Vitalik Buterin, the co-founder of Ethereum, recently published an article discussing the addition of privacy to the Ethereum network through what is referred to as a Stealth Address. In his article, Buterin explains how a stealth address works and its potential to increase privacy for users on the Ethereum network. In this article, I explain how Stealth Addresses work in a basic manner using an example: Alice wants to send Bob 1.2 ETH.
Why Are Stealth Addresses Needed?
The idea that public blockchains such as Ethereum and Bitcoin are private is a common misunderstanding; to be clear, public blockchains are not private. Public blockchains offer some form of privacy through pseudonymity in the form of wallet addresses. But you can think of the wallet address as a username; once someone pinpoints your username, they can see everything you’ve ever done with it.
Every interaction that a wallet address makes on-chain, including transactions, interactions with decentralized applications, purchases of NFTs, etc. are recorded and stored in a public manner that anyone with an Internet connection can view. Websites like Etherscan make viewing this information convenient. Applications like Dune Analytics make analyzing that information easy.
Without privacy protection, this information can quickly and easily be exploited without consent. An analogy would be your bank account. With existing online banking, your activity isn’t seen by anyone, even if they know the username you used to log in. With public blockchains, once someone knew your username (in this case, wallet address), they could see all of the subscriptions you have; they could see every time you make a purchase, where you made the purchase, and use that information to locate you, blackmail you, or exploit you in other ways. On-chain privacy solutions are quickly becoming a solution to protect web3 users worldwide. Recently, Vitalik Buterin has given this topic deeper thought and proposed his…
