Monero (cryptocurrency)

Monero was created in April 2014 by seven people, including Riccardo Spagni. The cryptocurrency promotes privacy, decentralization, and scalability. Monero can be run via runs on Windows, MacOS, Linux, Android, and FreeBSD. Monero uses a public ledger called a blockchain to record transactions and Monero coins (XMR) are created through GPU and CPU cryptocurrency mining.

Monero was originally launched on April 18th under the name Bitmonero.

Unlike most cryptocurrencies today, Monero is based on the CryptoNote protocol. The CryptoNote whitepaper was originally written by pseudonymous author Nicolas van Saberhagen in 2012 and updated in 2013. The protocol only allows the approximate amount of a transaction to be known, while the origin, destination, or actual amount remain hidden. Though Monero allows a hidden trace of every transaction made, their users still have the privilege to share certain information selectively. All Monero accounts have their own distinctive view key which allows users to check a specific account’s transactions.

Monero uses a more complex scheme digital signatures called ring signatures, as opposed to EDSA signatures used by many other blockchains. The ring signatures may contain the public keys of multiple individuals, one real signature and a number of other signatures known as mixins. A transaction or statement signed with a ring signature proves that one of the members of the group provided a private key for the digital signature, however the details on which specific individual provided the digital signature remains impossible to establish.

Diagram of a Ring signature. Source: Cryptonote.org

Initially, it was possible for Monero users to trace the amount being transferred while keeping the sender and the receiver hidden. The RingCT update obscured both the value of individual transactions, along with the identity of senders and recipients.

Every address for payments in CryptoNote protocol are one time usage. This makes the tracing of the movement of funds through addresses much more difficult. The ambiguity built into the ring signatures means that any member of the ring signature group could be responsible for the transaction, in addition to the one time only use of the transactions, creates a tree structure with extremely high numbers of possible paths the transfer of value could have taken.

Ambiguity in transaction path. Source: CryptoNote.org

Practical vulnerabilities in the privacy guarantees of Monero transactions have been highlighted by researchers. Taking advantage of Monero's mixin sampling strategy, researchers estimated that traceability analysis would be able to guess the real input from the mixins with approximately 80% accuracy. Prior to February 2017, the Monero protocol allowed users to choose the number of mixins and did not enforce a minimum number, resulting in transactions using 0 mixins which are similar to bitcoin transactions. Thus these transactions, and any transactions which utilize these as mixins do not have robust crypto analysis resistance.