Vitalik Buterin divulges the ‘largest remaining challenge’ in Ethereum

Ethereum co-founder Vitalik Buterin has shared a possible solution to what he describes as the “largest remaining challenge” on Ethereum — privacy.

In a blog post on Jan. 20, Buterin acknowledged the need to come up with a privacy solution because by default, all information that goes onto a “public blockchain” is public too.

He then arrived at the concept of “stealth addresses” — which he said can potentially anonymize peer-to-peer transactions, nonfungible token (NFT) transfers, and Ethereum Name Service (ENS) registrations, protecting users. 

An incomplete guide to stealth addresses:https://t.co/21Q18BrD30

— vitalik.eth (@VitalikButerin) January 20, 2023

In the blog post, Buterin explained how on-chain transactions can be carried out between two parties with anonymity. 

Firstly, a user looking to receive assets will generate and keep a “spending key” which is then used to generate a stealth meta-address.

This address — which can be registered on ENS — is then passed onto the sender who can perform a cryptographic computation on the meta-address to generate a stealth address, which belongs to the receiver. 

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

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

Buterin noted that a “Diffie-Hellman key exchange” in addition to a “key blinding mechanism” would need to be implemented to ensure that the link between the stealth address and the user’s meta-address can’t be seen publicly.

The Ethereum co-founder added that ZK-SNARKs — a cryptographic-proof technology with built-in privacy features — could transfer funds to pay transaction fees.

However Buterin emphasized that this may lead to problems of its own — at least for the…