Although the theoretical underpinnings of stealth addresses appear to be complex, Buterin has previously referred to them as a “low-tech approach” in comparison to other Ethereum privacy choices.
The “biggest remaining barrier” on Ethereum, privacy, has a potential answer, according to Vitalik Buterin, co-founder of Ethereum.
Because every data that is placed on a “public blockchain” is public by default, Buterin acknowledged the necessity for a privacy solution.
He came up with the idea of “stealth addresses” after that, which he claimed might potentially protect users by anonymizing peer-to-peer transactions, nonfungible token (NFT) transfers, and Ethereum Name Service (ENS) registrations.
Buterin clarified how anonymous on-chain transactions might be carried out between two parties.
A user who wants to receive assets will first create and preserve a “spending key,” which is used to create a stealth meta-address later on.
This address, which can be registered on ENS, is then given to the sender, who can use the meta-address to execute a cryptographic calculation to create a stealth address that belongs to the receiver.
In addition to publishing a temporary key to prove that the stealth address belongs to the recipient, the sender can then transfer funds to the receiver’s stealth address.
This has the result that each new transaction generates a new stealth address.
Buterin highlighted that in order to prevent the connection between the stealth address and the user’s meta-address from being publicly visible, it would be necessary to implement both a “Diffie-Hellman key exchange” and a “key blinding mechanism.”
The co-founder of Ethereum also mentioned ZK-SNARKs, a cryptographically secure technology with built-in privacy characteristics, which may transmit money to pay transaction fees.
Buterin noted that this could create its own issues, at least in the near term, adding that it “costs a lot of gas, an extra hundreds of thousands of gas only for a single transfer.
On-chain privacy concerns have been a topic of discussion for some time, and stealth addresses have long been suggested as a potential solution. The market has seen the introduction of incredibly few solutions, nonetheless.
As for the idea of stealth addresses in Ethereum, Buterin has talked about it before.
He described stealth addresses as a “low-tech technique” in August 2022 for covertly transferring ownership of ERC-721 tokens, also referred to as NFTs.
The co-founder of Ethereum outlined how the stealth address concept differs from the currently sanctioned Tornado Cash in terms of how anonymity is provided:
Tornado Cash is able to conceal transfers of popular fungible assets like ETH or well-known ERC20 tokens, but it struggles to provide privacy to transfers of less-known ERC20 tokens and is unable to do so for NFT transfers.
Now that simple stealth addresses can be created quickly, practical user privacy on Ethereum may be considerably improved.
Supporting them does require some effort on the part of the wallet. In spite of this, he believes that wallets should begin moving to a more natively multi-address approach for additional privacy-related reasons.
Buterin stated that stealth addresses might bring to longer-term usability challenges, such as problems with social recovery. He is optimistic, nevertheless, that long-term solutions may be found for the issues:
Although these issues can be resolved in the long run, he said, the stealth address ecosystem of the long run is looking like one that would fairly heavily depend on zero-knowledge proofs.
