The “largest remaining challenge” for Ethereum is ‘privacy’ and it has a potential solution, said Vitalik Buterin, co-founder of the blockchain network.
Buterin acknowledged the necessity for a privacy solution in a blog post on January 20 because any information that gets onto a “public blockchain” is public by default.
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 private on-chain transactions in the blog post. In order 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 operation on the meta-address to get a stealth address that belongs to the recipient.
The sender can now transfer the amount 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 on the Ethereum blockchain will result in the creation of a new stealth address.
Ethereum co-founder provides further explanation
Buterin stated that in order to prevent the connection between both the stealth address and the user’s meta-address from being publicly observed, a “Diffie-Hellman key exchange” as well as a “key blinding mechanism” would need to be created.
The co-founder of Ethereum stated that transaction fees might be paid using ZK-SNARKs, a cryptographically secure technique with built-in privacy features.
Buterin warned that “this costs a lot of gas, an extra hundreds of thousand of gas just for a single transfer,” emphasizing that this may cause issues of its own in the short run.
Buterin spoke about crypto restrictions in November, adding that he is somewhat delighted that authorities continue to deny proposals for crypto exchange-traded funds (ETFs).
