A survey on Ethereum pseudonymity: Techniques, challenges, and future directions

Abstract

Blockchain technology has emerged as a transformative force in various sectors, including finance, healthcare, supply chains, and intellectual property management. Beyond Bitcoin’s role as a decentralized payment system, Ethereum represents a notable application of blockchain, featuring Smart Contract functionality that enables the development and execution of decentralized applications (DApps). A key feature of Ethereum, and public blockchains in general, is pseudonymity, typically achieved by using public keys as pseudonyms for users. Despite implementing several privacy-preserving techniques, the public recording of user activities on the blockchain allows various deanonymization methods that can profile users, reveal sensitive information, and potentially re-identify them. Most blockchains, such as Bitcoin, Litecoin, and Cardano, employ the Unspent Transaction Output (UTXO) model for accounting, which focuses on individual transactions and is susceptible to various deanonymization techniques. In contrast, Ethereum uses an account-based transaction model, integrating the concepts of accounts and wallets at the protocol level. This makes most UTXO-based deanonymization techniques ineffective for Ethereum. However, alternative methods with the potential to deanonymize Ethereum users have been proposed and developed. Privacy preservation techniques have been used to counteract deanonymization attempts; however, the challenges related to these techniques, their effectiveness and efficiency, and the trade-off between usability and protection levels remain areas for further exploration. This survey presents a comprehensive analysis of state-of-the-art privacy preservation along with deanonymization techniques in the blockchain and Ethereum ecosystems. This survey examines the intrinsic mechanisms supporting pseudonymity in Ethereum, providing a detailed assessment of the advantages and disadvantages of privacy preservation techniques, and suggests potential countermeasures against those deanonymization methods. It also discusses the implications arising from the intersection of DApps and data protection legislation, which is vital for ensuring the coexistence and advancement of groundbreaking blockchain capabilities and protecting user data.