Vitalik Buterin weighs in on the stealth address to bring privacy to blockchain transactions

Privacy tools have always been heralded as a key to financial freedom in the crypto industry. In the Ethereum ecosystem, discussions around the topic have mainly centered around privacy-preserving transfers of ETH and mainstream ERC20 tokens.

In an effort to improve the state of privacy on the network, co-founder Vitalik Buterin has proposed a stealth address system.

“Last Remaining Challenge for Ethereum”

The concept of Stealth addresses using elliptic curve cryptography was first introduced in the context of Bitcoin by BTC core developer Peter Todd in 2014 to hide transaction details. In the latest blog post, Buterin acknowledged that privacy is “one of the biggest remaining challenges in the Ethereum ecosystem,” while highlighting the need for a privacy solution because “everything that goes into a public blockchain is public.”

Stealth addresses, on the other hand, can help in this regard. Buterin noted that such a mechanism in place would allow the Ethereum wallet to generate stealth addresses to receive funds privately and access them using a special code called a “spend key.”

The proposed stealth addresses can be generated by both parties, but they can only be controlled by one of them. The user receiving the assets generates the stealth address and keeps a spending key secret, which will then be used to generate a stealth meta-address that can be forwarded to the sender.

This allows the sender to perform a calculation on this meta address to initialize a hidden address belonging to the recipient. The sender can then send any assets they wish to send to this address, while the recipient will have full control. Along with the transfer, the sender publishes some additional cryptographic data on the chain confirming that the stealth address belongs to the recipient.

Buterin argued that stealth addresses provide the same privacy features as a user generating a new address for each transaction.

Stealth address vs. Tornado Cash

Several methods have been used in recent years to hide transaction details. This includes Tornado Cash which was recently sanctioned by OFAC. First, Buterin said, the proposed stealth address concept provides a different kind of privacy than the popular Ethereum-based coin mixer. He explained,

“Tornado Cash can hide transfers of common fungible assets like ETH or large ERC20s (although it is most easily useful for private sending to yourself), but it is very weak at adding privacy to transfers of obscure ERC20s, and it cannot add privacy to NFT transfers at all.”