Confidential transactions

Assalamualaikum

Greetings to you all!

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Confidential transactions are basically privacy-enhancement technologies which are used in cryptocurrencies such as Bitcoin and other digital assets.Confidential transactions are used to enable concealment of amount of transaction, so it make it tough for outsiders for determining of the value which is being transferred.

The concept of confidential transactions was first develop in 2016 which is a well known cryptographer and blockchain expert. The technology use more Innovative cryptographic techniques which includes homomorphic encryption and zero-knowledge proofs for protecting amounts of transactions.

Confidential transactions work in a unique way which I am describing below;

Encryption

The transaction amount is kept encrypted by the usage of a public key which make it unreadable to everyone except those who are recipient.

Commitment

A commitment scheme is helpful for proving that encrypted amount is valid without exposing its actual value.

Verification

The transaction are verified by the use of zero-knowledge proof that confirm that each transaction is valuable without exposing any sensitive information or data of users.

Settlement

The transaction are settled at blockchain by encrypted amount which is going to be recorded.

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Confidential transactions are really offering different benefits which includes;

Enhanced privacy

Confidential transactions are used for protecting transaction amounts from public so it's a way of maintainence of financial privacy of different individuals.

Improved security

By concealment of transaction amounts confidential transactions help in reduction of risk of targeting attacks at high value transactions.

Compliance

Confidential transactions are helpful in financial institutions and businesses for meeting different regulatory needs for giving more privacy to transaction and more confidentiality.

There are some limitations associated with confidential transactions including more computational power requirements, limited level of interoperability,more uncertainty in regularity.So these challanges are also significant to keep in mind so for enhancement of privacy of crypto transactions confidential transactions are most powerful tool that can be considered.

Have a blessed day