Stealth payments

Private transaction with stealth addresses

Most of todays transactions are still processed using cash. Reason? Well privacy and finality. Blockchain systems have done a good job at enabling finality but not so much on privacy. When Bob knows Alice’s address he can track her payments because everything is public. This is good and bad. Good in that we can track malicious activity incase of a hack, bad in that even businesses can’t move their activities to crypto because their pivate financial activity will be monitored. Stealth addresses aims to solve this problem.

How it works

Now if Charles wants to send Alice some funds he will have to generate a random number r multiply it with Alice’s public key P and the send funds to the address generated from the resulting public key. In math terms: P · r = P'. Elliptic curve math helps us produces the private key of the resulting address by just taking the private key of the receiver and multiplying it with the random number r. p · r = s. Now Alice can spend the funds from the newly generated address and Bob has no idea that Alice received money from charles. As pointed out by Stealth payments we take a different approach to avoid using your private key to scan for funds. Alice generates view and spending key pairs and makes the public keys P_view and P_spend public. Now when Charles want to send Alice some funds he will generate a random number r and multiply it with P_spend to generate the stealth address. He then encrypts r with P_view and a random ephemeral private key (Elliptic Curve Diffie-Hellman). He sends funds to the stealth address and also sends the encrypted random number r and ephemeral public key outputted from the encryption for alice to prove funds belong to her. Alice starts computation by taking her view private key p_view and ephemeral public key received from charles and decrypts the random number. She then multiplies r with the spending private key p_spend and computes an address from this private key. If the address matches the stealth address charles sent funds to, she owns the funds.

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