Vitalik Buterin proposes a solution to the privacy problem on Ethereum

Buterin acknowledged the need to develop a privacy solution because, by default, all information recorded on a public blockchain is publicly accessible

By Shashank Bhardwaj

Published: Jan 25, 2023 08:24:04 PM IST

Updated: Jan 25, 2023 08:36:40 PM IST

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Vitalik Buterin; Image: Michael Ciaglo / Getty Images via AFP

Vitalik Buterin, one of the co-founders of Ethereum, has proposed a potential solution to the issue of privacy on Ethereum, which he considers to be the most significant remaining challenge for the platform.

In a blog post, Buterin acknowledged the need to develop a privacy solution because, by default, all information recorded on a public blockchain is publicly accessible.

Buterin suggested the idea of "stealth addresses" as a way to potentially anonymize various types of transactions on Ethereum, such as peer-to-peer transactions, non-fungible token transfers and Ethereum Name Service registrations, thus providing privacy to the users.

Buterin, in the blog post, explained how transactions on Ethereum can be made anonymously between two parties.

The process starts with the recipient generating and keeping a "spending key", which is then used to create a "stealth meta-address." This meta-address is then given to the sender, who uses it to perform a computation and generate a "stealth address" that is of the receiver.

The sender then transfers assets to the receiver's stealth address and publishes a temporary key to make sure that the stealth address belongs to the receiver. This results in a new stealth address being generated for each new transaction.

Buterin noted that to ensure the link between the stealth address and the user's meta-address is not publicly visible, a "Diffie-Hellman key exchange" and a "key blinding mechanism" must be implemented. He also added that a technology called ZK-SNARKs, which is a cryptographic-proof technology with built-in privacy features, could be used to transfer funds to pay for transaction fees.

However, Buterin pointed out that this solution may have its own drawbacks in the short term, as it would cost a lot of gas, potentially adding hundreds of thousands of gas to the cost of a single transfer.

The concept of stealth addresses has been proposed as a solution for on-chain privacy issues on Ethereum for several years, but few solutions have been implemented so far. This is not the first time that Buterin has discussed the use of stealth addresses in Ethereum.

In August, he described stealth addresses as a low-tech solution for anonymously transferring ownership of ERC-721 tokens, also known as non-fungible tokens (NFTs).

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash