Vitalik Buterin spilled the beans on the biggest remaining challenges for Ethereum, While the concept of stealth addresses seems complex in theory, Buterin has previously described it as a “low-tech approach” compared to other Ethereum privacy solutions.
Ethereum co-founder Vitalik Buterin has shared a possible solution to what he describes as the biggest remaining challenge for Ethereum.
In a blog post on January 20, Buterin acknowledged the need to find privacy solutions because by default, all information that goes to a public blockchain is also public.
He then arrived at the concept of a “stealth address” which according to him has the potential to anonymize peer-to-peer transactions, nonfungible token transfers (NFT), and Ethereum Name Service (ENS) registrations, in order to protect users.
In the blog post, Buterin explains how on-chain transactions can be carried out between two parties with anonymity.
First, a user wishing to receive assets will generate and store an “expenditure key” which is then used to generate a stealth meta address.
This address that can be registered with the ENS is then forwarded to the sender who can perform cryptographic computations on the meta address to generate a stealth address, which belongs to the recipient.
The sender can then transfer the asset to the recipient's stealth address in addition to issuing a temporary key to confirm that the stealth address belongs to the recipient.
The effect of this is that a new stealth address is generated for every new transaction.
Vitalik Buterin noted that the Diffie-Hellman key exchange, in addition to a key masquerading mechanism needs to be implemented to ensure that the link between the stealth address and the user's meta address is publicly visible.
The co-founder of Ethereum added that ZK-SNARKs, a cryptographically resistant technology with built-in privacy features can transfer funds to pay transaction fees.
However, Vitalik Buterin stressed that this could create Live draw sdy its own problems at least in the short term by stating that this consumes a lot of fuel, an additional hundreds of thousands of fuel for just one transfer.
Stealth addresses have long been touted as a solution to address on-chain privacy concerns, having been in the works since early 2014. But so far very few solutions have been brought to market.
This is also not the first time Buterin has discussed the concept of stealth addresses on Ethereum.
In August, he dubbed stealth addresses a “low-tech approach” for anonymously transferring ownership of ERC-721 tokens — otherwise known as NFTs.
The Ethereum co-founder explained that the proposed stealth address concept offers different privacy to Tornado Cash which is now approved by the US Office of Foreign Assets Control (OFAC):
“Tornado Cash can hide transfers of major convertible assets like large ETH or ERC20 […] but is very weak at adding privacy to obscure ERC20 transfers, and cannot add privacy to NFT transfers at all.”
Buterin offers some suggestions for a Web3 project developing a solution:
“Basic stealth addresses can be mcitytoto implemented fairly quickly today, and could be a significant boost for practical user privacy on Ethereum.”
They do require some work on the wallet side to support them. That said, it is my view that wallets should start moving towards a more genuine multi-address model […] for other privacy-related reasons as well,” he added.
Buterin suggests that stealth addresses can pose "long-term usability problems," such as problems of social recovery. However, he believes the problems can be handled properly in time:
“In the long term, this problem can be solved, but the stealth address ecosystem in the long term looks like one that is going to rely heavily on zero-knowledge evidence,” he explained.