Ethereum Staking Privacy Concerns and Exposed IP Addresses

Ethereum staking has raised concerns around IP address privacy. Validators must connect to the network through an Ethereum client that uses their IP address to communicate with the network. This can reveal the location and identity of the validator, which can be a security risk.

Staking typically involves locking up a certain amount of cryptocurrency or tokens as collateral to participate in the network and earn rewards. Depending on the specific staking mechanism and platform being used, there may be varying levels of anonymity and privacy when it comes to revealing your IP address.

In some cases, staking may require a public IP address to participate in the network, which could reveal the staker’s location and other identifying information. This could concern individuals who value their privacy and want to remain anonymous while staking.

However, many staking platforms and protocols have measures to protect their users’ privacy. For example, some may use techniques such as onion routing or other forms of encryption to obfuscate the staker’s IP address and maintain anonymity. Additionally, some staking platforms may allow for the use of a VPN or other privacy-focused tools to further enhance anonymity.

Ultimately, the level of privacy and anonymity available during staking will depend on the specific platform and mechanism being used and the measures taken by the staker to protect their privacy. Individuals must research and understand the privacy implications of any staking platform or protocol they are considering.

Ethereum (ETH) staking is the process of holding a certain amount of ETH in a designated wallet to support the network’s security and earn rewards. This process involves validators who verify transactions, propose new blocks, and secure the network by locking up a minimum amount of ETH as collateral. While staking offers many benefits to the Ethereum network, it has raised concerns about IP address privacy.

Every computer that participates in the Ethereum network must have a unique identifier known as an IP address. This identifier enables computers to communicate with each other, and validators must connect to the network and perform their duties. However, IP addresses can reveal the location and identity of a validator, raising privacy concerns.

When validators stake their ETH, they must run a validator node that communicates with other nodes on the network. To participate in staking, validators must connect to the Ethereum network through an Ethereum client, such as Prysm, Lighthouse, or Teku. These clients use the validator’s IP address to communicate with the network and send and receive information.

Privacy At Stake

While IP addresses are essential for network communication, they can also reveal the location and identity of the validator. Hackers or malicious actors can use IP addresses to launch attacks or gain unauthorized access to the validator’s system. Additionally, governments or law enforcement agencies can use IP addresses to track down validators who may be engaging in illegal activities.

One of the trending censures comes from Ethereum (ETH), which recently underwent a hard fork. A researcher at the Ethereum Foundation revealed that the IP addresses of ETH stakers are monitored as part of a broader set of metadata. Thus, causing privacy concerns.

During an April 12 interview on the Bankless crypto podcast, Justin Drake, a researcher at the Ethereum Foundation (EF), stated: 

“There’s a lot of metadata, you can look at deposit addresses, you can look at withdrawal addresses, you can look at fee recipients, you can look at IP addresses.” 

Podcast host Ryan Sean Adams inquired if the dataset was relatively Sybil resistant and comprised the most engaged Ethereum users. Drake confirmed this to be the case. Needless to say, while the interviewee tried to calm down the situation, crypto Twitter was quick to react. 

One Twitter user referred to Ether as the “real surveillance coin,” while another mocked Drake by sarcastically rehashing him. “We can stop censorship by censoring those we don’t like.”

 Another described the situation as “central governance to a T.”

Remediations to Consider

To address these concerns, validators can take several measures to protect their IP address privacy. One approach is a Virtual Private Network (VPN), which encrypts the validator’s internet traffic and routes it through a remote server. This makes it difficult for hackers or malicious actors to identify the validator’s IP address and location.

Another approach is to use Tor, a free and open-source software that enables anonymous online communication. Tor routes internet traffic through a network of relays, making it difficult for anyone to trace the validator’s IP address or location. However, Tor can slow down internet connections, which may not be suitable for ethereum staking, requiring a reliable and stable internet connection.

Validators can also use proxy servers to hide their IP address. A proxy server is an intermediary between the validator’s computer and the internet. When a validator connects to the Ethereum network through a proxy server, the server’s IP address is used instead of the validator’s IP address. This can make it difficult for hackers or malicious actors to identify the validator’s IP address and location.

Ultimately, the Ethereum community must work together to develop best practices and protocols that protect the privacy and security of all network participants.

Suggestions From the Community

BeInCrypto contacted the Ethereum Community members on Reddit with one main question. How can folks running ETH validators (or any other staking node) protect their IP address from being publicly knowable? While simultaneously ensuring they can act as a peer that can accept connections.

One user who requested anonymity stated, ‘Normally, folks running a validator can just connect to a VPN, but that has a few problems when it comes to something that needs high uptime and reliability like validating.’ 

“The VPN service might periodically change the IP you are assigned to, making P2P connections unstable. The VPN service itself might go down from time to time, and you could miss attestations. There’s usually no way to forward common ports to your IP address over a third-party VPN connection, so you can only connect outwards, which limits the effectiveness of a decentralized network of peers.” 

It isn’t the first privacy-related statement to have caused a stir in the crypto community, either. For instance, ConsenSys, the team behind the Ethereum wallet MetaMask, began collecting IP addresses last year.