Good day everybody,
Welcome to CryptoGod-1's blog on all things crypto. Today I will be looking at a recent announcement by Vitalik Buterin regarding his position on the potential future of Ethereum wallet addresses. Within he proposes a system where there would be a multitude of stealth wallet addresses, doing so to enhance transactional privacy on the Ethereum Blockchain.
Vitalik Buterin
One of the most recognisable and famous "good actors" in crypto, Vitalik Buterin is a Russian-Canadian computer programmer who shot to fame for his work as a co-founder on the Ethereum blockchain. He was born in 1994 in Kolomna, Russia, and moved to Canada with his parents when he was six years old. In his early days Buterin wrote for a publication called Bitcoin Weekly after meeting a person on a bitcoin forum with the aim of earning bitcoin. Soon after is closure, he was co-founder of a magazine known as Bitcoin Magazine. Soon after he applied for a job at Ripple (XRP) and while he was given an offer of employment, the proposal fell through due to Ripple being unable to support a U.S. visa for Buterin.
From there Buterin moved onto the creation of Ethereum, which he described as a "decentralised mining network and software development platform rolled into one." His whitepaper describing the network was released in November 2013, where he argued that bitcoin needed a scripting language for application development. From there he redefined the project to a more general scripting language and the project began to gain publicity and traction. The rest is history as they say, with Ethereum one of the most recognisable crypto's along with Bitcoin, and the go to network of choice for developers creating D'Apps, DeFi, and DAO's.
Stealth Addresses
Buterin has recently announced a proposal wherein there would be a system of stealth addresses on the Ethereum blockchain. While at first glance this may seem like an unusual proposal, it is in fact an idea which would enhance and allows users to make use of more privatised transactions on the blockchain. Buterin has called it "one of the largest remaining challenges in the Ethereum ecosystem" and his proposal would allows users to send and receive funds in a private manner. He made his statement in his blog post titled "An incomplete guide to stealth addresses" and the system is based on a theory of allowing users to generate cryptographically obfuscated public addresses. Think of tornado cash, only without the criminal stigma associated with it such as when it was sanctioned by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) for potentially illicit activities.
As described by Buterin in his blog, if someone sends another person a transaction (Crypto, ENS, NFT's, etc) but the reciever does not want the entire world to be able to know they have it, then they face a major issue. The blockchain is public and immediately anybody can check transaction history to discover what has been transferred, making it impossible to hide. The transfer can never be hidden thanks to blockchain technology, but, there could be ways of hiding the recipient. The solution according to Buterin is one that maintains the simplicity of current transactions with a "encoded address." This address would allow someone to pay the recipient to this address, which then in turns transfers the assets on to the actual recipient.
Buterin goes on to explain how it differs from Tornado cash in that:
Tornado Cash can hide transfers of mainstream fungible assets such as ETH or major ERC20s (though it's most easily useful for privately sending to yourself), but it's very weak at adding privacy to transfers of obscure ERC20s, and it cannot add privacy to NFT transfers at all.
The stealth address system would therefore allow any Ethereum wallet to generate one of these cryptographically obfuscated public addresses called "stealth addresses'' and receive funds in a private manner. The user would then access these funds via a special code known as a "spending key." Buterin went on to add that the stealth address would give a user the same privacy as someone generating a fresh address for each transaction. Therefore these address would increase privacy on Ethereum as an anonymous addresses would be created for each transaction. This would also make it difficult for anyone to track the transaction, either out of interest in knowing how much a person has in their wallet, or for other malicious actions. Having a users transaction history remain private is a key factor in increasing the uptake and adoption of crypto.
Potential Issues Such as Transaction Fees
An issue that Buterin highlighted was of course "who is going to pay for the transaction fees" associated with these stealth addresses? As mentioned above, when a user makes use of their spending key they have access to their stealth wallet, or wallets, but to transfer funds, NFTs, etc, they have to pay a transaction fee! To add ETH into it from your own wallet would be negligible as it would create a transaction history on the blockchain meaning people could associate your main wallet with that of the stealth one.
One of his solutions includes the use of ZK-SNARKs to transfer funds to pay for the fees. However, ZK-SNARKs are gas intensive and would end up costing up to an extra hundreds of thousands of gas just for a single transfer. Another solution could be making use of trusting specialized "transaction aggregators."
These aggregators would allows users to pay a off fee to purchase a set of "tickets" that can be used to pay for transactions on-chain. To make use of the stealth wallet, a user would simply make use of one of their aggregator tickets. These are encoded via a Chaumian blinding scheme, which is the original protocol used in centralized privacy-preserving e-cash schemes that were proposed in the 1980s and 1990s. The fact it is only used to pay for transaction fees means trust and regulatory issues are much lower than a "full" implementation of this kind of centralized privacy-preserving e-cash.
Conclusion
Vitalik Buterin is certainly making some interesting points here. Instead of a user needing to create and fund multiple address to ensure their transactions remain private on the network, which even with multiple address can be tracked when a user attempts to fund the wallets, that a user makes use of one stealth address. These addresses can be implemented fairly quickly today, and could be a significant boost to practical user privacy on Ethereum. The downside is the requirement for work to be done on wallets in terms of support, although that is an achievable goal. Buterin believes wallets should be moving towards a more natively multi-address model (eg. creating a new address for each application you interact with could be one option) for other privacy-related reasons as well.
There are other longer term issues associated with stealth address, such a the difficulty in social recovery, but these should be seen as acceptable issues for now. These problems can be solved in the longer term, with a stealth address ecosystem likely to be one which would be relying on a system of zero-knowledge proofs. For now, we accept the basics of a main wallet and potentially additional wallets for items such as NFTs. In the future, we could have a main wallet with a series of stealth wallets associated to the wallet, making interaction between D'apps, DeFi, and the overall privacy on the blockchain much safer for all users.
Have a great day.
Peace. CryptoGod-1.
**I first published this article on Medium on the 23rd of January 2023, and it can be found here: https://medium.com/@1r3n9project/vitalik-buterin-believes-stealth-addresses-will-enhance-ethereum-privacy-68ec7cd9c535 **
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