Ethereum co-founder Vitalik Buterin publishes a blog post about how stealth addresses could improve the state of privacy on Ethereum.
Buterin stated that one of the biggest remaining challenges in the Ethereum ecosystem is privacy. He added that the Ethereum wallet will be able to create hidden addresses to receive money discreetly and gain access to it through a unique code known as a “spend key.”
Although either party can create the proposed stealth addresses, only one can control them. To create a hidden meta address that can be sent to the sender, the person receiving the assets must first generate a hidden address and keep a hidden spending key.
As a result, the sender can calculate this meta address to set a hidden address for the recipient. The recipient will have full power while the sender is free to send any assets they want to this address.
Along with the transfer, the sender posts more cryptographic evidence on the chain that proves the recipient owns the stealth address.
According to Buterin, using a stealth address has the same privacy benefits as creating a new address specifically for each transaction.
Buterin claimed that the idea of a stealth address offers a different kind of privacy than Tornado Cash, which can hide transfers of popular fungible assets like ETH or significant ERC20, but is very ineffective in doing so for obscure ERC20 transfers and cannot add privacy. to NFT transfers at all.
Stealth addresses will offer privacy to NFTs, Ethereum Name Service (ENS) domain names, or any peer-to-peer transactions.
Gas costs would be one of the biggest hurdles for stealth addresses, as zero ETH would be present in a newly generated stealth address, thus unable to proceed with any further transactions.
The idea behind using a stealth address in the first place would be defeated if ETH was sent to it from another address, as it would create a publicly visible link to the main wallet. ZK-SNARKs could be used as a potential solution, however they have a high gas cost.
Another would be the use of specialized transaction aggregators, which can give network users the option to pay for numerous transactions at once, and then allow them to spend these prepaid transactions whenever they want.
Vitalik Buterin acknowledged that stealthy addresses present some long-term usability concerns, such as the difficulty of social recovery.
Buterin noted: “Basic stealth addresses can be implemented fairly quickly today and could be a significant boost to practical user privacy on Ethereum.” In the absence of hidden addresses, wallets should offer native privacy capabilities like automatic address generation, she added.