Vitalik Buterin Says Ethereum’s ‘Remaining Biggest Challenge’

Ethereum co-founder Vitalik Buterin has shared a potential solution to what he describes as the “biggest remaining challenge” on Ethereum – privacy.

In a blog Post On January 20, Bitcoin acknowledged the need to come up with a privacy solution because, by default, all information going on a “public blockchain” is also public.

He then came up with the concept of “stealth addresses” – which he said could potentially anonymize peer-to-peer transactions, non-fungible token (NFT) transfers, and Ethereum Name Service (ENS) registrations. can, which protect consumers.

In the blog post, Butrin explained how on-chain transactions can be done anonymously between two parties.

First, a user who wants to acquire assets will generate and hold a “spend key” which is then used to generate a stealth meta-address.

This address – which Can be registered on ENS. – is then forwarded to the sender who can perform a secret computation on the meta-address to generate the stealth address, which belongs to the recipient.

The sender can then transfer the assets to the recipient’s stealth address in addition to publishing a temporary key to verify that the stealth address belongs to the recipient.

The effect is that a new stealth address is generated for each new transaction.

Vitalik Butteren’s stick figure diagram of how a stealth address system might work. Source: Vitalik.ca.

Butrin noted that a “key-blinding mechanism” would need to be implemented in addition to “Diffie-Hellman key exchange” to ensure that the relationship between the stealth address and the user’s meta-address is not publicly viewed. can go

Ethereum co-founder added ZK-SNARKs — A Cryptographic Proof Technology With built-in privacy features — can transfer funds to pay transaction fees.

However Butrin stressed that this could create its own problems – at least in the short term – saying “it costs a lot of gas, hundreds of thousands of extra gas just for one transfer.”

Related: Crypto privacy is more at risk than ever – here’s why.

Stealth addresses have long been touted as a solution to online privacy issues, which Working since early 2014. However, very few solutions have been brought to market so far.

This is also not the first time that Bitcoin has discussed the concept of stealth addresses in Ethereum.

In August 2022, he dubbed. Stealth Leaves as a “Low-Tech Approach” To anonymously transfer ownership of ERC-721 tokens—otherwise known as NFTs.

The Ethereum co-founder explained that the proposed stealth address concept offers privacy that is now different from the US Office of Foreign Assets Control. (OFAC) Approved Tornado Cash:

“TornadoCash can hide the transfer of mainstream fungible assets such as ETH or large ERC20s. […] But it is very weak in adding privacy to the transfer of obscure ERC20s, and it cannot add privacy to NFT transfers at all.

Butrin offered some advice to Web3 projects that are developing solutions:

“Basic stealth addresses can be implemented quite quickly today, and could be a significant boost to practical user privacy on Ethereum.”

“They need some work on the wallet side to support them. That said, it’s my view that wallets should start moving towards a more native multi-address model. […] Also for other reasons related to privacy,” he added

Butrin suggested that stealth addresses could introduce “long-term usability concerns”, e.g Social rehabilitation issues. However, he is confident that long-term issues can be adequately addressed:

“In the long term, these issues can be addressed, but the stealth address ecosystem in the long term looks like it’s going to rely heavily on really zero-knowledge proofs,” he explained.