Covert wallets: the best kept secret of cryptocurrencies

Can you imagine being able to send and receive cryptocurrencies without anyone, except you and your recipient, knowing who owns the addresses involved? Would you like to have a higher level of privacy and anonymity than traditional wallets offer? If your answer is yes, then you should know about covert wallets or stealth addresses, an innovative technology that promises to revolutionize the world of cryptocurrency transactions.

Stealth wallets are a special type of digital wallets that generate unique and random addresses for each transaction, so that the identity of the participants is hidden and their movements are prevented from being tracked. These addresses are created using a cryptographic protocol that combines the hash of the receiver's address, the token identifier, and a secret parameter of the sender. This way, only the receiver can access the funds sent and only the sender can verify that the transaction was successful.

Stealth wallets offer a number of advantages over conventional wallets, which store private keys in online applications or on physical devices, and expose public addresses for all to see.

Some of these advantages are:

Anonymity: stealth wallets allow transactions to be made without revealing the identity of the users, which provides them with greater security and protection against possible attacks, theft or extortion. Furthermore, since they are not linked to any person or entity, shadow wallets are not subject to regulation or taxation by authorities.
Privacy: Stealth wallets prevent users' transaction history from being traced, giving them greater freedom and control over their finances. Thus, users can prevent their consumption habits, preferences or relationships with other users from being known.
Fungibility: covert wallets guarantee that all units of the same cryptocurrency are indistinguishable and interchangeable, which prevents certain tokens from being discriminated against or censored based on their origin or destination. In this way, the value and integrity of cryptocurrencies is preserved.
Stealth wallets are not new in the world of cryptocurrencies, as they have existed for several years and have been implemented by some digital currencies such as Monero, Zcash or Dash. However, they have recently gained greater relevance thanks to the proposal of Vitalik Buterin, the founder of Ethereum, to incorporate this functionality into ERC-721 tokens, also known as NFTs or non-fungible tokens.

NFTs are a type of tokens that represent unique and unrepeatable assets, such as works of art, collectibles, games or domains. These tokens have become popular in recent months, generating a multi-million dollar market and great demand from users. However, NFTs also present a privacy issue, since being unique, they can be easily identified and their transactions traced on the blockchain.

Buterin proposes a simple, low-tech solution to solve this problem, based on covert wallets. According to his idea, users could send and receive NFTs to hidden addresses, so that only they would be able to see who the owners of the tokens are. For example, an NFT could be sent to vitalik.eth without anyone except it being able to see who the new owner is.

This proposal has generated great interest and expectation in the cryptocurrency community, as it could open the doors to a new level of privacy and anonymity in the NFT ecosystem. However, it has also generated some criticism and doubts, as some believe that covert wallets could facilitate money laundering, tax evasion or illicit trading in digital assets.

In conclusion, covert wallets are a promising technology that offers a more secure and private alternative to transacting cryptocurrencies. However, they also pose a series of challenges and risks that must be appropriately evaluated and regulated. Therefore, it is important that users inform and educate themselves about the operation and implications of this technology, and that they use it responsibly and ethically.