What Is Monero? An Introduction to XMR, the Popular Anonymous Coin
Fork and Birth
The origin of Monero dates back to 2014, when a geek released a CryptoNote protocol to improve Bitcoin’s anonymity, which soon brought about the creation of the first anonymous coin, Bytecoin.
A few weeks later, Bytecoin’s GPU mining machine was born, thanks to its greater anonymity and privacy protection compared with Bitcoin.
But soon some people found out that the developers had pre-mined 82% of the tokens! In the decentralized cryptocurrency world, no doubt that this is resisted by many.
As a result, the community hardforked the Bytecoin directly, and on April 18, 2014, Monero, also known as XMR, was officially born.
Like Bitcoin, Monero also uses a proof-of-work mechanism (PoW), but instead of SHA-256, it uses the CryptoNight algorithm.
In Bitcoin, due to the openness and traceability of the blockchain ledger, anyone can trace out all the Bitcoin accounts associated with it through the public information of the Bitcoin Blockchain Browser. Therefore, the anonymity of Bitcoin is not unimpeccable.
Monero uses ring signatures and address obfuscation to ensure anonymity. The transaction not only hides the address of both parties, but also can hide the transaction amount. By default, the transaction details are completely invisible and the privacy is extremely strong. The so-called ring signature is when a transaction occurs, the system automatically generates several groups of transactions with the same amount, through this “true and false mix” way, so that you can not find out exactly which address the currency went to.
In addition, Monero does not have an upper limit of number.
Unlike Bitcoin, which has a maximum cap (21 million), Monero will continue to inflate, but the mining reward per block will be gradually reduced to 0.6 Monero (expected in the second half of 2022, compared to the current per-block reward of about 2.5 XMR).
Bitcoin blocks on average every 10 minutes, and Monroe coins block every 2 minutes, with no fixed size limit. In order to prevent miners from clogging up the system with large blocks, Monro coins have a Penalty mechanism for mining:
Each newly generated block that exceeds 300,000 bytes and exceeds the median of the latest 100,000-block size (it was the median of the latest 100-block size before the fork last March) is penalized with a reduction in the block bonus.
The secret of invisibility
Monero uses three major technologies: ring signature, address obfuscation, and RingCT.
A transaction mainly involves data from sender, receiver, and transaction amount. The 3 technologies are exactly targeted at the 3 aspects.
Ring signature: sender, untraceability
How to make it difficult for the outside world to guess who the initiator is when we create a petition? The names can be written in a circle in which each name appears to be in equal position, making it difficult to guess who the originator was. Let’s say A sends Monero to B and sets the number of obfuscating transactions to be 5. The network will automatically generate five transfer transactions during the transfer, except the one sent by A to B, and the other four are all “decoy transactions” used to deceive outside observers, so as to achieve the purpose of concealing the sender.
Address obfuscation: receiver, not associative
Obfuscating addresses is to break the correlation between input and output addresses, so as to hide where the money goes. Whenever a sender initiates a transfer, the money does not go directly to the receiver’s address, but to an address temporarily generated by the system. For example, when A transfers money to B, A, as the sender, uses B’s public key and private key plus some random numbers to generate a unique and one-time address, and the system transfers money to this temporary address. Both A and B can see the temporary address themselves, but neither knows who the money in the address belongs to.
So how does B know that someone has transferred money to him, and how does he receive this money? B’s wallet will use the private key to search and check whether the temporary address on the blockchain has its own money. The money can be used when B’s private key (only the recipient B’s own private key can) recognizes the temporary address it is entitled to claim.
RingCT: hiding transaction amounts
When A transfers money to B in a RingCT transaction, A does not directly disclose the amount transferred to the network, but instead provides an RCT number as the output of the transaction amount. RCT = random number + true transaction amount. Random numbers are used to mask the real amount and are generated automatically by the wallet. The network can use this RCT value to verify that the transaction input is equal to the transaction output amount, to confirm that no additional Monero is generated by counterfeiting. For others, however, there is no way of knowing the actual transaction amount.
Against inequality
Monero coins are born to fight for unfairness.
In 2018, Bitmain launched the Monero ASIC mining machine. The Monero development team immediately resisted and modified the algorithm with hard fork to prevent ASIC from taking over the mining machine ecology in a large scope.
Why boycott ASIC? The computing power of ASIC mining machine is very strong. If everyone buys ASIC, it is easy to be controlled by suppliers. Or Bitmain mines with ASIC at its own cost price, then it goes back to the problem of the so-called centralization caused by the monopoly of computing power.
The backlash from the Monero community surprised Bitmain. If the new version of the algorithm does not support ASIC mining machines, then ASIC mining machines will be a pile of rotten iron.
Bitmain, once the king of the cryptocurrency market, cannot afford to stand by.
It’s a repeat of the same trick that pushed bitcoin to fork in 2017 and generate bitcoin cash.
Bitmain immediately recruited a technical team to fork the Monero, and Monero-Classic was born. Monero-Classic supported ASIC mining rigs, and Bitmain repeatedly claimed that the Monero Classic was the legitimate one.
But shortly after the fork, Monroe Classics collapsed due to a lack of community support.
Instead, the Monroe coin is like a soldier who fights to the top, and now ranks 14th in market capitalization at $2 billion.
Source: https://www.bixiaobao.com/en/coinlist/monero
As you can see on the Monero website, Monero now has seven core developers, and over 500 developers have contributed code to Menlo coin since its inception, which makes the Monero community really strong.
To combat mining hogs and hackers, Monero upgrades its algorithm every six months on average. It started with CryptoNight and later upgraded its RandomX algorithm against ASIC mining rigs and added bulletproofs to the fight against hackers.
Regulatory risks
The anonymity of the Monroe is both its greatest strength and its greatest weakness. Anonymity is valuable, but it can also make illegal activities to go unpunished. As a result, regulations are more difficult.
In March 2018, Coincheck said it would remove three anonymous cryptocurrencies: XMR, DASH, and ZEC. Many exchanges in South Korea and Japan have also removed currencies such as XMR, ZEC and DASH, which have anonymous transmission and trading capabilities, presumably because of government regulation.
Aside from the regulatory issues, Monero’s privacy protections aren’t all that strong. WIRED earlier published an article on the privacy weaknesses of Monero, in which researchers from various universities pointed out flaws in its transaction-mixing algorithm that undermined its untraceablility. In response to these problems, the developers of Monero have made regular and continuous improvements to it. Privacy, however, will not be upgraded overnight. It will be a constant improvement.
Admittedly, Monero has introduced privacy to cryptocurrencies without sacrificing decentralization, and it deserves credit for using innovative techniques to ensure transactions are uncorrelated, untraceable, and the amount sent is hidden. The developers of Monero are currently working on improvements to address scalability, hacking and data abuse issues, but government oversight is still an uncertainty.
References:
1. Monero price: https://www.bixiaobao.com/en/coinlist/monero
Wikipedia: Monero
3. Official website of Monero: www.getmonero.org
4. “Monero: You Have Money and Mining Rigs? I’ll Have A New Algorithm” by https://blog.csdn.net/weixin_44365914/article/details/92796614
5. “What is Monero” in A Brief Introduction to Blockchain
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