Monero cryptocurrency (XMR) ranks 13th in CoinMarketCap's ratings, but its market value is far from the main feature attracted by users. The anonymity of transactions is what Montero offers in the first place, bearing in mind a number of advantages over Bitcoin.
But is everything so smooth with the stated features of XMR? Can this coin really be considered a solution for those who want to hide a certain part of their network activity from prying eyes?
In the material below, ForkLog responds to some of the most important issues arising from the community, and also recalls the key milestones in the history of this cryptanalysis.
Monero – start
To understand where Monero derives, we must first turn to another cryptivalation called Bytecoin. It was launched in the summer of 2012 and became the first digital currency using the CryptoNote technology.
A key feature of this technology is the use of ring signing technology – cryptographic reception, causing several public keys to be combined in a single transaction. This ensures that the same anonymity – becomes impossible to determine the sender of the transaction.
Bitecoin may be a good attempt to understand anonymity in encryption, but the project has faced other problems, especially in the area of initial coin distribution. So, it turned out that 80% of all coin editions during the launch already existed.
As a result, a group of seven programmers decided to call Bytecoin, and in April 2014 a new cryptography called Bitmonero appeared. Later, it was abbreviated to Monero, which means "coin" in Esperanto. Of the seven developers who stood at the project's source, five, including the founder of thankful_for_today, decided to retain anonymity from the start; the other two, whose names are known, are the leading investor Ricardo Fluffoni Spanja and David Latapi.
Keep in mind that in the first months of Monero, only the users of the command line were available to users. At the request of the community, developers began working on a graphical user interface (GUI), but these plans were revised after a sophisticated hacker attack was launched in the Monero network in early September 2014. As a result, developers had to re-examine the priorities and, in order to increase network resistance against attacks, spent most of their time on code-base.
However, by the end of 2014, Ricardo Spaniard has still launched the MyMonero wallet, which is now available not only in the web version, but also on platforms like MacOS, Windows and Linux, and in the form of a mobile application for iOS.
What distinguishes Monero from other cryptographies
Like many other cryptoworks, Monero is an uncensored, decentralized open source project. However, there is what distinguishes it from others, and above all, the privacy of transactions.
Thanks to the CryptoNote algorithm, it is not possible to link the sender or transaction recipient to a particular person, making Monero a favorite coin from those concerned with privacy issues. The reasons why this happened are not always legitimate, although in many cases the desire to preserve the confidentiality of transactions is justified – from financial issues to unwillingness to publish certain aspects of your personal life.
Another important feature of Monero, which is also directly related to privacy, is the exchangeability of coins. To understand what this is, let's turn to Bitcoin as an example. As you know, all transactions in the Bitcoin network are recorded in a public block (blockchain), which is available to any person at any time. And if it is not always possible to identify the participants in the transaction, then at least there is the possibility to follow the movements of each coin.
In practice, this can lead to a situation where the user, by selling some legitimate products or services and receiving payment for it in battles, then finds that these coins previously participated, for example, in a drug sale transaction. For many, this is not a problem, but there may be situations where the next recipient will want to refuse such "tagged" coins. And this is not at all a property that by definition should be inherent in money. One dollar, for example, should be equivalent to one dollar anywhere in the world, where it has not been used before, and the same should apply to encryption.
And if Bitcoin developers have been working on this problem for many years, creating CoinJoin coin-changing services, Monero has been using this feature from the start.
Another area where Monero differs from Bitcoin is scalability – the ability of network growth depending on demand. For example, until recently, the size of a bitcoin block was limited to 1 MB, that is, one block every 10 minutes could include up to 1 MB transactional data. With the activation of the SepEGit Witness (SegWit) protocol in August 2017, this limit was increased, however, scalability remains one of the most important issues for Bitcoin.
Limited scalability also means that during periods when many users want to send transactions at the same time, there is network congestion. Transactions simply do not fit into one block, and users need to wait for miners to include them in the next block. It also often forces users to pay higher fees, hoping that their transactions will get priority. Such a situation, for example, at the beginning of 2017, when Bitcoin users simply had to pay more than $ 30 for checking transactions.
Monero from this point of view is different in that there is no predefined block size limit. This allows you to include more transactions in the extracted blocks, although theoretically this approach has its drawbacks, allowing you to spam the network.
To prevent this, the crypto-developers introduced a system of penalties: for example, if the block size exceeds the average of the previous 100 blocks, the reward received from the miner is reduced. Thus, the miners have created an economic incentive to prevent the creation of too large blocks. At the same time, the reward for the block found can not be less than 0.3 XMR, making Monero a deflationary currency, and also giving miners enough to continue to mince the coin and maintain network security.
ASIC mining counteraction
The "Monero" network included modification of the work-based consensus algorithm, focused primarily on mining graphs. For this reason, crypto-developers do not hide the desire to limit the possibility of mining using ASIC devices.
In this regard, the story that happened in the spring of 2018 is very indicative. Thus, in mid-March 2018, one of the largest mining equipment manufacturers, Bitmaine, unveiled the new ASIC Miner Antiminer X3 for crypto-accuracy based on the Kryptonite algorithm, but only three weeks later, in the Monero network, it aimed to cope with these devices.
Shortly before, Ricardo Spanjski emphasized that in order to avoid centralizing control over the network, developers alter the consensus algorithm used every six months. At the same time, if the development, production and delivery of new miners on the market last for at least 5 months, the PoW algorithm can be changed in just 3 months, therefore, in his opinion, Monero developers will always be in front of potential monopolists.
It takes at least 5 months for designing, recording and downloading ASICs. We can not change the network.
– Ricardo Spanja (@fluffypony) March 15, 2018
This developer's approach also means that Monero is likely to continue to be one of the most centralized coins.
Another hardware, which aims to combat the mining of ASICs, was implemented in March 2019.
RingCT, Bulletproofs and Address Quiz
Ring confidential transactions are a signature system proposed by ShenNether and Adam McKenzie. The technology is adapted to work with ring signatures, enabling, in particular, to hide the transactional amounts, and is based on the study of confidential transactions, the concept of which was first proposed by Blockex CEO Adam Beck and developed by Bitcoin Core developers Gregory Maxwell and Peter Vele.
RingCT technology was activated in the Monero network in January 2016, and if its use was optional at first, then from September 2017 it would be impossible to bypass RingCT after the following scheduled hard forks.
This technology was improved in October 2018, when the Bulletproofs protocol was activated as a result of the next hard-core. It was not just an addition to RingCT technology, but also helped significantly reduce network commissions.
Another important feature of Monero is the use of the so-called. hidden addresses (hidden addresses).
Hidden Addressing is a method by which the sender can assume the recipient's public address and turn it into a one-time address in such a way that:
- It is publicly impossible to determine the origin of the original public address;
- It is publicly impossible to connect to any other address that interacted;
- Only the recipient can link all of their payments together;
- Only the recipient can get the secret key associated with a one-time address.
- Using a skeletal address, the recipient can publish an address and receive an unlimited amount of public payments on it, which can not be traced.
At the same time, as noted by TheFuzzStone, the likelihood of collision, or the situation in which two cache addresses are the same, is cryptographically meaningless.
Monero and dark
For a while, many merchants of illegal goods of darkness gave absolute preference to Bitcoin, because the history of Silk Road and the crypto-sales auctions withdrawn as a result of closing this platform clearly speaks. However, quite quickly realizing that "digital gold" does not give real anonymity, they began to direct their attention to Monero.
Thus, in February 2018, the analytical company Recorded Future presented a report according to which Western users of darkness increasingly use Monero. It is worth mentioning that their Russian "colleagues", as researchers say, prefer Litecoin, whose anonymity can also be claimed.
"It's absolutely logical that Dark Network resources are beginning to use Monroe. This is more secure than in the case of a bitcoin blockade because bitocin transactions are publicly available, you can see them, – said in August 2016 Tyler Moffit from the cyber security company Vebro.
By the way, in the same year of 2016, when many well-known platforms for darkness began to report on Monero support, the coin grew rapidly and climbed to the Top-10 CoinMarketCap.
At a certain stage, even the US Federal Bureau of Investigation (FBI) has dealt with this issue, saying that the growing popularity of HMP could lead to changes in the methods of conducting investigations.
In fair, it should be noted that Bitcoin remains the most popular method for calculating the darkness today, while Monero, according to the latest estimates, accounts for about 15-20% of transactions.
Declared anonymity – is it so simple?
Although Monero is often called the "opaque queen", in March 2018, a group of researchers from a number of leading universities in the world released a report pointing to a number of shortcomings in the XMR mixing algorithm, thanks to which individual transactions can be monitored. In this case, the problem applies to anyone who has ever used the system.
In particular, they spoke about two weaknesses associated with the mixing mechanism to hide the source of payment. According to researchers, the situation was particularly bad until the update, published in February 2017. Transactions performed to this point were called very vulnerable, however, after the upgrade, the payments made, they say, do not provide the reliability reliant on the users of crypto-currency.
"People tend to be simpler, so they think Monter's transactions guarantee their anonymity. In fact, there are open information that is not encrypted over the network, – said one of the authors of the report and advisor to the development team of another anonymous crypto Zcash – Andrew Miller of the University of Illinois.
The detected vulnerability helped establish a sender, not their recipient – to hide the address of the latter in Monero, using the aforementioned stealth-address technology. In addition, it assumes certain scenarios in which the user can be identified, not only in theory, but also in practice.
For example, when the summer of 2017, AlfaBay, the largest network of darkness, was closed, all data on transactions made within seven months, when the Monterey network was to be the most vulnerable, was available to the police.
Commenting on the vulnerability discovered, Ricardo Spani admits that Monterey developers have been aware of these problems for many years and are constantly working to improve the code.
"Confidentiality is not achieved once and for all, it is a constant struggle between the shield and the sword," – He then said.
Regarding the identification of users through timestamps, Spanja was also forced to admit that this problem does not have a simple solution.
"There are measures that can be taken to make it difficult to track, but this is a problem that can not be solved by simple repairs. We need a new scheme that will allow us to use more coins in the mix" – he said.
This, however, leads to another problem: the more coins are used in each transaction, the more space users' computers will be occupied by Monero's blocker data and the longer the transactions will be processed.
"We are trying to find a balance," – said Spanja.
In any case, most monitors should be those Monero users who have used the system during the presumed maximum vulnerability, since all traces of their activity are recorded in the block. It also leads to a common fundamental problem for all crypto-invasions: any vulnerability discovered in the future can be used based on existing data, allowing interested observers to retrieve practically all old skeletons outside the closet. Privacy, talk?
What to expect next
It is undoubtedly that Montero is an extremely important and revolutionary technology, which in the "field conditions" has proven to be worth and deserves the status of "digital money" rightfully. However, with its own problems, including hidden mining, it will inevitably be modified, and the most important such change can be the transition to a new PoW protocol called RandomX.
Its development is carried out by the developer of the decentralized Internet Arveave, but the final decision on this issue has not been made at the moment, and everything will depend on the results of the protocol audit.
It is also quite unusual to follow the Tari project, which includes Ricardo Spanja. Tari is claimed to be a digital asset protocol, which is actually Monero sidechain, which will focus on "unique features" tokens that contain their own information (for example, points of loyalty or virtual goods). Also, developers note that their protocol will allow digital asset issuers to participate in the secondary market.
Returning directly to Monero, in April 2019, Ricardo Spanjay expressed confidence that the crypto currency would continue to exist and that those who really need a higher level of financial privacy would choose XMR in their transactions.
At the same time, he agreed with the opinion of other industry representatives, saying Bitcoin could become a global reserve currency. Ricardo Spagni also noted that the first cryptoavailability is largely adequate to the level of anonymity, and solutions such as the Lightning Network will allow it to be effectively reduced.
All this gives hope that the future will not be bored at least. However, there are no boring days in the world of cryptography.
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