Ethereum co-founder Vitalik Buterin wrote the blog article “An Incomplete Guide to Stealth Addresses” in January 2023. In his post, he proposed a “stealth address” protocol to provide privacy for Ethereum. He says, “One of the largest remaining challenges in the Ethereum ecosystem is privacy.” He described how two parties can transact on the blockchain and remain anonymous.
The press coverage on Ethereum’s stealth addresses gives the impression that stealth addresses are a new technology. Monero, however, has already been using stealth addresses along with other cryptographic technologies. Other privacy coins, such as Zcash, Dash, Verge, Navcoin, and PIVX, also use stealth addresses.
Ethereum’s stealth addresses
To illustrate how stealth addresses will work, Buterin gave a situational example. Alice would like to send Bob crypto or an NFT. Of course, Bob does not want someone else to know that he is getting the digital asset Alice is sending. Buterin figures hiding who the recipient is will be more viable by using stealth addresses. either Alice or Bob can generate a stealth address, but only Bob can control it. “Bob generates and keeps secret a spending key, and uses this key to generate a stealth meta-address. He passes this meta-address to Alice (or registers it on ENS). Alice can perform a computation on this meta-address to generate a stealth address belonging to Bob. She can then send any assets she wants to send to this address, and Bob will have full control over them. Along with the transfer, she publishes some extra cryptographic data (an ephemeral pubkey) on-chain that helps Bob discover that this address belongs to him.” Bob does not need to interact, but he will benefit from the privacy as he generates a new address for each transaction.
Monero’s stealth addresses
Monero’s stealth addresses are essentially burner addresses. They are disposable and unique in that the sender generates a new address in each transaction. This prevents the recording of the receiver’s wallet address on the blockchain. These addresses are generated each time you send Monero. Your XMR Wallet has “public addresses with 95-character strings, which incorporate two public keys (the public view and public spend keys) mathematically derived from your seed. When somebody sends funds to you, they will use the public keys in your address along with some random data to generate a unique onetime public key. These onetime public keys that are recorded in transactions on the blockchain are named stealth addresses because it is impossible for the network or an outside observer to connect these random codes back to the originating wallets,” according to Mastering Monero.
These are simplified explanations of how stealth addresses work in Monero and Ethereum. Those with the technical expertise are the ones who can say how different or same they are. If Ethereum’s stealth addresses work similarly to Monero’s, then there are many benefits to using them. As mentioned above, stealth addresses hinder the recording of wallet addresses on the blockchain. Nobody will figure out who owns the wallet and because each transaction generates a onetime key, prying eyes will not be able to link multiple payments to the same address. Linking payments to the same address may give outsiders the ability to know who the wallet address belongs to.
No matter how one feels about Ethereum, this move to make it more private should be applauded. Privacy is fundamental for all financial transactions, including cryptocurrency. As crypto adoption grows, so do hacks and data leaks. Regulators and law enforcement agencies, of course, want these to end, but often at the expense of privacy. They seem to think that privacy and secrecy are the same. Privacy is simply being able to choose what information you would like to reveal to the world and no one should have to justify why they want to protect their identity. Neeraj Agrawal put this succinctly in a title for an article in Bankless. “Crypto privacy is humanitarian.”