ERC-5564: Ethereum's Stealth Era Has Arrived, Receiving Addresses No Longer 'Exposed'

Original author: Vaidik Mandloi

Original compilation: Luffy, Foresight News

Have you ever opened Etherscan to search for your own wallet address, not to check a transaction, but just to see what it looks like to an outsider?

Your current balance, every token you've ever held, NFTs you've bought, protocols you've interacted with, those late-night DeFi attempts, every airdrop you've claimed or ignored... everything is there, completely public.

Imagine sending this address to a freelancer who's supposed to pay you, a DAO giving you a grant, or even just someone you met at a conference. You're not just handing over a receiving address, but an entire, complete on-chain financial life.

The reason is simple: Ethereum, like most public chains, treats every address as essentially a public ledger.

Most people have felt this awkwardness. You hesitate for a second before pasting your wallet address; some people simply create a dedicated "new wallet" for receiving funds; others move funds around first to avoid revealing too much information through their balance.

This instinct isn't limited to crypto-native users. A 2023 global survey by Consensys covering 15,000 people showed: 83% of people value data privacy, but only 45% trust existing internet services.

ERC‑5564 is designed precisely to address this address correlation issue. It brings stealth addresses natively to Ethereum: a standard that allows you to receive payments without exposing your main wallet every time.

What exactly does ERC‑5564 bring?

The core of the problem is that one address permanently records all your actions. So why must we reuse the same address?

Think about how you receive payments in the real world: someone needs your account number to transfer money to your bank account. This number doesn't change with every payment. Over time, the bank account becomes a complete record of your income, spending, and savings. The difference is: only you and the bank can see it.

On Ethereum, the wallet address is structurally the same: it's a permanent account in the network's global state. To send you money, someone needs the address. The address doesn't change, and all transactions are recorded under the same public address.

Researchers call this the "glass bank account" problem. The issue isn't transaction visibility itself, but that all actions are automatically tied to an almost immutable address.

In the early crypto world, this only exposed basic transfer records. But later, blockchains evolved into lending markets, NFT platforms, governance systems, payment and identity layers. Today, an address can reveal far more information than it could a few years ago.

A common analogy in privacy research: imagine playing the game Battleship on a blockchain, where every move is publicly visible. The rules are correctly enforced, and the system faithfully records everything. But when both sides can see each other's ship positions, strategy disappears.

The system operates exactly as designed, but the experience is completely altered because transparency eliminates privacy.

The same principle applies to financial collaboration. Not every payment needs to come with the entire history of an address.

ERC‑5564 doesn't attempt to eliminate Ethereum's transparency, nor does it introduce complex designs like encrypted balances or privacy pools. It focuses on a narrower, more practical problem: reducing automatic correlation at the payment receiving layer.

The core logic is very simple: instead of directly giving someone your wallet address, you give them a stealth meta-address. This meta-address is not the receiving target; it contains public-key cryptography information to generate a unique, temporary receiving address for you.

This means when someone sends you a payment, the funds go not to your public main wallet, but to a brand-new address generated solely for that transaction. On-chain, it looks like a transfer to a new account that has never been used.

To the network, everything proceeds as usual. The change is that each payment goes to a different address, avoiding continuous recording on a single permanent account.

Does Ethereum really need this?

Look at user behavior for the answer.

Take Tornado Cash as an example: a mixing protocol that lets users deposit funds into a public pool and withdraw to a new address, severing the send-receive link. Despite sanctions and severe scrutiny, Tornado Cash still processed over $2.5 billion in volume in 2025. This shows users are willing to take legal and reputational risks to separate transactions from their main wallets.

Then there's Railgun: it uses zero-knowledge proofs to enable private transactions, hiding balances and transfer details. In 2025, Railgun's TVL remained stable around $70 million, with cumulative transaction volume exceeding $2 billion.

In stealth receiving, Umbra implemented application-layer stealth payments on Ethereum: users publish stealth information to receive funds at one-time addresses. As of 2026, Umbra has generated over 77,000 active stealth addresses.

These numbers aren't massive relative to the entire market, but they are sufficient to show: users have a strong need for "compartmentalization."

Meanwhile, these tools all involve compromises:

• Mixing requires separate deposit/withdrawal contracts, adding friction, harming composability, and operating in a regulatory gray area.
• ZK privacy tools remain an additional layer; users must actively choose to use them.
• Umbra proved stealth receiving is useful, but it's a standalone application, not a wallet standard.

On Ethereum, obtaining privacy always requires an extra step.

ERC‑5564 takes a different path: instead of creating a new privacy protocol, it standardizes stealth receiving at the wallet layer.

Where does Ethereum stand in the privacy landscape?

Privacy in the crypto world isn't black and white; it's a spectrum of trade-offs.

At one end of the spectrum are protocols like Monero, which embed privacy directly into the base layer. Transaction amounts are hidden, and sender and receiver addresses are obfuscated. Privacy isn't an option; it's enforced by design. Users don't need to opt-in; confidentiality is the network's default state.

Then there's Zcash, which introduced shielded transactions using zero-knowledge proofs. Zcash allows users to choose between transparent and private transactions, but it operates within a dedicated shielded pool, not across the entire system. The architecture supports confidentiality, but it remains a separate mode, not a fundamental behavior of the network.

Ethereum is entirely different; it prioritized transparency and composability from day one.

It was this openness that allowed DeFi, NFTs, and DAOs to explode rapidly. The cost is structural correlation; the privacy ecosystem had to be built outside the protocol layer.

ERC‑5564 marks a shift in thinking: no longer adding privacy as an external layer, but embedding it as a foundational component within Ethereum's existing design, especially at the receiving layer.

If Monero treats privacy as foundational, and Zcash treats it as an optional mode, then ERC-5564 turns privacy into infrastructure within a wallet standard, rather than relying on separate chains or standalone applications.

The industry narrative is also evolving: the debate is no longer "should public chains be fully transparent or fully private," but rather: where should privacy be applied, how much is needed, and how can it coexist with verifiability and composability.

What does privacy actually bring to users and the market?

Privacy isn't just about hiding transactions; it fundamentally changes the incentives and power distribution within financial systems. In this sense, privacy unlocks three core elements, which we can explore one by one.

On transparent blockchains, all operations are visible. This might sound trivial, but it's not.

When all transaction data is public, the biggest beneficiaries aren't ordinary users, but participants with the best data analysis tools, such as hedge funds, MEV bots, analytics firms, and AI models. Ordinary users' actions are public, while these sophisticated participants observe, model, and extract value from them.

This creates a structural asymmetry.

The problem isn't transparency itself, but that transparency turns every economic action into a public signal, leading to strategies developed around and profiting from these signals.

When transactions aren't easily exploitable, competition among participants shifts from who has better surveillance tools to competition based on price and risk. This leads to healthier, fairer market behavior. This is the first step of privacy: it limits value extraction that occurs simply because transaction activity is visible.

The second unlock is even more significant. Privacy facilitates capital formation in ways transparent systems cannot.

Retail users might tolerate full transparency, but institutional users never will.

If every position can be monitored in real-time, funds cannot deploy significant capital in DeFi. If a fund holds an asset, the market can move against it; if it hedges, competitors can track the hedge. Strategy protection becomes impossible. The same logic applies to corporations. If supplier relationships are visible to competitors, companies cannot tokenize invoices on a public ledger; if salary structures are public, companies cannot do payroll on-chain. Transparent systems favor experimentation but hinder autonomous decision-making.

This validates the saying, "Tokens are easy to bridge; keys are hard to bridge."

On public chains, transferring assets between different networks is simple because all information is already public. In private systems, once you leave the privacy domain, historical transaction records are exposed, creating friction. Privacy-conscious users prefer to stay in environments where their transaction history isn't leaked upon exit.

This creates a new kind of network effect.

Traditional blockchain competition revolves around throughput, fees, and developer tools. Privacy introduces competition based on information compartmentalization. The larger the private anonymity set, the more valuable it is to stay within it. Liquidity also begins to concentrate there, as confidentiality strengthens with scale.

The third unlock can be called selective disclosure.

In today's systems, privacy choices are very binary: either everything is public, or everything is hidden. But cryptography introduces a third option: you can prove something without revealing the underlying data.

A protocol can prove its solvency without disclosing all its holdings. An exchange can prove its reserves without revealing account balances. A user can prove compliance with certain rules without exposing their entire transaction history.

This reduces the emergence of systemic data honeypots. It also lowers the trade-off between privacy and regulation, opening the door to entirely new financial applications.

For example, private lending markets can enforce collateral rules and liquidation logic while hiding individual borrower identities. Platforms like Aleo and Secret Network are experimenting with confidential DeFi designs in this area.

On-chain dark pools can match trades without revealing order size or direction before execution. This is what Renegade is building—crypto trading infrastructure designed to prevent traders from being front-run simply because their intent is visible.

Compliant stablecoins can provide regulators with access under proper legal procedures while preventing the public from learning user behavior through transaction graphs. Private stablecoin projects like Paxos and Aleo, as well as the selective disclosure model pioneered by Zcash via viewing keys, are exploring this concept.

Trade finance platforms can tokenize invoices and prove they haven't been used for double financing without leaking supplier relationships. Enterprise networks like Canton Network are piloting this confidential infrastructure with large financial institutions, enabling businesses to share ledger efficiency without exposing sensitive commercial data.

All of this leads to long-term behavioral effects.

Transparent systems permanently link identity and financial behavior. Over time, this reduces willingness to experiment, as actions cannot be decoupled from long-term identity. Privacy restores the separation between participation and permanent exposure. It allows users to act without recording every decision in an immutable public profile.

Conclusion

The original intent of transparency was verifiability. Native privacy encryption preserves verifiability while supporting institutional capital and selective disclosure. ERC‑5564 isn't about turning Ethereum into a privacy chain; it's about giving Ethereum programmable, lightweight, native receiving privacy.