Stealth addresses are a tool to enhance a user’s anonymity by generating one-time addresses for every transaction. This means that third-parties cannot learn nothing about the parties involved in a transaction, therefore increasing the privacy of users.
With a cryptocurrency like Bitcoin for example, all transactions from a single are stored on the blockchain but from the same address. This allows transactions to be traced back to a specific wallet on the blockchain, and usually, a wallet an be traced back to an individual through an IP address or an account on a public crypto exchange.
Stealth address pose a problem legally because criminals have access to this technology and can use it for illicit transactions. The most common illicit transactions are theft, scams, ransomware, fraud, and tax evasion. Due to this problem, federal and international agencies have privacy coins under increased observation.
To see the first written proposal of stealth addresses, click here.