A "stealth address system" has been suggested by Vitalik Buterin, the co-founder of Ethereum, to enhance transactional anonymity on the Ethereum blockchain. Buterin stated in a study blog that privacy is "one of the largest remaining challenges in the Ethereum ecosystem."

The stealth address system is built on a method that would enable any Ethereum wallet to create "stealth addresses," which are publicly visible addresses that have been cryptographically obscured, in order to receive money in secret and access it using a unique code called a "spending key."

According to Buterin, using a stealth address has the same privacy benefits as creating a new address for each transaction. By generating distinct, anonymous addresses for each transaction, these suggested stealth addresses are a technique to improve privacy on Ethereum.

So that it is impossible for anybody to follow the transactions or figure out who is giving and receiving assets, each time someone makes a transaction, they can establish a fresh stealth address. This implies that the transactional history of each user may be kept secret. Buterin also recommended utilizing ZK-SNARKs, an acronym for zero-knowledge proofs, to increase system privacy and make it more challenging to link stealth addresses.

Transactions on Ethereum are by default made public, which may be a privacy risk. On the network, there are techniques for achieving transactional anonymity, such as employing bitcoin mixers like Tornado Cash. Such techniques, meanwhile, may cause regulatory problems. This was demonstrated with Tornado Cash, a U.S.-approved program by the Office of Foreign Assets Control (OFAC) of the Treasury Department for possible illegal activities.

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