You Can Now Recycle Addresses (Cleaner Wallets For Frequent Traders)

This blog post was published before LocalEthereum became LocalCryptos.

We’ve just launched a new feature enabling users to re-use Ethereum addresses across multiple trades. This will help frequent traders to have less “clutter” in their wallets.

Note: If you log in using an external wallet (e.g. MetaMask, imToken or another wallet app), this feature won’t apply to you. The upgrade is for users who use the non-custodial web wallet.

We’re incredibly focused on user privacy — privacy is one of the primary reasons we created LocalEthereum. It’s the reason why we don’t ask for your identity, we don’t collect detailed traffic logs, and we deny ourselves access to read your messages or access your wallet by leveraging client-side encryption.

However, privacy on the blockchain sometimes comes with trade-offs. Today we are allowing users to opt-in to a slight privacy compromise if they want to re-use Ethereum addresses across multiple trades. When we force frequent traders to use brand new Ethereum addresses for each trade, it can be frustrating to manage finances, as they are split into many addresses.

The past behaviour (and still the default)

Since inception, if you use the LocalEthereum web wallet for trading, the platform will choose a brand new Ethereum address for every new trade. This means that each time you receive ether, it will go into a new address in your wallet. This protects your privacy because it makes it harder for your trade partners and onlookers to view your aggregate balance or see who else you’re trading with. However, it can cause a hassle when you want to send ether out of your web wallet.

Because of the way Ethereum is designed, it’s not possible to send ether from multiple addresses in a single transaction. In cryptocurrencies like Bitcoin that use what are called UXTOs, users can create a single transaction to send amounts from many different addresses at once. Unfortunately, that ability is lost in Ethereum, which can cause headaches and privacy concerns for end-users.

When transacting on LocalEthereum, both parties can see each others’ Ethereum address for that trade. For example, if Alice sells 1 ETH to Bob, then Bob can see the address from which the ETH came from, and Alice can see Bob’s receiving address. If both parties used only one Ethereum address, Alice and Bob would be able to see each others’ complete Ethereum financial history — including their current ETH balance, past transactions, their token inventory, and which smart contracts they play with.

This is the crux of the problem: Many privacy-concerned users want to obfuscate this information. This is why LocalEthereum chooses a brand new Ethereum address for each trade by default.

The new feature

From the “Account” tab, you can now choose to use the same Ethereum addresses in multiple trades. You can select how often you want to recycle Ethereum addresses: 24 hours, 7 days, or 30 days. If you choose 30 days, then you will trade using the same Ethereum address for a period of 30 days, after which a new address will be selected from your wallet.

To keep the current behaviour, the default option is to never recycle Ethereum addresses (i.e. use a new address for each trade).