Anonymity has been a most yearned-for feature in the world of digital crypto transactions. Details and history of transactions on the blockchain can be looked up by anybody with blockchain explorers to look up the transaction hash.

This being said, individuals have dreamt of times when their transactions are private and not open to the eye of prying entities. With the uprising of stealth addresses, can these dreams come true? It’s only a matter of time till we find out.

What is a Stealth Address?

A stealth address is a one-time wallet address that provides privacy or creates anonymity for transactions on the blockchain. When a transaction is made with a stealth address, the identity of the receiver is concealed as opposed to regular cryptocurrency wallet addresses that are publicly available and whose transactions can be traced to that address. Stealth addresses offer an extra layer of protection and act as a proxy for your wallet transactions.

How Does a Stealth Address Work?

According to Ethereum’s co-founder Vitalik Buterin, when a transaction on the digital landscape is about to be carried out, the recipient “Bob” or the sender “Alice” (or any other names you might wish to call them) can generate a stealth address from either of their ends.

Out of both parties, only Bob, the recipient, would be able to control the transaction. Buterin said a stealth address can be thought of as a wallet address that is cryptographically tied to Bob’s public address but is only visible to the parties carrying out a transaction.

To provide a more in-depth explanation of how this works, Bob would need to generate a secret spending key to conceal their identity. This secret spending key would then be used to create a stealth meta address. Bob would then share the meta address with Alice, who in turn performs a computation from her end to generate a stealth address that belongs to Bob.

Once the stealth address is generated, Alice can send assets to Bob. When Alice sends assets to the stealth address, some of her cryptographic data is also published on the blockchain, and this data is called an ephemeral pubkey, which helps Bob find the assets. It is through this cryptographic data that a spending key would be useful to claim assets.

A stealth address is a handy tool for people who want to keep their transaction details private.

Advantages of Stealth Addresses

Now that we have an idea of how stealth addresses work, we can go on to explore the benefits and advantages of using them every now and then. Some of these advantages include:

Increased Anonymity

This is, of course, the number one benefit that comes with using a stealth address. Users can perform transactions without worrying about their transaction details flying around the blockchain and falling in the laps of the wrong person. A one-time address makes it difficult to track transactions back to a user and, therefore, offers an extra layer of protection.

Defense Against Hackers

In the virtual and digital world, hackers have always been a threat one way or the other. There have been various instances of crypto wallets getting hacked while using their traditional public address. With the one-time nature of stealth addresses, the possibility of a hacker gaining access to your funds is very unlikely.

Protection Against Surveillance

As is of its nature, all cryptocurrency transactions are recorded in a public ledger called a blockchain, and this simply gives anyone the liberty to be able to look up the details of transactions between addresses. While stealth addresses do not completely mask everything done on the blockchain, users who are wary of any kind of surveillance should stick to stealth addresses as they leave little traces inaccessible to third parties and make it difficult for external forces to monitor their transactions.

Scalability

Scalability in blockchain simply refers to transaction speed, which is a major challenge in the cryptocurrency industry these days due to implementations. Stealth addresses are a scalable privacy and security solution as they are available to everyone who uses the blockchain, and they have no negative impact on network speed or efficacy.

Flexibility and Convenience

Stealth addresses are created every single time a new transaction has to be carried out, and the good thing is they do not need to be created manually. They are generated with ease and are user-friendly. These addresses also have wonderful adaptability for users, given the fact that they can be used with any cryptocurrency on the blockchain that implements the feature.

Concerns About Stealth Addresses

Everything good can also have flaws or get abused. Stealth addresses are not an exception. With its ability to evade trackers and promote enhanced anonymity, illicit activities remain hidden through the use of stealth addresses by shady individuals.

Stealth addresses can also serve as a tool for those who plan to evade taxes. They can make it really difficult for the government to track funds and see which accounts they’re moving in and out of. While flexibility is an advantage of stealth addresses, the creation of new stealth addresses for every transaction can prove to be problematic for users who intend to reconcile and keep tabs on their financial activities because every transaction would always be linked to different addresses.

But not to worry, measures to curb these illicit practices are being put in place. The Internal Revenue Service (IRS) has assigned task forces to the issue by creating “Operation Hidden Treasure,” an operation designed to investigate cryptocurrency users who have made it a habit out of tax evasion.

In conclusion, while stealth addresses are not completely perfect, they help to protect privacy and keep individuals with malicious intent out of the businesses of those who operate on the blockchain. In the present age we live in, privacy is a luxury, and only a few are currently able to enjoy it.