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 dresses” — 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 dresses: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-dress.

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

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

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

Vitalik Buterin’s stick figure diagram of how a stealth dress system may work. Source: Vitalik.ca.

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

The Ethereum co-founder ded 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 le to problems of its own — at least for the short term — stating “this costs a lot of gas, an extra hundreds of thousands of gas just for a single transfer.”

Related: Crypto privacy is in greater jeopardy than ever before — here’s why

Stealth dresses have long been touted as a solution to dress on-chain privacy issues, which have been worked on since as early as 2014. However very few solutions have been brought to market thus far.

It also isn’t the first time Buterin has discussed the concept of stealth dresses in Ethereum.

In August 2022, he dubbed stealth dresses as a “low-tech approach” to anonymously transfer ownership of ERC-721 tokens — otherwise known as NFTs.

The Ethereum co-founder explained that the stealth dress concept proposed offers privacy differently to that of the now U.S. Office of Foreign Asset Control (OFAC)-sanctioned Torno Cash:

”Torno Cash can hide transfers of mainstream fungible assets such as ETH or major ERC20s […] but it’s very weak at ding privacy to transfers of obscure ERC20s, and it cannot d privacy to NFT transfers at all.”

Buterin offered some vice to Web3 projects that are developing a solution:

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

“They do require some work on the wallet side to support them. That said, it is my view that wallets should start moving toward a more natively multi-dress model […] for other privacy-related reasons as well,” he de

Buterin suggested that stealth dresses may introduce “longer-term usability concerns,” such as social recovery issues. However, he is confident the problems can be properly dressed over the long-term:

“In the longer term, these problems can be solved, but the stealth dress ecosystem of the long term is looking like one that would really heavily depend on zero-knowledge proofs,” he explained.

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ARTICLE: Vitalik Buterin divulges the 'largest remaining challenge' in Ethereum
PUBLISHED: 2023-01-23 02:57:26 
SOURCE: https://cointelegraph.com/news/vitalik-buterin-divulges-the-largest-remaining-challenge-in-ethereum