Vitalik Buterin, the architect of Ethereum, has suggested a brand-new "stealth address" method for the cryptocurrency that would radically enhance and streamline the process for establishing anonymity for common users.
An incomplete guide to stealth addresses, a blog post by Buterin over the weekend, claims that the proposed approach will provide the same privacy benefits as creating new addresses for each transaction a user gets.
The recipient wouldn't need to do anything to make this happen; that would be the sole difference.
The way Buterin's method would function in practice is by having wallets produce so-called stealth meta-addresses for receiving money using a private "spending key" that only the recipient of a transaction has access to. The sender is then given access to the stealth address. For the recipient to recognize that the address belongs to him, the sender must also broadcast a piece of cryptographic information known as an ephemeral pubkey on-chain.
Buterin suggested using the Diffie-Hellman key exchange, which enables the production of the secret spending key and the public stealth meta-address. Buterin claims that this technique is a cornerstone of contemporary encryption and would do everything required to establish stealth addresses on Ethereum.