Vitalik Buterin reveals the last big challenge for Ethereum

Ethereum’s co-creator, Vitalik Buterin, has unveiled a potential remedy for what he deems the “biggest obstacle” still facing Ethereum: the lack of privacy.

In a recent blog post dated January 22, 2023, Buterin explains the necessity of devising a privacy solution, as, by default, all information that is recorded on a “public blockchain” is also available to the public.

On a quest to discover the answer, Buterin stumbled upon the notion of “stealth addresses” – a method that could potentially conceal peer-to-peer transactions, NFT transfers, and ENS registrations, thus safeguarding users from prying eyes.

He delves into the concept of how, through stealth addresses, transactions can take place between parties with complete anonymity on the blockchain.

How the stealth addresses would work

To start, a user seeking to acquire assets will create and hold onto a “spending key,” which will then be utilized to generate a stealth meta-address.

Once the meta-address, which can be registered on ENS, is shared with the sender, they can then perform a cryptographic calculation on it to create a stealth address that is exclusive to the receiver.

By utilizing this process, the sender is able to transfer assets to the receiver’s stealth address and provide a temporary key to confirm that the stealth address indeed belongs to the intended receiver.

How the stealth addresses would work

To start, a user seeking to acquire assets will create and hold onto a “spending key,” which will then be utilized to generate a stealth meta-address.

Once the meta-address, which can be registered on ENS, is shared with the sender, they can then perform a cryptographic calculation on it to create a stealth address that is exclusive to the receiver.

By utilizing this process, the sender is able to transfer assets to the receiver’s stealth address and provide a temporary key to confirm that the stealth address indeed belongs to the intended receiver.

He further proposed that ZK-SNARKs, a cryptographic proof technology that boasts built-in privacy features, could be used to facilitate the transfer of funds for paying transaction fees.

For years, stealth addresses have been seen as a potential solution to the on-chain privacy concerns that have been tackled since as early as 2014. However, despite all the work, very few practical solutions have been made available to date.

“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.

Not the first time Buterin has brought up stealth addresses

Back in August 2022, Buterin had referred to stealth addresses as a means of “low-tech” solution for transferring ownership of ERC-721 tokens, also known as NFTs, anonymously. 

He pressed on, explaining that his idea for a stealth address provided a unique method for protecting one’s privacy, different from the method employed by the OFAC-approved 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.”

Problems with stealth addresses

Buterin recognizes that stealth addresses may raise certain “long-term usability concerns,” such as issues related to social recovery. However, he remains optimistic that these challenges can be tackled and resolved over time.