Vitalik Buterin proposes a privacy solution for Ethereum

The co-founder Ethereum Vitalik Buterin named privacy “the biggest remaining problem” of the network and proposed a solution.

He reminded that by default all information on the public blockchain is public. This means the potential disclosure not only of cryptocurrency transactions but also of registration data ENS, any types of NFTs, and other data, Buterin noted.

To ensure privacy, he proposed using the concept of stealth addresses (stealth addresses).

Under the scheme, the user creates a spending key used to generate a meta-address for passing assets to the recipient. The latter uses the data to create a stealth address through cryptographic computations to send assets to it. Along with the transaction, he publishes an encrypted key (ephemeral pubkey), which helps the recipient locate the address.

For each operation, a new stealth address is generated, unknown to anyone externally, even to the sender. The user can discover them all by scanning the network with the ephemeral pubkey.

To further obscure the link between the data used to generate the stealth address, Buterin proposed using in the transaction chain a further couple of algorithms.

To avoid disclosing information about the interactions of the stealth address when paying fees, for example in NFT transfers, the Ethereum co-founder proposed using ZK-SNARK privacy technology. Another option could be purchasing tickets (fee-payment bundles) from transaction aggregators.

According to Buterin, the proposed privacy solution will create problems for wallets with social recovery. In such accounts, the multi-signature mechanism allows the owner, with the help of trusted parties, to regain access in case of data loss.

Buterin believes that under this option users should accept that the recovery process will be complex, costly and time-consuming — up to two weeks. In the long run, the process could be simplified by using zero-knowledge proofs, the Ethereum co-founder believes.

“Basic stealth addresses could be implemented quite quickly now to significantly increase practical privacy for users in Ethereum. They require some work from wallets to support them. Nevertheless I believe we should move toward a more natural multi-address model for other privacy-related reasons,” concluded Buterin.

Earlier in December, the Ethereum co-founder named five directions for the development of the ecosystem of the second-largest cryptocurrency, which inspire him.

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