In blockchain technology, a feature, known as crypto stealth address, improves the privacy of users receiving money. Unlike traditional crypto addresses, these provide unique and one-time addresses to conduct transactions. The actual address of the receiver is kept a secret, which allows the sender to send money through a crypto stealth address. The wallet identifies any incoming transactions. However, the recipient does not generate the stealth address or identify it.

The wallet uses the private key related to the recipient’s address, to help process the transaction and recognition. Thus, enabling the recipient to access and control the funds he received without revealing his primary address. The utilization of crypto stealth addresses in cryptocurrency transactions enhances the privacy and security of users by preventing any potential monitoring or scrutiny of their financial dealings. This feature contributes to the ongoing advancement of secure transactions in the blockchain ecosystem, reinforcing the need for additional protection. 

What is the Difference Between Regular Wallet Address & Stealth Address?

Stealth addresses provide an added layer of security and improve privacy. It offers one-time and unique addresses every time you receive a payment. On the other hand, regular wallet addresses are more static and do not provide such measures. 

The stealth addresses usually offer standard addresses consisting of alphabets and numerals. The main difference lies in the one-time use. Moreover, it uses a cryptographic method to becloud the real address with a stealth address. 

While using a traditional wallet address, the receiver receives multiple transactions on the same address. This can help the scammers track the activities of the user. Thereafter, increasing the possibility of giving away sensitive information. Moreover, it also violates the way third-party applications violate privacy and enable third parties to examine and monitor transaction histories. 

Additionally, the adversaries could use information to track spending patterns, financial behaviors, and even income sources. The reuse of a similar address makes the account vulnerable to attacks and risks deanonymization attempts. 

How Does a Stealth Address Work?

Crypto stealth addresses improve the privacy of the user. For every transaction, it creates a new wallet address only for the recipient to access and verify. 

Here’s an example of how stealth addresses work. Meredith and Christina are two friends using hypothetical cryptocurrency. To increase their privacy, they planned to use the stealth addresses. The address is a cryptographic conduit that creates unique wallet addresses every time during a transaction. Here’s how.

Meredith Creates & Shares Her Stealth Address

Meredith creates two stealth addresses A and B. However, she only shares A with everyone, keeping the address B safe. This combination is the new stealth address for Meredith that comprises a series of characters. The combination of both A and B comprise the stealth address that Meredith uses to receive funds. To complete the transaction, Meredith shares the address with Christina. Now Christina needs to create the address for Meredith and complete the transaction. 

Christina to Perform Cryptographic Computations to Send Funds

Now, after receiving the stealth address, Christina uses it to perform the cryptographic computations with address A, with random numbers, to create a new stealth address say D. With the help of this computation, a new and one-time stealth address is created to transfer funds. Now, Christina sends the funds to the crypto stealth address D, thereby keeping the sensitive data safe.

Christina Publishes Ephemeral Pubkey

Christina adds the added cryptographic information known as the ephemeral pubkey say E on the blockchain. Now, Meredith needs to locate E to claim the funds. The ephemeral pubkey is a temporary key for certain cryptographic transactions. However, it’s not related or tied to the receiver’s long-term address. 

Meredith Receives Funds

Meredith keeps tracking the network in search of any transaction records on the stealth address. When she notices the transaction of Christina to D, she uses her secret addresses and the ephemeral key to look for the original sheet number. The use of ephemeral pubkeys makes it challenging for outsiders to find or track E. 

This process ensures that the different transactions to one account offer distinct wallet addresses, keeping the recipient’s information safe and secure. 

Pros and Cons of Crypto Stealth Address

While stealth addresses improve privacy, it however is a more complex, and time-consuming way of receiving funds. 

Pros of Using Crypto Stealth Addresses

There are several advantages of using a crypto stealth address. It improves security, and privacy during crypto transactions. Since for every transaction, there is a new and unique one-time stealth address, it supports user anonymity. Moreover, it makes it difficult for outsiders to track any movement of the funds. 

With the stealth address, it also reduces the chances of repetition of the same address. Thereafter, it decreases the chances of transaction linkability and protects the financial activity of the users. To keep the cryptocurrencies fungible, the crypto stealth address is a must with an added layer. 

Cons of Using Stealth Address

While stealth addresses can greatly improve security, it also has its own sets of drawbacks. One of the significant disadvantages of crypto stealth addresses is its complexity. This not only complicates wallet software but also causes user errors. With the extra computational procedure, it makes it difficult for the users to complete transactions. Thus, it takes a longer time to transact funds in comparison to traditional wallet addresses. Moreover, stealth crypto addresses are yet to gain full-fledged adoption by cryptocurrencies. It limits their use in the crypto ecosystem. To maximize the advantages and use of stealth crypto addresses, proper training and knowledge are crucial. 

Also Read- FASB Wants “Fair Value” Reporting For Cryptocurrency

In Conclusion

Crypto stealth address is the next step to add layers of protection to your crypto wallet. However, with the complexity of its integrity, in-depth knowledge among users is crucial. With mainstream adoption, these addresses can be beneficial in the future, reducing the risk of potential concerns.