Vitalik Buterin Shares Solution for Privacy in Blockchain.

While stealth addresses seem to have a complicated theoretical foundation, Buterin has previously called them a low-tech approach in comparison to other Ethereum privacy options.

The biggest remaining barrier for Ethereum, privacy, has a potential answer, according to Vitalik Buterin, co-founder of Ethereum.

Buterin acknowledged the need for a privacy solution in a blog post on January 20. By default, every data that is placed onto a “public blockchain” is also public.

He then came up with the idea of “stealth addresses,” which he claimed has the potential to protect users by potentially making peer-to-peer transfers of nonfungible tokens (NFTs) and registrations for the Ethereum Name Service (ENS) anonymous.

Buterin described how two parties can conduct anonymous on-chain transactions in the blog post.

To create a stealth meta-address, a user seeking to receive assets must first create and store a “spending key.”

The sender receives this address, which can be registered on ENS, and uses it to conduct a cryptographic calculation on the meta-address to get a stealth address that belongs to the recipient.

The sender can then transfer funds to the recipient’s stealth address and publish a temporary key to verify the recipient’s ownership of the stealth address.

As a result, each new transaction results in the creation of a new stealth address.

Buterin said that a “Diffie-Hellman key exchange” and a “key blinding mechanism” would need to be developed in order to prevent the link between the stealth address and the user’s meta-address from being openly viewed.

The Ethereum co-founder claimed that ZK-SNARKs, a cryptographically safe method with built-in privacy characteristics, could be used to pay transaction fees.

Buterin stressed that this could create its issues, at least in the near term, noting that “this costs a lot of gas, an extra hundreds of thousands of gas simply for a single transfer.”

Stealth addresses, which have been developed since as early as 2014, have long been hailed as a remedy for on-chain privacy difficulties. But only a small number of solutions have so far been commercialised.

Additionally, Buterin has previously discussed the concept of stealth addresses in relation to Ethereum.

He described stealth addresses as a “low-tech approach” in August for surreptitiously transferring ownership of NFTs or NFC-721 tokens. The co-founder of Ethereum emphasised that the stealth address concept offered privacy in a different way than the current U.S. Office of Foreign Asset Control (OFAC)-sanctioned Tornado Cash:

“Tornado Cash can hide transfers of mainstream fungible assets such as ETH or major ERC20s.. but it’s very weak at adding privacy to transfers of obscure ERC20s, and it cannot add privacy to NFT transfers at all.”

Buterin offered some advice to Web3 projects that are developing a solution:

“Basic stealth addresses can be implemented fairly quickly today, and could be a significant boost to 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 toward a more natively multi-address model […] for other privacy-related reasons as well,” he added.

Buterin suggested that stealth addresses may introduce “longer-term usability concerns,” such as social recovery issues. However, he is confident the problems can be properly addressed in time:

“In the longer term, these problems can be solved, but the stealth address ecosystem of the long term is looking like one that would heavily depend on zero-knowledge proofs,” he explained.

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