1. What is Monero?
Monero (XMR) is an open-source cryptocurrency whose protocol implements a number of techniques to anonymize transactions: stealth addresses, confidential transaction rings.
In Monero network, only participants of transactions and those who will be given a special access key know the amount, sender and receiver addresses.
2. Who, when, and how did Monero launch?
Monero was launched in April 2014 under the name BitMonero. The protocol was based on the code base of the CryptoNote and Bytecoin projects. The name was later changed.
The first mass implementation of CryptoNote was Bytecoin cryptocurrency. The project’s reputation was undermined by a pre-main, during which the developers kept 80% of the total issue. Led by Ricardo Spagna, some users created their own version of the coin with zero premain.
Almost all of the Monero developers use pseudonyms. Only two revealed identities – Ricardo “Fluffypony” Spagni and Francisco Cabanas.
The cryptocurrency ranks third behind bitcoin and Ethereum in terms of the number of developers, but only some of them write code on a regular basis.
3. What anonymization technologies are used in Monero?
In cryptography, “ring signatures” allow a member of the signer list to anonymously sign a message without revealing their identity.
Ring signatures in Monero include mixins (decoys) in the form of inputs/outputs of other people’s previous transactions in a transaction. They help to confuse the trail: you can’t tell exactly where in a transaction there are “impurities” and where there are real funds.
For a long time, the feature of adding impurities to transactions was unavailable, and then offered to be used optionally. Users ignored it. This allowed researchers to de-anonymize about 64% of all transactions made before September 2017.
Ring Confidential Transactions (Ring CT)
Confidential Transactions technology hides the time, payment amount, and participating addresses.
Ring Confidential Transactions was implemented in Monero in January 2017. Since September 2017, this feature became mandatory for all transfers. A minimum of 10 attachments are automatically added to the transaction.
Transactions in the Monero network are performed through unique, one-time “stealth addresses” that create sender wallets. Coins are sent to this address.
The addresses hide the connection between the sender’s address, the recipient’s address, and any other transactions/addresses.
The recipient will not lose anonymity by accepting multiple payments to the same address, since incoming payments will go through different stealth addresses.
Future implementation of the Kovri I2P protocol in Monero
The protocol is written in C++ based on I2P. It will allow all of a Monero user’s traffic (IP and other metadata) to be transmitted through anonymous volunteer nodes, similar to Tor.
The user discloses their IP address when making a transaction. Although it is not recorded in the blockchain, real-time network scanning will capture the IP.
4. What are Monero addresses, and what are the keys for?
Monero addresses consist of 95-106 characters and start with number 4.
Standard addresses (raw addresses) are the technical basis for sub-addresses and integrated addresses. They are useful for:
- receiving block rewards in the case of solo-mining, as other address types are not supported;
- Receiving payments from senders who bundle multiple payments into one (like mining pools).
Integrated address – an ordinary address with an identifier (ID) encrypted in it. It allows to distinguish between incoming transactions (in case of exchanges) and payments (in case of merchants).
A sub-address is generated using the standard address and provides the highest degree of anonymization.
Sub-addresses are stored in groups in so-called wallet accounts. Accounts can be assigned labels, such as “Mining”, “Trading”, and so on.
Keeping multiple accounts within a single mnemonic phrase (SEED) is handy when recovering a wallet. Also, you know exactly who sent you funds and for what. Create a new address for each incoming payment.
Two versions of the wallet are available for download: command line (CLI version) and GUI (GUI version, recommended for most).
5. Why are private and public address keys needed?
The public view key shows the stealth addresses related to the transaction.
The public spend key is used by the sender’s wallet to generate a public key for the stealth address.
The private view key is needed to view the address’s transaction information. If you share it, you allow another person to view the amounts and history of all incoming transactions. It will not display outgoing transactions correctly unless you also provide the key image associated with them.
A private spend key reveals all the information about the address and allows you to spend coins on it.
6. What are the advantages of Monero?
- Dynamic block provides low commissions and fast transaction confirmation in case of spam attack. If there is enough space in the block, there is no queue of transactions. The network monitors the number of transactions in the last 100 blocks. If there are more, the block size increases, but not more than twice the current size.
- Tail emission provides funding whereby a fixed mass of money ceases to be so over time. To compensate for “lost” coins and incentivize miners after May 2022, the network will be guaranteed to add 0.6 XMR every 2 minutes to the base money supply (of 18.4 million coins). Monero is programmed to gradually decrease the reward per block, similar to bitcoin.
- Multilingual mnemonic phrases (SEED phrases) are useful when detected by an intruder on a piece of paper. Even an experienced thief (or investigator) may not guess that it is SEED if the words are not written in English.
7. How easy is it to attack Monero?
In 2019, researchers discovered the “Janus attack.” Let’s imagine you have two sub-addresses in your Account. They are also available in public forums.
You don’t want one of the addresses associated with you, while a certain person wants to prove that connection. To do this, he arranges a transaction with you and then sends the payment to the wrong address. If you fail to notice that the payment came to the wrong address and acknowledge receipt, you will expose yourself.
There is also a transactional flood attack. It consists of sending a huge number of small transactions to compromise the anonymity of other users through impurity control. The cost of the attack is estimated at $1.7 million,
8. What prompted the delisting of Monero on a number of exchanges?
Under pressure from the FATF and local regulators, exchanges are removing anonymous cryptocurrencies from their listings in an attempt to ensure legal compliance.
Monero lacks the ability to de-anonymize transactions even with tools like Chainalysis and Crystal Blockchain, preventing exchanges from getting rid of gray capital.