Ethereum co-founder Vitalik Buterin proposed a light-touch solution to boost privacy on the Ethereum blockchain without any changes on the consensus layer below.

In a recent research, Buterin offered a four-stage roadmap covering the main areas of privacy. These are on-chain payments, anonymization of application activity, private chain interaction, and network-level protection.

Rather than suggesting complex and contentious protocol changes, Buterin’s approach is to make pragmatic upgrades that are possible through better wallet design, application isolation methods, and technological updates of existing systems.

Buterin identifies four fundamental challenges

Buterin’s roadmap to privacy identifies four core privacy concerns for Ethereum users: payment privacy onchain, anonymization of application activity, private chain interaction through RPC calls, and network-level anonymization. Instead of suggesting drastic changes to Ethereum’s consensus layer, the strategy maps out realistic steps that can be taken with minimal protocol modification.

For anonymity of payments, Buterin suggests incorporating existing privacy tools like Railgun and Privacy Pools into standard wallets. The feature would include an added “shielded balance” to the wallet and an added “send from shielded balance” feature. This approach emphasizes convenience for users and says that users “should NOT have to download a separate ‘privacy wallet.’”

A more effective proposal is to shift the ecosystem to “one address per application” by default. Granting this entails “substantial convenience sacrifices.” Buterin contends this shift is necessary in order to separate public links among a user’s activities across different applications. This segregation approach would pair nicely with in-application wallets and align with existing workflows necessary for cross-chain interoperability.

The technical implementation would be supported by making send-to-self transactions privacy-preserving by default and implementing proposals like FOCIL and EIP-7701. These changes would allow privacy protocols to operate without relying on relays or public broadcasters.

Looking ahead, the roadmap suggests short-term improvements using Trusted Execution Environment (TEE)-based RPC privacy integrated into wallets, with a longer-term shift to Private Information Retrieval (PIR) technology once it becomes efficient enough for large datasets.

Buterin suggests improvement of wallet functionality

Buterin’s strategy includes a number of technical pieces that leverage existing Ethereum infrastructure instead of needing new consensus protocols. One of them is enhancing wallet functionality to natively support privacy features. That means adding shielded balances and making sure that users can privately send transactions without extra software.

The roadmap highlights using FOCIL (First-Operation Censorship resistance Layer) and EIP-7701, which would enable privacy protocols to function without bespoke relays or broadcasters. This makes development easier and maintenance easier as well, while making censorship resistance stronger across all transactions.

For RPC privacy—shielding information users reveal when they interact with the blockchain—Buterin proposes a two-stage solution. Short-term, TEE-based systems such as those built by Automata can be incorporated into current wallets as a stopgap. While recognizing the weaknesses of TEEs, Buterin points out that they offer an immediate advantage while stronger solutions come to maturity.

The longer-term strategy involves replacing TEEs with Private Information Retrieval (PIR) technology, which offers stronger cryptographic guarantees. Since PIR is currently inefficient for large datasets, Buterin proposes potential hybrid approaches, such as using “TEEs to isolate regions of the state of size 2**20, and use PIR inside of those, shifting the constants up over time as PIR becomes more efficient.”

To further reduce metadata leakage, the roadmap recommends connecting wallets to multiple RPC nodes, potentially through a mixnet, with different nodes used for different applications. This approach, combined with security improvements for RPC nodes through light client support, would allow users to trust a broader set of servers without compromising privacy.

Ethereum price currently a generational opportunity?

Buterin concludes his privacy roadmap by outlining the expected outcomes of making these changes. If these practices are adopted, they would make it so that a large portion of sends are private, and private sends are default in many cases. Though activity within each app would still be public, how different apps are connected to a user’s activities would be private.

Significantly, such privacy assurances would be more than minimum blockchain monitoring and would guard against adversaries running RPC nodes, fixing a critical vulnerability in the system today where users tend to expose their transaction intent before it arrives at the blockchain.

The privacy enhancements come at a time when some analysts are highlighting Ethereum’s potential value proposition. Analyst Ted has suggested that “buying ETH in the $1.3K-$1.4K range is a generational opportunity.” He cited several fundamental factors including stablecoin market capitalization reaching new highs and institutional adoption accelerating. Ted notes that “ETH is below its realized price for the first time since March 2020” and considers “ETH below $1.6K a bargain.”

Data from CryptoQuant appears to support a bullish case from a supply perspective. The data shows that Ethereum balances on exchanges continue to decline. This could be signs of a “supply crunch imminent” as tokens move to private wallets and staking solutions.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now