A new proposal would see an ERC-721 extension use stealth address to hide NFT transactions on Ethereum. Anton Wahrstatter, an Ethereum researcher, was inspired by Vitalik Buterin’s idea of nontransferrable soulbound tokens. He also came up with a new proposal to extend ERC-721. This would allow for “stealth” addresses that would hide public blockchain transactions involving nonfungible tokens ( NFTs).
To implement stealth addresses to ERC-721 tokens- Ethereum’s current token standards for NFTs-Wahrstatter suggests using a privacy-focused piece cryptography known Zk-SNARKs.
Per the proposal, part of a stealth address, which is essentially a one-time address for every transaction, is inserted into a Merkle tree–a data structure used for data verification and synchronization–thus allowing for sending, storing, and burning NFTs without leaving much of the transaction details seen on the public blockchain.
Although Wahrstatter’s idea is still in its conception stage, Vitalik Buterin has already noticed it and described it as “a low tech approach to add significant privacy to the NFT ecosystem.”
He tweeted Monday, “So you would [for example] be able send an NFT (vitalik.eth) without anyone other than me (the new owners) being able see who the new owners are.”
Buterin had some objections to Wahrstatter’s proposal. She argued that anonymous NFT transactions could be achieved “with much lighter technology.”
He commented on the proposal and said that “the reason you don’t have to need Merkle trees, or ZK-SNARK-level Privacy is because each ERC-721 unique, so there is no possibility of creating an ‘anonymity set’ for an ERC-721.”
Buterin stated, “Rather, you want to hide the link from the sender/recipient’s highly visible public identification (so, I can send an ERC-721 directly to ‘vitalik.eth’ but no one can see that vitalik.eth has received an ERC-721; all they will see is that someone received an ERC-721),”
According to Ethereum co-founder, the remaining challenge is to find a way to pay fees.
“The best I can think of is that if you send an ERC-721 to someone, also send enough ETH to pay fees 5-50 more times to send it farther. He wrote that if you don’t have enough ETH to get an ERC-721, you can send some ETH in to keep it going.
Buterin’s previous comment was about Tornado cash, which is a privacy tool that mixes users’ coins to obscure the origin of Ethereum transactions.
Tornado Cash was in the news Monday, after the U.S. Treasury Department approved the mixing services by adding it to the Specially Designated Nationals List. Americans are now prohibited from using this tool or transacting via these addresses.
The move generated strong reactions from crypto community. Ethereum core developer Preston Van Loon told Decrypt Tornado Cash, like all other tools, “can be used to do good and bad.” However, it was also part of a wider debate about transparency and privacy in crypto space.