According to a tweet sent on Monday, Vitalik Buterin, the creator of Ethereum, wants to integrate stealth addresses for ERC-721 tokens, which are Ethereum's current token standard for NFTs. According to the ethresear.ch page Buterin linked in his initial tweet, users can transfer, mint, and burn NFTs with some degree of anonymity once this feature is implemented.
The study that underlies Buterin's tweet was written by Anton Wahrstätter, a researcher at the Research Institute for Cryptoeconomics and a lecturer at the Institute for Distributed Ledgers and Token Economy (WU). In turn, Buterin's blog article from January that discussed the need for private proof of attendance protocol (POAP) NFTs in a Soulbound Token-enabled future served as Wahrstätter's inspiration for his suggested stealth addresses. Buterin stated that allowing users to conceal these tokens at will would not just be a privacy safeguard but also a crucial component of a user's overall security measures online, especially for medical procedures as contentious as vaccination.
However, not everyone is in favor of the idea.
Although Buterin's idea of a decentralized society (DeSoc) appears to be the main source of inspiration for the debate on introducing stealth addresses, several users voiced concern about Buterin's co-signing of stealth addresses online. Given the current state of the NFT ecosystem, stealth addresses might give criminals and other bad actors a mechanism to make it very hard to recover stolen NFTs. Tracking down stolen NFTs becomes more difficult than it already is in the absence of a publicly accessible address that investigators can look into on the blockchain.
However, as noted in the whitepaper for Soulbound Tokens and on Buterin's blog, the widespread use of the social recovery wallet may be able to resolve the problems caused by giving ERC-721 tokens the ability to use stealth addresses.
According to this paradigm, users can give five "guardians"—individuals they have a lot of faith in—access to their wallets. These "guardians" will have the ability to modify the wallet's private keys if it is ever compromised. By doing this, an additional point of failure is introduced to the user's crypto wallet, increasing security. According to Buterin, these are the three key characteristics that make up a really safe crypto wallet, together with usability and accessibility.
It's important to note that Buterin's blog post on the significance of developing improved security features for crypto wallets was released in January 2021, a few months after the NFT market saw a bull run throughout the entire year. Cryptocurrency wallets are still vulnerable to significant hacking assaults more than a year later, as was the case when Solana users were hacked, resulting in the compromising and emptying of more than 8,000 crypto wallets.
One of the main characteristics of NFTs and cryptocurrencies, building a new, decentralized economy based on open records, may be considered by some to be a violation of the fundamental principles of blockchain technology. A future Web3 society cannot be established if the wallets that store our money and other sensitive data on the blockchain are not made significantly less vulnerable to fraud. This is true even with an increasing number of businesses investing in the long-term development of Buterin's proposed DeSoc.
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