Of all the cryptocurrencies on the CoinMartketCap, Monero certainly cannot go unnoticed. With the XMR ticker, Monero occupies the twelfth position on CoinMarketCap. It is often referred to as a privacy coin due to its function of protecting anonymity.
It’s a cryptocurrency born to solve the problems of privacy and thus ensure the anonymity of transactions and wallets. This is not always possible with other currencies, such as bitcoin (BTC).
Currently, Monero is one of the most interesting coins both for the miners and for those looking for a means of payment that can ensure high privacy. Precisely for this reason, Monero continues to hold an important role within the crypto world.
Monero originated from ByteCoin
Monero was born in April 2014 and is still based on the CryptoNote protocol with the necessary project-specific tweaks. Like ByteCoin, XMR was one of the first coins based on this protocol focused on the total anonymity of the parties involved in the transactions.
In fact, Monero was born from a fork of the ByteCoin cryptocurrency. ByteCoin had been almost abandoned at that time and had already been widely mined, arousing little interest from the market. Precisely for this reason, the two coins initially had a good part of the code in common.
However, after a first phase in which the project initially called BitMonero seemed destined to die, the community, led by Riccardo Spagni, decided to improve and evolve Monero, solving some of the problems found in the original ByteCoin, moving further and further away from its origins.
CryptoNote protocol and BulletProofs for privacy
The key features of Monero for ensuring anonymity are derived from the CryptoNote protocol. In particular, privacy is guaranteed by the use of Ring Signature and the modified implementation of Diffie-Hellman, in combination with many other protocols.
The Ring Signature provides that all transactions are signed on behalf of the group to which the individuals belong. In this way, during the verification process, it is practically impossible to identify the source since all the signatures of the members of the group are indistinguishable from each other.
In addition, to help with privacy, to guarantee that no one can identify the users through transactions, each time a transaction is executed the addresses are regenerated. Thus, they are always different, even though they are associated with the same entities. This mechanism was introduced thanks to a new version of the Diffie-Hellman protocol.
Furthermore, in order to avoid that the receiver of a transaction can recognise the sender and to prevent the quantity of Monero transferred from being visible to all, in January 2017 the Ring CT was also introduced.
Ring CT is an application of Ring Signatures to transactions. In this way, no one can verify the quantity, except the sender and the recipient. An additional system, Kovri, has been added to it so as to guarantee an additional layer of untraceability by exploiting the I2P.
Monero was also the first cryptocurrency to introduce Bulletproofs. With the fork which took place in October 2018, Monero introduced this very important protocol aimed at improving not just privacy itself, but the size issue (in terms of memory) of the Confidential Transactions on the blockchain.
The fork was used to move from Range Proofs, used for verifying the inputs and outputs of the Confidential Transactions, to the BulletProofs, allowing a significant reduction in memory use by transactions performed on the XMR blockchain.
Range Proofs scale linearly with respect to the number of outputs and bits in the verification range (currently 64 bits). This causes a large use of memory within the transactions, resulting in higher fees and more space occupied on the Monero blockchain.
BulletProofs, invented by Benedict Bunz and Jonathan Bootle, allow managing the verification mechanism of confidential transactions in a more efficient way. BulletProofs, in fact, are short non-interactive zero-knowledge proofs that do not require a reliable configuration, as is the case with the alternative SNARK solution adopted by ZCash.
Unlike Range Proofs, the size of BulletProofs scales logarithmically (O(log(m))) with the size of the interval and the number of outputs. This, in the case of a confidential single-output transaction performed on Monero’s blockchain, allows the transaction size to be drastically reduced, from 13.2 kB of Range Proofs to only 2.5 kB of BulletProofs.
This is an 80% reduction in transaction size, which translates into a reduction in network fees. In addition, if multi-output operations are performed, the results are even more significant.
Supply, wallet and mining
There are currently 17.2 million XMR in circulation. Monero can be produced by mining and uses the CryptoNight mining algorithm in a variant modified every six months in order to boycott ASICs and FPGAs. As such, the cryptocurrency is only mined by CPUs and GPUs, although to make a profit it is necessary to rely almost exclusively on GPUs.
Next autumn, Monero will probably switch to the new PoW RandomX, which could make CPUs competitive in mining again.
There are several wallets that support Monero, including Exodus wallet. For iOS devices, it is worth mentioning the CakeWallet mobile wallet, while for Windows, Mac and Linux there is an official wallet.