Ethereum's Vitalik Buterin Proposes ‘Stealth Address’ System to Enhance Blockchain Privacy – Here’s How it Works

cryptonews.com:

Ethereum creator Vitalik Buterin has proposed a new “stealth address” system for Ethereum that would dramatically improve and simplify the workflow for achieving privacy for ordinary users.

According to a blog post published by Buterin over the weekend and titled An incomplete guide to stealth addresses, the proposed system would bring the same privacy properties as generating new addresses for each transaction someone receives.

The only difference would be that this would happen without any work needed for the receiver.

In the blog post, Buterin admitted that privacy – or the lack thereof – is a large problem for Ethereum users, saying:

“One of the largest remaining challenges in the Ethereum ecosystem is privacy. By default, anything that goes onto a public blockchain is public […] In practice, using the entire suite of Ethereum applications involves making a significant portion of your life public for anyone to see and analyze.”

He added that improving this situation for users is “widely recognized” as an important problem that developers should work on.

Specifically, the system proposed by Buterin would work by having wallets generate so-called stealth meta-addresses for receiving funds using a secret “spending key” that only the receiving party in a transaction has access to. The stealth address is then shared with the sender, who must also publish a piece of cryptographic data called an ephemeral pubkey on-chain for the receiver to understand that the address belongs to him.

To enable the generation of both the secret spending key and the public stealth meta-address, Buterin proposed to use a system known as the Diffie-Hellman key exchange. According to Buterin, this system is a foundational part of modern cryptography,