Bitcoin and Ethereum, both based on blockchain technology, function in different ways on many levels, including how they use and generate addresses.
In Bitcoin, each time you carry out a transaction, you “sign” it using your private key. This indicates that you alone authorize the transaction. Theoretically, if someone intercepted multiple transactions and reversed-engineered the signing process, they might be able to decipher your private key. That’s why it’s recommended to use a new address for each transaction: this limits the amount of data available to an attacker trying to decipher your key. Also, Bitcoin’s design is pseudonymous, not anonymous. All transactions can be traced back through the blockchain. By using different addresses for each transaction, you make it harder for someone to track your Bitcoin activity.
On the other hand, Ethereum uses an account-based model instead of Bitcoin’s UTXO (Unspent Transaction Output) model. In Ethereum’s model, you have a single account (or address) that holds a state like a bank account. You can send Ether from one account to another, and the state of both accounts changes. This differs from Bitcoin’s approach, where each transaction generates a new output that gets spent. Moreover, Ethereum implements state transitions in a way different from Bitcoin, meaning that privacy and security concerns applicable to Bitcoin do not directly apply to Ethereum.
However, this does not mean that Ethereum’s transactions are completely private. All transactions can still be traced on the blockchain, and it is possible to analyze transaction patterns to identify users. Ethereum addresses also reuse the same public key for each transaction, but the difference here is that cryptographic security in Ethereum’s design significantly complicates deriving the private key from multiple signatures. It’s a good practice to use different addresses if you’re concerned about privacy, but for most users, it’s more convenient to have a single address.
Ethereum also has privacy-focused solutions like Zether and Tornado Cash. These technologies use ZK-Snarks technology, which allows transactions to be verified without revealing information about them, enhancing privacy on Ethereum.