RGB Privacy Protection

RGB inherently offers a significant level of privacy due to its client-side validation architecture, which conceals information from those observing the blockchain (the method of recording state transition commitments ensures on-chain privacy). To enhance privacy further, additional features have been incorporated into the protocol.

Blinded UTXOs

RGB enhances the privacy for recipients by using blinded UTXOs as payment outpoints, rather than standard UTXOs. This process involves a user, when seeking payment, sharing their UTXO in a blinded format. This format is essentially the hash of the combined UTXO and a random blinding secret. As a result, the payer is unaware of the exact destination of the assets and cannot track their future expenditure. This is a significant privacy improvement over traditional Bitcoin on-chain payments, where a payer can always monitor such transactions.

During the asset spending phase in RGB, to validate ownership, the sender must disclose the blinding secret used to create the blinded UTXO to the receiver. Therefore, in the validation phase, the new recipient can confirm that the blinded UTXO is indeed derived from the UTXO that is being spent.

Example of blinded UTXO:

UTXO: ad3ebdcda0f83b37fffab0439c89fd3ef7d99c41c353a45a98d5983d9ad00183:0

Outpoint blinding secret: 8114079862469528952

Blinded outpoint: txob1kewrvnf8sjmarq65gv98lz2xrgxylpnlta8lc3p78fjxaw9qda4qkewlwr

Bulletproof

To conceal the transaction amounts in each state transition within an asset's history, RGB uses a zero-knowledge technique known as Bulletproof, developed by Blockstream. This method is an advanced and more efficient variant of the Confidential Transactions used in the Liquid sidechain. With Bulletproof, users achieve privacy regarding the amounts transferred in each transaction from future asset owners who can view the transaction history during validation. These future owners can see all UTXOs that have held the asset, but the specific quantities transferred in each transition remain obscured. However, the zero-knowledge proof ensures that they can still confirm that no hidden inflation has occurred at any point.