Vitalik Buterin Uncovers ‘Missing Link’ For Creating Transaction Privacy on Ethereum

Vitalik Buterin, the co-founder of Ethereum, recently released a guideline for bringing privacy to transactions on the Ethereum network.

In a comprehensive blog post tweeted on Friday, the 23-year-old billionaire broke down the concept of stealth addresses, adding that Ethereum is working to develop the concept as a solution to the ‘last remaining challenge’ for the blockchain.

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Given the transparent nature of public blockchains, all transactions are easily viewable and traceable by default. “Anything that goes onto a public blockchain is public….and as such “, using the entire suite of Ethereum involves making a significant portion of your life public for anyone to see and analyze.”

Stealth Address System Explained

Vitalik describes a stealth address as an address generated by either party in a transaction, with the power of control in the hands of only one party. Using a hypothetical Bob and Alice, a stealth address will depend on the creation of a secret key comprising elements of both party addresses to veil transactions from public notice.

The central idea, according to Vitalik, is to have the transaction registered on the blockchain, but the knowledge of the receiver is totally unknown through a method akin to OTPs that generate a unique validation code for a user with every transaction.

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The stealth address system will serve as an impressive upgrade from the methods used by the asset-mixing platform Tornado Cash, which uses a mixing smart contract to mash multiple transactions together, making tracing difficult.

To solve the problem of settling Transaction fees which automatically makes the identity and destination of transactions public, Vitalik proposes either cost-intensive Zero Knowledge Proofs, also known as ZK-Snarks or the employment of “specialized transaction aggregators.”

Privacy and Regulations

Brilliant as it seems, experience has shown that the concept of masking identities and hiding recipients may pose a challenge to regulatory compliance. Last year, key programmers for Tornado Cash became targets of government bodies over the mechanism of the platform, which is believed to encourage the escape of bad actors.

Ethereum, since migrating over to Proof-of-stake, many analysts have expressed concern about the network’s potential to tilt towards centralization and become susceptible to control.