Ethereum creator Vitalik Buterin has put forward a general approach to stealth addresses, as seen on his personal blog on Jan. 20.
Stealth addresses, as described by Buterin, circumvent the fact that public blockchains like Ethereum reveal a significant amount of transaction data.
Stealth addresses essentially conceal the recipient of certain transactions. Stealth addresses also reproduce the benefits of a standard privacy practice that some crypto users adhere to: creating a new address for every transaction received from a new sender.
Buterin noted that, despite their privacy benefits, stealth addresses do not provide any way to pay transaction fees. To resolve this, he suggested two approaches. The first approach involves ZK-SNARKS and would be expensive; the second approach involves specialized transaction aggregators and seems to be his preferred solution.
Buterin further noted that stealth addresses make it more difficult to create social recovery wallets — that is, wallets that can be recovered by third parties if the main holder loses their private key. Though Buterin proposed certain solutions, he said that developers could “bite the bullet” and recognize that recovering a wallet is costly and expensive.
Buterin also distinguished stealth addresses from Tornado Cash. He said that although Tornado Cash can obscure transactions involving ETH and major ERC-20 tokens, it is not useful in obscuring transactions involving NFTs and minor ERC-20 tokens. He added that Tornado Cash is most practical for self-directed coin mixing.
Buterin has discussed stealth addresses in the past. In March 2020, he suggested a stealth address scheme compatible with the Ethereum Name Service (ENS). In August 2022, he suggested a stealth address scheme compatible with ERC-721 NFTs.
Buterin did not say when or if Ethereum will add stealth addresses. However, he said that stealth addresses “can be implemented fairly quickly today” and would provide significant privacy benefits to users. He added that wallets should introduce native privacy features, such as automatic address generation, in the absence of stealth addresses.
At least one existing Ethereum Improvement Proposal, EIP-5564, puts forward a standardized way to create stealth addresses on Ethereum. However, the status of that proposal suggests that it is likely to change in the future.