• Buterin wants to integrate data protection features into NFTs
• Implementation of stealth addresses for NFTs
• Smart contract wallets as a possible solution
Ethereum founder Buterin wants to implement stealth addresses
In an early August tweet, Ethereum founder Vitalik Buterin proposed a “low-tech approach” to embed privacy features into non-fungible tokens (NFTs), or NFT transactions. Buterin expressed the idea of introducing stealth addresses for the current Ethereum token standard for NFTs, ERC-721, and linked to the site ethresear.ch in his post.
On ethresear.ch, Anton Wahrstätter, researcher and lecturer at the Institute for Distributed Ledgers and Token Economy, had previously reported on the idea of stealth addresses. He was inspired for his idea by a January blog post by Ethereum founder Buterin. Wahrstätter explains that with the implemented stealth addresses, users could transmit, mint and burn NFTs with relative anonymity.
More anonymity through stealth addresses
“Idea: Stealth addresses for ERC721s. A low-tech approach to add a significant amount of privacy to the NFT ecosystem. For example, you can send an NFT to vitalik.eth without anyone but me (the new owner) seeing , who the new owner is,” Buterin said on Twitter.
Idea: stealth addresses for ERC721s.
A low-tech approach to adding a significant amount of privacy to the NFT ecosystem.
So you would e.g. be able to send an NFT to vitalik.eth without anyone but me (the new owner) being able to see who the new owner is.https://t.co/UdqK6NAYjn
– vitalik.eth (@VitalikButerin) August 8, 2022
A stealth address is a unique address for the wallet used to create more anonymity in transactions. While regular wallet addresses are publicly visible and transactions can be traced back to this address, a stealth address acts as a sort of proxy for your own wallet address.
Buterin suggests smart contract wallets as a possible solution
In response to Wahrstätter’s proposal on ethresear.ch, which included Merkle trees and Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge, or zk-SNARKs for short, Buterin explained that this involves a more complicated method of stealth addresses for the ERC -721 Tokens and proposed a solution of its own: According to Buterin, smart contract wallets could include a method that would allow the sender to essentially mask their address from third parties.
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According to Buterin, however, there is still a challenge in figuring out how to pay fees. “The best I can think of is if you send an ERC721 to someone, also send enough ETH to pay 5-50 times the fee to forward it. If you receive an ERC721 without enough ETH, you can send some ETH into it to keep the chain of transmission going,” Buterin said. However, according to the Ethereum founder, there may be “a better generic solution that somehow involves specialized searchers or block builders.”
After Wahrstätter and Buterin spun the idea further on ethresear.ch and other users also joined the discussion and asked questions, Buterin explained a few days later: “Now that I think about it more, I realize that it actually doesn’t make sense to keep this standard part of ERC721 itself. There are many potential use cases for it. So it should probably be an independent ERC that allows users to generate new addresses owned by other users, and both ERC721 applications and other applications can use this ERC.” And further: “Other than that, my main feedback on EIP so far is that I hope something like the generateStealthAddress method from my previous post can be added so we can support smart contract wallets.”
Criticism of Buterin’s idea
However, some users also expressed concerns about Buterin’s co-signing of stealth addresses, according to nft now. For example, stealth addresses could be a way for thieves and other ill-intentioned actors to make it nearly impossible to retrieve stolen NFTs. Tracking stolen NFTs would be even more difficult without a publicly available address for investigators to look at on the blockchain.
Another argument is that Buterin’s idea breaks with one of the core principles of blockchain technology, namely the creation of a new, decentralized economy based on publicly available records.