Confidential transactions make use of Pedersen commitments in order to provide confidentiality.
Commitment schemes allow a user to commit to some value while keeping it secret with the capability of revealing it later.
From Initiation to Immutable Confirmation (Part 2)
Two properties that need to be satisfied in order to design a commitment scheme are binding and hiding.
Binding makes sure that the committer is unable to change the chosen value once committed, whereas the hiding property ensures that any adversary is unable to find the original value to which the committer made a commitment.
Pedersen commitments also allow addition operations and preserve commutative property on the commitments, which makes it specifically useful for providing confidentiality in bitcoin transactions.
In other words, it supports homomorphic encryption of values.
Using commitment schemes allows the hiding of payment values in a bitcoin transaction.
This concept is already implemented in the Elements Project ( https://elementsproject ).
Why This Matters for Blockchain Technology
Understanding Confidential transactions is not just an academic exercise — it has real-world implications for how blockchain systems are designed, deployed, and secured. Whether you are a developer building decentralized applications, a business leader evaluating blockchain adoption, or a curious learner exploring the technology, this knowledge provides a critical foundation.
Key Points to Remember
- Confidential transactions Confidential transactions make use of Pedersen commitments in order to provide confidentiality.
- Commitment schemes allow a user to commit to some value while keeping it secret with the capability of revealing it later.
- Two properties that need to be satisfied in order to design a commitment scheme are binding and hiding.
- Binding makes sure that the committer is unable to change the chosen value once committed, whereas the hiding property ensures that any adversary is unable to find the original value to which the committer made a commitment.
Conclusion
Confidential transactions represents one of the many innovative layers that make blockchain technology so powerful and transformative. As distributed systems continue to evolve, a solid understanding of these core concepts becomes increasingly valuable — not just for developers, but for anyone building, investing in, or working alongside blockchain-powered systems.
Whether you are just starting your blockchain journey or deepening existing expertise, mastering these fundamentals gives you the tools to think clearly about decentralized systems and make smarter decisions in this rapidly evolving space.