Normal bitcoin addresses cannot be published in public without losing all privacy, since all transactions to that address can be seen by anybody. Stealth addresses let us publish an address in public which can be used by payers to derive a new address that the payee has access to, but no one else knows is associated with the stealth address. The trick is that the payer must use a nonce to derive the address paid to, and this nonce must be delivered to the payee so they know how to recover the funds. This nonce can be delivered in the transaction, so that no separate channel is required to communicate the nonce.
The same technology can also be used to construct new public keys to send encrypted messages to.
We will discuss four methods:
- The simplest form of stealth addresses, which has some drawbacks that can improved upon.