Stealth Address: What they are and what they are for

A Stealth Address, or hidden address translated into Spanish, is a single-use cryptocurrency wallet address to be able to carry out cryptocurrency transactions anonymously. On the official blog of Vitalik Buterin, co-founder of Ethereum, he explained why stealth addresses were proposed, which aim to protect the privacy of users when sending or receiving funds. Let's see then what stealth addresses are and how they work.

What is a Stealth Address

A Stealth Address, or hidden address translated into Spanish, It is a single-use cryptocurrency wallet address to be able to carry out cryptocurrency transactions anonymously.. Since cryptocurrency addresses are publicly available because they are hosted on the blockchain itself, transactions can be traced back to those addresses. Therefore, if your name or other information is somehow publicly associated with your wallet address, The transactions made from that wallet can be perfectly traceable by anyone. Stealth addresses act as a proxy for wallet addresses to protect the privacy of transactions.

How are Stealth Addresses different from common addresses?

In a typical cryptocurrency transaction, the sender uses the recipient's wallet address to send cryptoassets. A wallet address is a public address, which can be tracked. When we use a hidden address, the blockchain records the transaction and enters the proxy address, which is the one that hides the public address. a hidden address can be created using different protocols or mechanisms within a cryptocurrency wallet if it allows it. There are several different mechanisms for creating hidden addresses. For example, just as We explained to you a few months ago, Monero uses ring signatures and RingCT (decoy output addresses and masked addresses) to make it difficult to trace the sender. This is not a cloaked address, but rather a technique to confuse potential trackers while using cloaked addresses.

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Diagram of how a ring signature works. Source: Wikipedia.

How Stealth Addresses work

How stealth addresses work It is quite different from the cryptocurrency transactions that we usually use. The steps to follow to make a transaction with the stealth addresses would be the following:

  1. Bob generates his root spending key (m) and its hidden meta-address (M).
  2. Bob adds an ENS record for register M as the hidden meta-address for bob.eth.
  3. We assume that Alice knows that Bob is bob.eth. Alice looks for her hidden meta-address M in ENS.
  4. Alice generates an ephemeral key that only it knows, and that it only uses once (to generate this specific hidden address).
  5. Alice uses an algorithm that combines your ephemeral key and Bob's meta-address to generate a hidden address. You can now send assets to this address.
  6. Alice also generates its ephemeral public key and publishes it to the ephemeral public key registry (this can be done in the same transaction as the first transaction sending assets to this hidden address).
  7. In order for Bob to discover the stealth addresses that belong to him, Bob you need to scan the ephemeral public key registry to get the complete list of ephemeral public keys published by anyone for any reason since the last time you scanned.
  8. For each ephemeral public key, Bob tries to combine it with his root spending key to generate a stealth address, and checks to see if there are any assets at that address. If there are, Bob calculates the expense key for that address and remembers it.
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Operation of a transaction with stealth address. Source: Vitalik.ca.

What problems do Stealth Addresses face?

Taking into account the ability of stealth addresses to confuse trackers and increase anonymity from honest cryptocurrency users, too They are an attractive option for users with dishonest intentions. With this in mind, regulatory agencies, tax authorities and governments are developing methods to protect honest cryptocurrency users. For example, both private coins and shadow addresses have been used to evade taxes. The US Department of Justice announced in October 2021 that it had created the National Cryptocurrency Law Enforcement Team, designed to investigate illegal activities financed by cryptocurrency. On our continent it seems that things are going slower and they are more committed to censoring their activity rather than trying to understand how they work in order to regulate them accordingly.


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