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3. Advanced Course

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  1. 1. What is Taproot?
  2. 2. Blockchain bridges – what are they?
  3. 3. What is Ethereum Plasma?
  4. 4. What is Ethereum Casper?
  5. 5. What is Zk-SNARK and Zk-STARK? 
  6. 6. What is Selfish Mining? 
  7. 7. What is spoofing in the cryptocurrency market? 
  8. 8. Schnorr signatures - what are they? 
  9. 9. MimbleWimble - what is it? 
  10. 10. What is digital property rights in NFT?
  11. 11. What are ETFs and what role do they play in the cryptocurrency market? 
  12. 12. How to verify a cryptocurrency project – cryptocurrency tokenomics 
  13. 13. What is the 51% attack on blockchain?
  14. 14. What is DAO, and how does it work?
  15. 15. Zero-knowledge proof – a protocol that respects privacy 
  16. 16. What is EOSREX?
  17. 17. What is Proof of Elapsed Time (PoET)?
  18. 18. Mirror Protocol – what it is? 
  19. 19. What are synthetic assets? 
  20. 20. How to create your own NFT? 
  21. 21. Definition of DeFi, and what are its liquidations?
  22. 22. New identity system - Polygon ID
  23. 23. Ethereum Foundation and the Scroll protocol - what is it?
  24. 24. What is Byzantine fault tolerance in blockchain technology?
  25. 25. Scalability of blockchain technology - what is it?
  26. 26. Interchain Security - new Cosmos (ATOM) protocol
  27. 27. Coin Mixing vs. Coin Join - definition, opportunities, and threats
  28. 28. What is Ethereum Virtual Machine (EVM) and how does it work?
  29. 29. Soulbound Tokens - what are they, and how do they work?
  30. 30. Definition of LIDO - what is it?
  31. 31. What are Threshold Signatures, and how do they work?
  32. 32. Blockchain technology and cyberattacks.
  33. 33. Bitcoin script - what it is, and what you should know about it.
  34. 34. What is zkEVM, and what are its basic features?
  35. 35. Do confidential transactions on blockchain exist? What is a Confidential Transaction?
  36. 36. Algorithmic stablecoins - everything you should know about them.
  37. 37. Polygon Zk Rollups ZKP - what should you know about it?
  38. 38. What is Web3 Infura?
  39. 39. Mantle - Ethereum L2 scalability - how does it work?
  40. 40. What is the NEAR Rainbow Bridge?
  41. 41. Liquid Staking Ethereum and LSD tokens. What do you need to know about it?
  42. 42. Top 10 blockchain oracles. How do they work? How do they differ?
  43. 43. What are Web3.js and Ether.js? What are the main differences between them?
  44. 44. What is StarkWare, and recursive validity proofs
  45. 45. Quant Network: scalability of the future
  46. 46. Polygon zkEVM - everything you need to know
  47. 47. What is Optimism (OP), and how do its roll-ups work?
  48. 48. What are RPC nodes, and how do they work?
  49. 49. SEI Network: everything you need to know about the Tier 1 solution for DeFi
  50. 50. Types of Proof-of-Stake Consensus Mechanisms: DPoS, LPoS and BPoS
  51. 51. Bedrock: the epileptic curve that ensures security!
  52. 52. What is Tendermint, and how does it work?
  53. 53. Pantos: how to solve the problem of token transfer between blockchains?
  54. 54. What is asymmetric encryption?
  55. 55. Base-58 Function in Cryptocurrencies
  56. 56. What Is the Nostr Protocol and How Does It Work?
  57. 57. What Is the XDAI Bridge and How Does It Work?
  58. 58. Solidity vs. Rust: What Are the Differences Between These Programming Languages?
  59. 59. What Is a Real-Time Operating System (RTOS)?
  60. 60. What Is the Ethereum Rinkeby Testnet and How Does It Work?
  61. 61. What Is Probabilistic Encryption?
  62. 62. What is a Pinata in Web 3? We explain!
  63. 63. What Is EIP-4337? Will Ethereum Account Abstraction Change Web3 Forever?
  64. 64. What are smart contract audits? Which companies are involved?
  65. 65. How does the AirGapped wallet work?
  66. 66. What is proto-danksharding (EIP-4844) on Ethereum?
  67. 67. What is decentralised storage and how does it work?
  68. 68. How to Recover Cryptocurrencies Sent to the Wrong Address or Network: A Practical Guide
  69. 69. MPC Wallet and Multilateral Computing: Innovative Technology for Privacy and Security
  70. 70. Threshold signature in cryptography: an advanced signing technique!
  71. 71. Vanity address in cryptocurrencies: what is it and what are its characteristics?
  72. 72. Reentrancy Attack on smart contracts: a threat to blockchain security!
  73. 73. Slither: a static analyser for smart contracts!
  74. 74. Sandwich Attack at DeFi: explanation and risks!
  75. 75. Blockchain RPC for Web3: A key technology in the world of decentralized finance!
  76. 76. Re-staking: the benefits of re-posting in staking!
  77. 77. Base: Evolving cryptocurrency transactions with a tier-2 solution from Coinbase
  78. 78. IPFS: A new era of decentralized data storage
  79. 79. Typical vulnerabilities and bridge security in blockchain technology
  80. 80. JumpNet - Ethereum's new sidechain
Lesson 35 of 80
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35. Do confidential transactions on blockchain exist? What is a Confidential Transaction?

Some cryptocurrency protocols, to improve their level of privacy, have introduced Confidential Transactions on cryptocurrency networks. This is a confidential transaction protocol. The use of the aforementioned protocol allows encryption of transactions that take place on a given blockchain network. As a result, they cannot be verifiable and validated within that network where they occur.  Moreover, the exact amounts of these conducted transactions cannot be seen. They are hidden from both the recipient and the sender. Do confidential transactions exist?

The idea for confidential transactions came in 2013. Their originator was Adam Back. Transparency and decentralization are the most important and also the best features of cryptocurrencies. However, some users may have a problem with privacy. Any network user can view the blockchain in its entirety and search for a transaction.  The implementation of an encryption protocol in a given ecosystem prevents such an action.

How do confidential transactions work?

At the time of a transaction, nodes can verify its most essential information: the amount, the time, or even the addresses from which the transaction went out. However, in networks that use confidential transactions, such action is impossible. A good example of this would be Monero, or other privacy cryptocurrencies, which we discussed here [LINK – WHAT PRIVACY TOKENS ARE – BASIC LEVEL].

When making a transaction using confidential tokens, the data associated with that transaction is mixed and hidden along with other important data. However, even in such a case, the network must be able to verify the correctness of this data, while not revealing it to users.

To make this possible, a scheme called Pedersen Commitment is used. This is a type of homomorphic encryption that allows the transaction to take place, without having to use addresses for it. In addition, it allows for verification of information.

Pedersen Commitment in its operation uses so-called blind signatures, instead of addresses. Therefore, anyone involved in such a transfer will have to use multiple signatures to validate a given transaction. PC also allows encryption of transaction inputs and outputs. This is how no third party can see the transaction in question or obtain any related data or information.

The idea for Confidential Transactions came to improve the blockchain system. CT allows certain information to be stored, which both parties to the transaction can read without much difficulty. However, such information is perfunctory and at the same time impossible to understand. A bystander to such a transaction can only verify that the encoded information is true. And this is done through a mechanism that will not allow him to get other confidential information anyway.

To make things work this way, Confidential Transactions uses a special hash to assemble the data. In this way, we can generate a block whose record is not identifiable. We digitally sign the hash generated in this way, as proof that no one knows about it. As a result, the user cannot change any information that the hash contains. Such a block guarantees the security of data in a confidential transaction.

Confidential Transactions on the example of Monero

Monero, is a cryptocurrency that was created in 2014. It is completely focused on privacy and decentralization. Its main goal is to provide a maximum level of privacy for users in and within its network. And also – in transactions. It can be used in any case, even if there is a risk of being classified, as undesirable. To make this possible, Monero uses the Ring CT protocol.

Ring Confidential Transactions allows Monero to hide all data related to the transaction. Amount, sender, recipient – nothing is known to us. To achieve this, Ring CT combines the actual Monero cryptocurrency with some others that are randomly selected within a given network. In this way, a disordered mix is created, confusing others. As a result, they cannot see or determine the number of coins being transferred.


There are many supporters of confidential transactions. They are not discouraged by the fact that in some cases they are used to laundering money or support criminal activity. Privacy advocates stress that Confidential Transactions introduced in all networks of cryptocurrencies would possibly allow them to serve as fungible money.