- Monero (XMR) is a Proof-of-Work cryptocurrency, which started in 2014. Its focus is on privacy, security, and untraceability. It relies on private and censorship-resistant transactions and aims to supply “fast, inexpensive payments to and from anywhere within the world”.
- Through the utilization of ring signature cryptography and other features like stealth addresses, Monero aims to form transactions both private and anonymous, hence solving a number of the problems of huge PoW cryptocurrencies like Bitcoin, lack of fungibility and transaction traceability .
- It also focuses on ASIC-resistance. Since December 2019, RandomX has replaced CryptoNote, deprecating the necessity for biannual upgrades.
- Monero is community-oriented with quite 30 active core developers, supported by community developers along side a search lab (named Monero’s Research Lab).
- Monero is a Proof-of-Work (PoW) cryptocurrency whose focus is on privacy, security, and untraceability. Its first block was mined in 2014.
- Its focus relies on private and censorship-resistant transactions through the utilization of ring signature cryptography and other features like stealth addresses.
- Monero also focuses on ASIC-resistance because of the utilization of the RandomX algorithm. before that, Monero had biannual network upgrades: these hard forks were intended to upgrade Monero’s PoW hashing algorithm (CryptoNote).
- Monero is community-oriented with quite 30 active core developers, supported by community developers along side a search lab, named Monero’s lab .
Monero was developed with four core principles:
- Network decentralization with the utilization of a distributed ledger and nodes spread across the planet along side “domestic miners” not counting on ASIC mining farms.
- Financial security through the utilization of cryptographic functions and no point of failure within the system.
- Financial privacy with ring signature cryptography and stealth addresses that protect the privacy of both the sender and recipient along side amounts transacted.
- Fungibility i.e., one XMR always adequate to one XMR because the origin of every individual moneroj is supposedly untraceable.
2. Monero’s key features
Monero may be a Proof-of-Work (PoW) cryptocurrency, supported the RandomX algorithm, and relies on different privacy features like Ring Confidential Transactions (RingCT) to stop non-transacting parties from distinguishing between individual transactions, and stealth addresses to take care of the confidentiality of transacting parties.
Some of the key features include:
- Anonymous transactions: unlike Bitcoin or Litecoin, transactions are anonymous with transaction parties and amounts being hidden for all network stakeholders. Anonymity relies on RingCT transactions and therefore the use of stealth addresses.
- Dynamic block-size: the blocksize cap may be a function of the past block sizes which ends up in greater blocksize, containing more transactions when network activity picks up. Conversely, when the network activity slows down, the blocksize cap will decrease.
- ASIC resistance: through regular network updates, Monero relies on GPU/CPU mining pools so as to supply greater decentralization at the mining level.
2.1 Ring confidential transactions (RingCT)
Ring Confidential Transactions (RingCT) hide the quantity of XMR being sent during a unique transaction. Specifically, only coinbase transactions display the quantity of XMR so as to let everyone confirm that mining rewards are accurate.
Ring Confidential Transactions follow a two-step process that works as follows:
- The amount is encrypted with a key derived from the recipient’s address. This encrypted amount can only be decrypted by the recipient.
- The amount is integrated into a Pedersen commitment, allowing all Monero users to verify the validity of the transaction. Whereas it’s impossible for them to verify the precise transaction amount, outputs and inputs are often independently verified to verify whether or not they match.
2.2 Stealth addresses
Stealth addresses are often interpreted as unique single-use addresses. One-time addresses are employed by both the recipient and therefore the sender. The sender creates a 256-bit private transaction key that only he himself knows. This number is multiplied by the recipient’s public address. The output index is then added to the present value before it gets hashed through the Keccak-256 algorithm.
Finally, the result’s multiplied by the ed25519 basepoint, before being added to the recipient public spend key. the ultimate result’s the stealth address.
On the receiving end, the recipient must search for an output that belongs to him. Knowing the general public transaction key, he can multiply it together with his private key and add the output index before hashing it through the Keccak-256 algorithm. Finally, the recipient multiplies this value together with his public spend key so as to seek out the output value.
After scanning all transactions pending on the blockchain, if this output value is that the same because the stealth address, this amount belongs to him.
2.3 Dynamic block size
One of the foremost innovative aspects of Monero is that the dynamic block size for brand spanking new blocks. Monero uses the past median within the blocksize together of the components to dynamically increase and reduce the cap on the block size.
Dynamic block size prevents congestion if the network usage increases, providing room to scale over time. However, some research companies (e.g., Noncesense Research) uncovered a possible vulerability referred to as a “big-bag attack.”. Since then, some changes are introduced to guard against this potential exploit.
Initially, the ASIC-resistant feature of the network owed itself to a modified version of CryptoNight (a PoW algorithm) that was frequently adjusted to stop ASIC mining.
However, since December 2019, RandomX has replaced CryptoNight. Through the utilization of random code execution and memory-intensive techniques, ASIC miners are discouraged to participate within the mining process. additionally , GPUs have also been penalized since the network upgrade.
Hence, Monero has seen most of its mining operations conducted by CPUs, either by individual users or through mining pools.
3. Economics and provide distribution
In a similar fashion as Bitcoin and Litecoin, Monero block rewards are decreasing over time.
However, after 2022, mining block rewards are going to be set at 0.6 XMR per block, maintaining a perpetual decaying rate of inflation .