Confidential Transactions (CT) is a cryptographic technique used to hide the number of transactions in a blockchain while still ensuring that the transactions are valid and no inflation occurs. The technology was first introduced by Gregory Maxwell, a Bitcoin Core developer, and is now used in several blockchains such as Monero and Liquid Network. Confidential Transactions increase privacy in blockchain transactions without compromising the security and validity of the transaction.

How Confidential Transactions Work

Confidential Transactions work by using Pedersen Commitments, an encryption method that allows the transaction amount to remain secret while still being verifiable by the network.

Confidential Transactions process:

• The sender makes a transaction and encrypts the amount with a Pedersen Commitment.
• The recipient can see the transaction amount after receiving the funds.
• Nodes in the network verify that the transaction is valid without knowing the amount.
• Ring Signatures or Bulletproofs technology is used to improve verification efficiency.