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Ethereum’s Vitalik Buterin Proposes ‘Stealth Address’ System to Enhance Blockchain Privacy – Here’s How it Works

Vitalik Buterin, the mastermind behind Ethereum, has introduced a novel “stealth address” mechanism for Ethereum, aiming to streamline and enhance privacy for the average user.

In a recent blog post penned by Buterin and aptly named “An incomplete guide to stealth addresses,” he elucidates that this proposed system would offer similar privacy benefits as creating new addresses for every incoming transaction.

What sets it apart is the convenience factor; receivers wouldn’t need to put in any additional effort.

Privacy remains a large challenge on Ethereum

In his blog post, Buterin candidly addressed the pressing issue of privacy within the Ethereum ecosystem, stating:

“Ethereum’s most glaring challenge is privacy. By nature, all actions on a public blockchain are visible to everyone […] In reality, engaging with the full spectrum of Ethereum-based applications entails exposing a considerable part of one’s personal life to the public eye, available for scrutiny.”

He emphasized that the community largely acknowledges this privacy concern, deeming it a crucial matter that developers must tackle.

Secret spending keys and stealth meta-addresses

Vitalik Buterin’s proposed system entails the use of wallets to create what are referred to as stealth meta-addresses for the receipt of funds. This process would leverage a confidential “spending key” exclusive to the recipient of a transaction. Once established, the stealth address would be conveyed to the sender. For the receiver to discern that the address is intended for them, the sender is required to post a specific cryptographic detail, known as an ephemeral pubkey, to the blockchain.

To facilitate the creation of both the confidential spending key and the overt stealth meta-address, Buterin recommends employing the Diffie-Hellman key exchange mechanism. Buterin underscores that this technique is instrumental in contemporary cryptography and perfectly aligns with the prerequisites to realize stealth addresses within Ethereum.

Zero-knowledge proofs

To sum it up, Vitalik Buterin, the brains behind Ethereum, acknowledged that while stealth addresses offer numerous benefits, they also present certain long-term usability challenges. Notably, he highlighted issues associated with the “social recovery” of misplaced keys. While he suggests these issues might be temporarily overlooked, he emphasized that a sustainable solution would likely rely predominantly on zero-knowledge (ZK) proofs.

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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