What is ERC 5564 in Ethereum? Stealth Addresses Explained

Ethereum Resource for Comments, abbr. as ERC 5564, is an adopted Ethereum standard meant to create privacy-centric stealth addresses for end-to-end transaction encryption for Ethereum users.

It works by creating a temporary receiving address for the receiver to protect their public identity.

What is a Stealth Address?

A stealth address is a temporary address meant to shield the receiver of the crypto from blockchain explorers. Once the temporary address vanishes, there is no trace of who has received the crypto.

What are Stealth Addresses used for?

Stealth Addresses are used to secure the privacy of the receiver. Once a crypto transaction is over, it is impossible to trace who received the crypto because the initial (temporary) address no longer exists.

Working

When a user is about to send cryptocurrency to someone, they set a stealth address for the receiver. The receiver receives the crypto from the sender via this address.

At the end of the trasactions the temporary address is discarded. Since the crypto was sent to this address and it is being defunct soon, it becomes almost impossible to trace the receiver of the crypto.

The address adds a layer of optional privacy for the users.

Issues Solved by Stealth Addresses

Stealth Addresses are needed in the current crypto landscape because of a lot of reasons.

1. Several countries have been levying impractical taxation on crypto assets.
2. Blockchain Investigators have exposed the privacy of almost every other business and HNI.
3. Crypto criminals are able to target end uses tracking their blockchain addresses. Since blockchain addresses leave a trail, it becomes impossible to escape once one of your addresses has been discovered.

How Does Privacy Work Currently in Ethereum?

Currently, Ethereum follows the standard blockchain privacy, where anonymously held addresses are used to send and receive cryptocurrencies.

The problem is that several blockchain analytics firms and investigating companies have been able to identify people and their addresses, even if the end user does not want to be shown. This amounts to a gross violation of privacy.

Below is a report from Arkham Intelligence showing the assets held by Justin Sun.

How Does Privacy Work Currently in Others?

ZCash

ZCash uses optional privacy, where shielded addresses are used to privatize crypto transactions. These shielded addresses rely on Zero Knowledge protocols to only submit a summary of transactions of a block and omit individual transactions.

Monero

Monero uses RingCT signatures to first disperse a single crypto transaction into multiple ones and mix it with others in the memory pool, then the crypto from these mixed batches is sent to the receiver.

Read More: Is ERC-20 the same as ETH?

Frequently Asked Questions

Das Crypto publishes information for knowledge. Please consult your financial advisor before trading or making any investment decisions. Cryptocurrencies are subject to uncertainties and market volatility.