Monero Quick overview

Introduction

Since Monero takes decentralization and the general idea of “governments can’t intervene” to a whole new level it is often considered the gold standard of privacy among cryptocurrencies. Monero’s biggest focus is on being an untraceable digital currency. Unlike Bitcoin or Ethereum, Monero obfuscates all information on the blockchain with cryptography. Transaction amounts, senders’ and receivers’ addresses they are all hidden. This is the default and only mode of operation, which means that no Monero user can undermine the privacy of other users.

In development since April 2014, Monero’s core team included seven people, but since it is an open source project, it had many people add to it over time. Monero didn’t have any ICO (Initial Coin Offering) and wasn’t premined. The emission of Monero is divided into two phases; the main emission includes about 18 million coins which will be mined by May 2020. Afterwards, the tail emission kicks in, locking the reward rate at 0.6 XMR per 2-minute block, leaving the inflation rate at around 1% a year.

In the future, Monero aims to further increase its security by reaching the milestone dubbed the Kovri project. Kovri aims to create a protected overlay-network across the internet, allowing users to effectively hide their geographical location and internet IP address. It is based on the open-source decentralized and encrypted communication protocol I2P (somewhat similar to TOR and Onion routing).

Influencers

Riccardo Spagni https://twitter.com/fluffypony

One of the seven core developers and one of the two who publicly revealed their identity. Riccardo has an extensive business experience and understanding of cryptocurrencies, cryptography and software development.

Francisco "ArticMine" Cabañas https://www.reddit.com/user/ArticMine

Has been researching and investing in cryptocurrencies since 2011. He holds a PhD in Physics, has an extensive business and non-profit experience and focuses on the economic, social, regulatory and long-term viability aspects of cryptocurrencies.

Technology

Fungibility

In short, fungibility means that any two currency units of the same size can be mutually substituted for each other. Monero is fungible because the currency provides no way to link transactions together or trace the history of any particular XMR. This is in stark contrast to Bitcoin and most other cryptocurrencies with an open blockchain. Some large Bitcoin companies were blocking, suspending, or closing accounts that have received Bitcoins used in online gambling or illegal activities - without the receiving party’s knowledge. Monero has been built specifically to avoid this problem by having transactions private.

Stealth Addresses (Recipient Privacy)

Stealth addresses are random one-time addresses created for every transaction on behalf of the recipient of XMR. While the recipient has a single public address, every transaction goes to a different unique address on the blockchain and transactions thus cannot be linked to the receiver.

Ring signature (Sender Privacy)

Ring signature is a type of digital signature which uses a group of people to sign on a transaction. It is nearly impossible to determine which of the group members’ key was used for the signature.

Ring Confidential Transactions (Amount obfuscation)

Was a modification to the original CryptoNote protocol implemented by January 2017, which hides the amount sent in a transaction. Based on Confidential Transactions from Bitcoin but used with ring signatures.

Advantages

• Complete privacy and an anonymous blockchain
• Untraceability of the coin
• Hidden amounts of transactions
• Scheduled hardforks
• CryptoNight PoW, an ASIC-resistant algorithm
• Dynamic blocksize
• Dynamic fees

Disadvantages

• Rate of Blockchain growth
• Smaller and slower adoption of the crypto

Whitepaper

While Monero does not have its own whitepaper, the currency's technical solution is based on CryptoNote. The CryptoNote's whitepaper examines Bitcoin's POW algorithm, hardcoded constants, irregular emission and other shortcomings of Bitcoin and presents how CryptoNote is tackling these with the egalitarian “one-CPU-one-vote” CryptoNight algorithm. The basis of Monero's security and privacy is explained in technical detail, so if you want to learn more about ring signatures and how transactions are made untraceable, the whitepaper has all the answers.

Real examples of use

Monero has fewer real uses compared to Bitcoin and bitcoin-based currencies. There aren’t any Monero ATMs at the moment, it will take some time for Monero to be integrated into hardware wallets, but the developers community is already working on it. The most prominent use of Monero may very well stay with drug dealers on the darknet, although the governments are doing their best to spread Monero among ordinary people that just don´t want to be spied.

Technical Analysis

Monero forked from Bytecoin in April 2014 and has been praised by Bitcoin core developers. The proof of work algorithm that Monero uses is called CryptoNight - its core values are privacy and egalitarianism. It’s coming back to the original Satoshi’s vision of “one-CPU-one-vote”, by combining memory-heavy Scrypt-like function with advanced hashing functions. Combining CPU and GPU mining makes CryptoNight resistant to both ASICs and fast memory-on-chip devices.

Fundamental Analysis

Many key features (the hashing algorithm, block time) have been announced in advance to be subject to changes. This flexibility makes Monero an adaptive currency ready to deal with problems of scalability and new discoveries in the future.

Monero has been showing a strong development over the course of its four-year existence and the upcoming features show big ambitions in terms of security, speed and scalability.

The development is completely decentralized, making it highly unlikely to be shut down by any central authority or legal decision.

Conclusion

With its clear mission and focus on privacy and anonymity, Monero has gained a significant following and an avid community. During its four year history, there haven’t been any major issues, and the security error inherent to all CryptoNote-based cryptocurrencies was quickly fixed. Even though all transaction information is anonymous and confidential, nobody is able to double spend, because every signature contains a key image, which is a one-way cryptographic function, a fingerprint of the secret key, which cannot be used to trace to the corresponding user however.

Monero is by far the leader in untraceable and private cryptocurrencies, with a strong community of users and developers and continued development. Monero also has its academic Research Lab and collaborates with cryptocurrency experts from other cryptocurrencies.

Roadmap

The next steps of Monero include specific features such as subaddresses and multi-signatures and the release of the Kovri communication layer which will further increase its security and privacy. The nearest future is dedicated to further research and addressing the looming problems of speed, scalability and transaction sizes.