible transaction details. When funds are sent to or from a z-address, the transaction data is encrypted and a zero-knowledge proof is generated to validate the transaction's correctness without revealing any sensitive information.

The core mechanism enabling z-address privacy is the zk-SNARK proof. When a user creates a shielded transaction, they generate a cryptographic proof that demonstrates: the input notes (funds being spent) exist and are owned by the sender, the output notes (funds being created) are correctly computed, and the total value is conserved (no coins are created or destroyed). This proof is then verified by network nodes. Crucially, the proof reveals that the transaction is valid, but discloses nothing about the addresses or amounts involved, achieving transaction graph privacy.

Zcash supports several transaction types: Shielded (z-to-z), Deshielding (z-to-t), and Shielding (t-to-z). A z-to-z transaction is fully private. A deshielding transaction reveals the destination t-address and amount on the blockchain, as the funds enter the transparent pool. A shielding transaction reveals the source t-address and amount. The protocol's flexibility allows users to choose the appropriate privacy level for their use case, balancing confidentiality with regulatory compliance or auditability requirements.

To spend funds from a z-address, the wallet must have access to the spending key associated with that address. This key is used to generate the zk-SNARK proof authorizing the spend. The wallet also maintains a local, encrypted database of commitments and nullifiers. Commitments are posted to the blockchain when funds are received, while nullifiers are published when funds are spent to prevent double-spending, without revealing which commitment they correspond to. This structure allows the network to enforce consensus rules without knowing the transaction's internal logic.

The primary trade-off for z-address privacy is computational intensity and transaction size. Generating a zk-SNARK proof is resource-intensive, requiring significant time and memory, which historically made shielded transactions slower and more suited for desktop wallets. Furthermore, shielded transactions are larger (over 2 KB) compared to transparent ones, increasing bandwidth and storage costs. However, ongoing protocol upgrades like Halo 2 aim to reduce these overheads, eliminating the need for a trusted setup and improving proof efficiency.