How Crypto Stealth Addresses Keep Your Transactions Private
Reading Time: 4 minutesCrypto stealth addresses are a handy way to protect your privacy when using crypto.
Cryptocurrency is totally anonymous, right? While many believe this to be true, there are ways through which you can be identified via your crypto transactions. This is where stealth addresses can come in handy. So, why isn’t crypto totally anonymous, and how can stealth addresses help you maintain your privacy?
Why Isn’t Crypto Anonymous?
A key lure of cryptocurrency is its increased anonymity and privacy over traditional currencies. For example, when you send or receive money to or from a person or business via your bank account using legal tender, your name will be displayed, making you instantly identifiable. While this is certainly an upside for catching illegal activity, many people are not comfortable with the lack of privacy mainstream money offers.
On the other hand, a typical crypto blockchain will record all transactions and display them publicly on a distributed ledger. The public element of this may sound concerning, but your name, contact details, and other sensitive information are never shown here. Rather, the sender and receiver wallet addresses within the transaction are displayed.
This helps crypto to remain somewhat traceable and can play a role in identifying cybercriminals when they steal from other wallets or launder funds in cryptocurrency. As for regular uses, this layer of relative anonymity allows them to protect their personal data from prying eyes and keep their crypto activities private. However, it’s important to remember here that the display of wallet addresses makes most cryptocurrencies, like Bitcoin, pseudonymous—not anonymous.
What you may not know is that it is possible to uncover a person’s identity via their crypto address. This isn’t a simple process, but it can be done given time. Because of this, cryptocurrency is not entirely anonymous. This is off-putting to many, especially those who value their privacy. However, there is a way you can maintain total anonymity when using crypto, and that’s through stealth addresses.
So, what are stealth addresses, how do they work, and should you use them?
What Are Crypto Stealth Addresses?
As previously discussed, crypto blockchains display the sender and receiver addresses within each transaction. A typical crypto wallet address consists of a random combination of letters and numbers but is unique to one person only. This makes it possible to track an address back to one individual.
Stealth addresses are still cryptocurrency wallet addresses but tackle the lack of total anonymity in several ways. This feature was initially proposed by Peter Todd, a Bitcoin developer, in 2014. Since then, numerous cryptocurrencies have adopted stealth addresses to protect the identity of users.
Every stealth address is single-use, meaning it is instantly discarded as soon as it is used within a transaction. This prevents the recipient address from being monitored or tracked by malicious entities.
Let’s look at an example of stealth addresses to understand how they work.
Monero’s Stealth Addresses
Monero is a popular cryptocurrency that uses stealth addresses. Monero is a privacy coin, meaning it prioritizes anonymity among its users.
When an individual conducts a Monero transaction as the recipient, a random, one-time wallet address is generated and displayed on the blockchain ledger. While the recipient can send all their funds to their true crypto address, the address publicized on the ledger will be entirely different and, therefore, untraceable.
It’s worth noting here that, in a stealth address transaction, the sender will know where the assets are going. The core purpose of stealth addresses is to keep transaction recipients private from the public eye, particularly those looking to exploit this kind of data.
Additional Stealth Address Cryptos
Various other cryptocurrencies offer stealth addresses, such as ZCash and Verge. When using ZCash, you can display your authentic crypto address on the blockchain or use a stealth address. Those who highly value anonymity can use a stealth address, but this isn’t a requirement when conducting ZCash transactions.
Verge’s stealth addresses (known as Dual-Key Stealth Addressing) can also be used to obfuscate transaction destinations. If you’re not a fan of ZCash or Verge, you can also make use of stealth addresses with Dash, Navcoin, and PIVX.
What’s more, Ethereum founder Vitalik Buterin has also suggested using stealth addresses for ETH transactions.
Currently, Ethereum transactions displayed on the blockchain show the true recipient address, meaning this asset is pseudonymous. However, with stealth addresses, ETH traders could enjoy the luxury of full anonymity. Buterin wrote on his personal blog that ‘stealth addresses give the same privacy properties as… generating a fresh address for each transaction, but without requiring any interaction.’
It is not yet known whether the Ethereum blockchain will adopt stealth addresses, but it seems to be a possibility.
The Problem with Stealth Addresses
While crypto stealth addresses are a fantastic idea for maintaining privacy, they can also inadvertently lend a hand in cybercrime. The crypto space is already rife with criminals, and stealth addresses are a handy tool. Privacy coins like Monero are popular on the dark web, and it’s no surprise why.
Those conducting crimes online will do what they can to remain anonymous to evade legal repercussions. While a cybercriminal can steal and launder regular currency online, cryptocurrency makes the process much easier because of its added layer of privacy.
When using stealth addresses, a cybercriminal can successfully conceal their true identity when moving funds from place to place. If law enforcement cannot discover who is handling stolen or illegal funds, making an arrest becomes almost impossible. With this level of anonymity through privacy coins, conducting cybercrime without facing punishment becomes that much easier.
Criminals can also benefit from the other features offered by privacy coins, such as Monero’s ring signatures and RingCT. All in all, this kind of virtual asset gives malicious actors a fantastic laundering vector. Of course, the exploitation of privacy features is nothing new in tech.
And while Monero and other cryptocurrencies are useful for conducting illegal activities, fiat currencies like dollars, euros, and pound sterling are still the preferred and most used currencies of all.
Crypto Stealth Addresses Have Benign and Malicious Uses
There’s no denying that crypto stealth addresses can be hugely beneficial in helping users maintain their anonymity on the blockchain. But the clear advantage privacy coins give malicious actors is also a concern. Dark web markets understandably favor privacy coins over traditional cryptos, and this trend will likely continue as more cybercriminals notice the perks of stealth addresses and other privacy-focused cryptocurrency features, but regular folks shouldn’t be denied privacy because some people use it to buy illegal items or commit fraud.
Reference: https://www.makeuseof.com/how-crypto-stealth-addresses-keep-your-transactions-private/
Ref: makeuseof
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