Privacy tools have long been hailed as the key to financial freedom in the crypto industry. In the Ethereum ecosystem, discussions around this topic have largely revolved around privacy-preserving transfers of ETH and mainstream ERC20 tokens.
In an effort to improve the state of privacy on the web, its co-founder Vitalik Buterin proposed a stealth address system. In 2014, BTC core developer Peter Todd first introduced the concept of stealth addresses using elliptic curve cryptography in the context of Bitcoin to conceal transaction details. In his latest blog post, Buterin acknowledged that privacy is "one of the biggest challenges in the ethereum ecosystem," while emphasizing the need for privacy solutions because "anything that goes onto a public blockchain is public."
Stealth addresses, on the other hand, can help in this regard. This mechanism, Buterin noted, would enable Ethereum wallets to generate secret addresses to receive funds privately and access them using special codes called “spending keys.”
Proposed stealth addresses can be generated by either party, but controlled by only one of them. The user receiving the asset generates a stealth address and keeps the spending key secret, then uses that key to generate a stealth meta-address that can be passed on to the sender. This allows the sender to perform computations on that meta-address to initiate a stealth address belonging to the receiver. The sender can then send any asset they want to send to that address, and the receiver will have full control. Along with the transfer, the sender publishes some additional encrypted data on-chain, confirming that the stealth address belongs to the receiver.
Stealth addresses, Buterin asserted, have the same privacy properties as users generating new addresses for each transaction.
