Silent Payments coinbase

The proposed system utilizes a dual-payout mechanism in cryptocurrency transactions, where payouts are processed either above or below a specified threshold. For amounts above the threshold, the payout is included directly in the coinbase transaction. Below the threshold, payouts are accumulated off-chain and subsequently transferred to an Ark user pubkey U. This differentiation uses cryptographic tweaks derived from the same ECDH scheme per block, ensuring unique tweaks for each transaction to maintain security and prevent data leakage between the two tiers of payout.

In detail, the on-chain transactions (t_onchain) generate coinbase outputs using serialized ECDH public keys combined with specific domain-separated tweaks. Meanwhile, off-chain transactions (t_ark) involve generating a blinded mailbox identifier that allows accrued funds to be sent securely to the recipient's Ark address without altering the existing Ark server setup. The pool's responsibility includes constructing a payable bark ark1 address from the public U, which only necessitates the public key without any additional registration.

Privacy concerns are addressed by ensuring that on-chain observers can only see SPc outputs, which are unlinkable and do not reveal the existence of arkoors (off-chain transactions). However, all arkoors are visible to the pool managing the transactions, potentially compromising anonymity if not handled correctly. A solution to enhance privacy involves rotating static mailbox identifiers per epoch, reducing the ability to link transactions over multiple epochs.

Additional technical implementations include modifying bark wallets to accept VTXOs claimed via tweaked keys, which entail around 150-300 lines of new code in the client side to manage these transactions effectively. The overall system aims to balance on-chain transparency with off-chain privacy, leveraging cryptographic techniques to secure and anonymize payments where necessary. For more detailed technical information and code examples, visit GitHub where the project repositories like spc_ark, spc_ark_mailbox, and spc_ark_client are hosted.