Monero: Completely Anonymous Decentralized Payments
Monero is a completely decentralized, anonymous cryptocurrency that was created in mid-2014. Monero uses an obfuscated ledger, resulting in completely anonymous transactions (different from a public ledger cryptocurrency like Bitcoin). Monero is a descendant of Bytecoin, and more distantly Bitcoin.
Technology
The coin was built on the CryptoNight proof-of-work algorithm, on top of which an obfuscation protocol was created. Because of the anonymity of the algorithm each coin is fungible, meaning coins are completely substitutable with one another; on public ledger networks like Bitcoin, coins previously associated with malicious activity can be blacklisted and refused by other parties.
Part of what makes this anonymity possible is ring signatures — basically anybody within a group of users can provide a digital signature to a transaction, but it’s impossible to know which specific user within the group provided it.
Since Monero masks the inputs from a transaction a new issue arises — double-spending. This issue is addressed by the use of key images which are unique keys attached to each ring signature and generated by the output being spent. Since key images are protected by cryptography it’s impossible to determine from which output they’re derived from. This allows miners to verify that no output has been spent twice.
Monero also uses stealth addresses, which further process the sender/receiver identities of a transaction from everybody except the parties involved.
Monero is often compared to ZCash, which is also a well-regarded means of transacting with complete anonymity. ZCash however is a public ledger with private addresses and transaction amounts, with the option to not remain private. This protocol is called zk-SNARK, and makes it more obvious (and public) to prove the integrity of the network, despite transactions being fully encrypted and private. The key outcome of this is the option to shield your transaction, whereas Monero transactions are always shielded and private. Therefore on the ZCash blockchain you can only trace a coin back as far as its last encrypted transaction, essentially providing the option for ZCash users to make the coin as fungible as Monero (if they want it to be).
If you’re interested in learning more on the underlying algorithms that differentiate privacy coins, here is a great article that breaks down the differences between Monero, ZCash, Dash, and other privacy coins.
Mining Monero
Miners of Monero have long cherished it for its fair, egalitarian nature in that it is designed to be ASIC-resistant and has fairly steady mining output, even for relatively civilian GPUs. To help increase ASIC resistance, Monero typically executes hard forks every 6 months, slightly altering and improving the algorithm. Because of this, specialized ASICs that were specifically designed to mine certain algorithms are rendered useless, returning mining power to CPUs and GPUs.
The thought process that drives this line of thinking that many development teams also subscribe to is that ASIC miners create more mining centralization and pushes out commodity hardware miners. Bitmain ASICs (before the Monero hardfork) were ~220x more powerful than a commodity GPU, and 40x more energy efficient. In theory, Bitmain could have the ability to launch a 51% attack if their ASICs continued gaining market share unhindered, although given the vast difference in hashing power of commodity GPUs vs. ASICs (GPUs on a gross basis have significantly more hashing power), an attack such as this is very unlikely. If the Monero team continues on the current schedule of biannual hard forks, they will occur every March and September.
Although being ASIC-resistant for now is the best course of action in the opinion of the Monero team, core developer Riccardo Spagni has admitted that this isn’t sustainable long term, as he tweeted below:
Whatever your stance on ASIC-resistance, it’s clear that Monero is a top-tier privacy coin, and one that is here to stay. Monero was added as the 5th coin in the Luxor network, and is a 1% True PPS pool. Click here to join Luxor’s Monero pool! For more info on PPS pools, click here.
Happy hashing!
