Ethereum Co-Founder Buterin Proposes Privacy Enhancements for ETH Wallets

Ethereum co-founder Vitalik Buterin has presented a comprehensive plan to bolster the privacy of the Ethereum network. In an April 11 roadmap, Buterin advocated for the integration of privacy tools into Ether (ETH) wallets and the adoption of privacy-enhancing norms and features within the Ethereum ecosystem and protocol. He emphasized that this roadmap serves as a short-term solution, requiring minimal changes to the base protocol along with supplementary long-term updates.

Buterin proposed the adoption of privacy-enhancing systems such as Railgun or Privacy Pools by existing wallets. He suggested that when funds are sent using these wallets, users should be presented with an option to “send from shielded balance,” which anonymizes the transaction. Ideally, this feature should be enabled by default. Buterin stated, “Users should NOT have to download a separate ‘privacy wallet.’”

Buterin also recommended significant changes in the implementation of decentralized finance (DeFi) and broader decentralized applications (DApp). He argued that these systems should be limited to “one address per application.” While acknowledging the inconvenience, he asserted that this approach is the most practical way to eliminate public links between all user activities across different applications. The user experience, he noted, would be similar to depositing funds to one chain from another in crosschain interoperability systems. Developers would need to ensure that user withdrawal functions are privacy-preserving by default to benefit from this change.

Buterin also highlighted the need for protocol changes, including the implementation of fork-choice enforced inclusion lists (FOCIL) and the Ethereum improvement proposal (EIP) 7701. EIP-7701 is an enhancement to Ethereum account abstraction, while FOCIL is a censorship-resistance improvement. EIP-7701 ensures that privacy protocols can operate without needing relays or public broadcasters, simplifying their development and maintenance. FOCIL prevents the censorship of transactions, including privacy-preserving ones, which are at a higher risk of being targeted.

To address the privacy limitations of current remote procedure call (RPC) systems used to interact with the blockchain, Buterin proposed the implementation of a trusted execution environment (TEE) as a short-term solution. TEE is a secure area within a processor that protects code and data loaded inside it, allowing users to interact with RPC nodes with stronger assurances that their private data is not being collected. As a long-term solution, TEEs should be replaced with a private information retrieval (PIR) system, which provides cryptographic guarantees and allows users to retrieve data concerning blockchain contents without the provider knowing which data is being shared.

Buterin also recommended that wallets should be connected to multiple RPC servers and use a separate RPC per DApp. Additionally, he suggested the use of a mixnet—a privacy-enhancing technology designed to obscure metadata. Other recommendations include the development of proof-aggregation protocols for privacy-preserving protocols, which would result in significantly lower fees for using such systems.