A common question we hear about Nocturne is why the protocol was designed as a “private account.” Why not another design? In this post, we distill past approaches to onchain privacy and the motivation behind the Nocturne design philosophy.

In the first part of this two-part blog post, we introduced the problem of anonymous payments, EIP-5564, and some of the outstanding UX challenges with stealth EOAs. To recap, in order to pay someone without revealing them as the recipient, we need a system that enables the generation of many unlinkable “one-time addresses” belonging to the recipient. EIP-5564 enables exactly this, where the stealth addresses are Ethereum EOAs. The core problem with using EOAs as stealth addresses, however, is that sending funds to and from these public addresses creates visible links. This makes moving the anonymously received assets or funding the stealth addresses for gas fees quite difficult in practice. What’s needed is a stealth address system that allows a stealth address owner to move funds without revealing what stealth address the funds are coming from. This way, received funds can be moved or gas funds can be provided without creating any links.

It is no question today that privacy on Ethereum is still one of the largest remaining challenges. Several attempts have been made to enable different kinds of privacy, including network layer privacy, confidential token transfers, and private smart contracts. Surprisingly, however, we still lack a truly usable solution for one of the seemingly most simple problems—receiving payments anonymously. Today, we outline the problem space of anonymous payments, how stealth addresses help solve the issue, and what outstanding UX problems remain. This is part one of a two-part blog post, where we outline the current state of anonymous payments in this first post, and discuss Nocturne’s approach more in the second post.

For crypto to reach its next stage of growth, it must be used less as a means of speculation and evolve to become more like money—a reliable medium of exchange and store of wealth.