A key challenge for smart contracts executed on a public blockchain, however, is the privacy of data: for instance, bid privacy is crucial in auctions and transaction privacy is leveraged in MEV-mitigation techniques.
Every transaction on Bitcoin is publicly visible. You could imagine how this might lead to people front-running or doing other hijinks if they were able to identify trades that are still in mempools.
Mostly, bitcpin avoids this problem because it doesn't have complicated finance stuff happening on the base layer. But it might not be that way forever.
We present BitPriv, the first Bitcoin-compatible protocol to condition payments based on the outcome of a secure two-party computation (2PC). The key idea is to let parties lock collateral on-chain and to evaluate a garbled circuit off-chain: a cut-and-choose mechanism deters misbehavior and any violation can be proven and punished on-chain via BitVM. This design achieves security against rational adversaries, ensuring that deviation is irrational under financial penalties.We showcase the new class of applications enabled by BitPriv as well as evaluate its performance through a privacy-preserving double-blind marketplace in Bitcoin. In the optimistic case, settlement requires only two transactions and under $3 in fees; disputes are more expensive (≈$507) with their cost tied to the specific BitVM implementation, but their mere feasibility acts as a strong deterrent. BitPriv provides a blueprint for building enforceable, privacy-preserving DeFi primitives on Bitcoin without trusted hardware, sidechains, or protocol changes.
I don't think the ideas laid out in the paper are useful for a normal bitcoin transaction, but it's always cool to see new privacy ideas.