What is Monero?

Monero is a cryptocurrency aimed at safeguarding personal data using the CryptoNote protocol. Monero can be put on a par with such coins like Dash, AnonCoin, and LibertyCoin - all of them are fighting for the maximum anonymity of transactions.

CryptoNote represents a unique code and is not a fork of bitcoin. CryptoNote uses ring signatures to hide personal data along with untracked transactions, which is achieved by using one-time keys for each transaction.

CryptoNote should not be confused with CoinJoin. Although both technologies are designed to maintain user anonymity, these are two completely different implementations.

The launch of Monero took place in April 2014 under the name BitMonero. The protocol is based on the code base of the CryptoNote and Bytecoin projects. Later the name was changed.

• The CryptoNote protocol was introduced in 2012 by the developer Nicolas van Saberhagen. He described CryptoNote in the CryptoNote v 1.0 White Paper and CryptoNote v 2.0 White Paper.
• The first mass implementation of CryptoNote was the Bytecoin cryptocurrency. The reputation of the project was undermined by the premine, during which the developers retained 80% of the total issue. Led by Ricardo Spagni, some users created their version of the coin with zero premine.
• Almost all Monero developers use aliases. Only two revealed their identities - Ricardo "Fluffypony" Spagni and Francisco Cabanas.
• Cryptocurrency is in third place after bitcoin and Ethereum in terms of the number of developers, but only some of them write code on an ongoing basis.

What is the difference between Monero and Bitcoins?

There is a common misconception that bitcoin transactions cannot be tracked. The very idea of Bitcoin is that all transactions can be viewed in a kind of public registry - blockchain. This is convenient when you need to check whether a transaction has passed, especially if everything should be transparent (for example, during operations of state or non-profit structures). Blockchain Monero uses a different type of technology so that transactions are not tracked, and the balance remains hidden. 

Knowing the address of your Bitcoin wallet, anyone can view your balance and all the other addresses you have ever interacted with. Even if no names are indicated on the blockchain when someone shares his address publicly, all activity associated with this address will forever be associated with this person. For someone to calculate your address, it’s not even necessary to publish it — you can figure out which address belongs to you based on transactions involving other “illuminated” wallets. For example: below, you can familiarize yourself with all transactions and the wallet balance used for WikiLeaks donations.

The problem with public transactions

Although organizations that require transparency can safely demonstrate their transaction history, the same cannot be said of all individuals and companies. Imagine that everyone can view all your bank accounts and transactions. Perhaps you would not want the whole world to know how much you earn and spend. Confidentiality of finances has become especially urgent after a series of high-profile leaks of credit card data over the past few years. You may not want each store or website where you shop to store this information. Monero protects personal information and, by default, hides transaction data from the outside world.

Stealth addresses

Similar to the explanation of Bitcoin's proposed solution, Monero hides addresses behind disposable, which are then destroyed, so that the transaction cannot be traced to a public address. The technology of Monero transacts using ring signature technology. They “mix” transactions of one person with others in a certain way, so it’s not clear from the outside which the addresses belong to. Monero also hides balances through hidden disposable addresses that are randomly generated and not tied to a specific person. 

Also, Monero employs a “spend key,” which is used to spend money, and a “view key,” which the user can share at his discretion to provide access to certain people. Optional transparency is important in some situations: for example, an audit or declaration of income. The presence of two keys allows a third party to view transaction information without access to funds.

Using Monero to Transfer Money

• The dynamic block provides low fees and fast transaction confirmation in the event of a spam attack. If there is enough space in the block, there is no queue from the transactions. The network monitors the number of transactions in the last 100 blocks. If there are more of them, the block size increases, but no more than twice the current size.
• Tail emission provides financing in which a fixed money supply ceases to be so over time. To compensate for the “lost” coins and to stimulate miners after May 2022, the network will be guaranteed to add 0.6 XMR to every 2 minutes to the base money supply (18.4 million coins). Monero is programmed to reduce the block reward by analogy with Bitcoin gradually.
• Multilingual mnemonic phrases (SEED phrases) are useful when an attacker detects a piece of paper. Even an experienced thief (or investigator) may not realize that it is SEED if the words are not written in English.

Ring Signatures

In cryptography, a "ring signature" allows a member of a list of signatories to sign a message without revealing an identity anonymously. Ring signatures in Monero include impurities (mixins, decoys) in the form of inputs / outputs of other people's transactions completed earlier. They help to confuse the traces: it is impossible to determine exactly where in the transaction there are “impurities” and where are real funds. 

For a long time, the function of adding impurities to transactions was unavailable, and then it was offered for use optionally. Users ignored her. This allowed researchers to deanonymize about 64% of all transactions made before September 2017.

Ring Confidential Transactions (Ring CT)

Confidential Transactions technology hides time, payment amount, and participating addresses. Ring confidential transactions were implemented at Monero in January 2017. Since September 2017, this feature has become mandatory for all translations. At least 10 impurities are automatically added to the transaction.

Future implementation of Kovri I2P protocol in Monero

The protocol is written in C ++ based on I2P. It will allow the transfer of all Monero user traffic (IP and other metadata) through the sites of anonymous volunteers, similar to Tor. The user discloses his IP address when making a transaction. Although it is not written to the blockchain, real-time network scanning will fix IP.