Crypto Stealth addresses and how they work

Blockchain transactions are transparent and pseudonymous. This is because transaction records are publicly available, but only show the alphanumeric wallet addresses of the sender and recipient. Therefore, while everyone can see these transaction details, real identities remain somewhat shielded.

Tag as we tell you all about stealth addresses and how they work.

Also read:

Understand stealth addresses

A blockchain is a public, distributed ledger of transactions. This means that everyone can see it, and several people have a direct copy of the general ledger. It registers the transaction amount and the public keys of the sender and recipient.

While this is not bad, it means that malicious observers can also see this information. This is where stealth addresses come in. First proposed by Bitcoin developer Peter Todd in 2014, these wallet addresses can be used to hide transaction details, thus giving you a greater degree of privacy on the blockchain.

How do stealth addresses work?

A stealth address is a one-time address that masks your public key. This ensures that no one can track payments back to you. Here’s how it works: the sender creates a stealth address on behalf of the recipient. Once set up, you can continue with the transaction. The blockchain will record the details of the transaction as it normally would. The only difference is that it will enter the stealth address as a proxy. This ensures that your actual public address remains hidden.

This is a useful service for anyone who wants to keep their transactions hidden from the public. For example, individuals who want to keep their donations private can use stealth addresses to hide the details of charities.

Stealth addresses – concerns

The obvious concern is that bad actors can also use stealth addresses. This would allow them to act anonymously and keep their illegal activities hidden. Stealth addresses have also been used to avoid taxes. They can make it difficult for the authorities to see where the funds are moving and block malicious accounts.

In addition, there are some disadvantages for people who receive crypto from stealth addresses. This is because a new stealth address must be created for each transaction. This will make it difficult to reconcile and manage one’s financial activity as each transaction will always be linked to a different address.

And while stealth addresses hide the details of the senders, recipients and the transaction amount, one can still see the product or service the payment was made for and their quantity. Combine this data with a few other details, and it will be easier for those with malicious intentions to find out who the parties to the transaction are.

(Edited by : Anand Singha)