Monero (cryptocurrency)

Monero (XMR) is an open source cryptocurrency created in April 2014 that focuses on privacy, decentralisation and scalability. Unlike many cryptocurrencies that are derivatives of Bitcoin, Monero is based on the CryptoNote protocol and possesses significant algorithmic differences relating to blockchain obfuscation.^[1] Monero has ongoing support from the community,^[2] and its modular code architecture has been praised by Wladimir J. van der Laan, a Bitcoin Core maintainer.^[3] Monero's market capitalization followed an upward trend in the year 2016, going from $3.7 million (3 December 2015) to more than $170 million (3 September 2016), partly due to adoption by major darknet market AlphaBay, before correcting to around $60 million two months later (3 November 2016).^[4]

History

Monero was launched on 18 April 2014 originally under the name BitMonero, which is a compound of Bit (as in Bitcoin) and Monero (literally meaning coin in Esperanto). Five days later the community opted for the name to be shortened just to Monero. It was launched as the first fork of CryptoNote-based currency Bytecoin, however was released with two major differences. Firstly, the target block time was decreased from 120 to 60 seconds, and secondly, the emission speed was decelerated by 50% (later Monero reverted to 120 seconds block time while keeping the emission schedule by doubling the block reward per new block). In addition, the Monero developers found numerous incidents of poor quality code that was subsequently cleaned and re-constituted.

A few weeks after launch, an optimized GPU miner for CryptoNight proof-of-work function was developed.^[5]

On 4 September 2014, Monero recovered from an unusual and novel attack executed against the cryptocurrency network.^[6]

Features

Monero coin supply and inflation over time.

Monero is an open-source pure proof-of-work cryptocurrency. It runs on Windows, Mac, Linux and FreeBSD.^[7]

Its main emission curve will issue about 18.4 Million coins to be mined in approximately 8 years.^[8][9] (more precisely 18.132 Million coins by ca. end of May 2022^[10][11]) After that, a constant "tail emission" of 0.6 XMR per 2-minutes block (modified from initially equivalent 0.3 XMR per 1-minute block) will create a sub-1% perpetual inflation (more precisely [see ref. above] starting with 0.87% yearly inflation around May 2022) to prevent the lack of incentives for miners once a currency is not mineable anymore.^[12] The emission uses a smoothly decreasing reward with no block halving (any block generates a bit less monero than the previous one, formula: Emission per 2-minutes block = max(0.6, floor((M − A)×2⁻¹⁹)×10⁻¹²) XMR, with M = 2⁶⁴ − 1 and A = 10¹² times the amount of XMR already emitted). The smallest resolvable currency unit is 10⁻¹² XMR. The proof-of-work algorithm, CryptoNight, is AES-intensive and "memory heavy", which significantly reduces the advantage of GPU over CPU.

Privacy

The changes in the results of blockchain analysis after implementing the ring signatures.

Monero daemon uses the original CryptoNote protocol except for the initial changes (as the block time and emission speed). The protocol itself is based on "one-time ring signatures"^[13] and stealth addresses. Underlying cryptography is essentially Daniel J. Bernstein's library for Ed25519, which is Schnorr signatures on the Twisted Edwards curve. The end result is passive, decentralised mixing based on heavily-tested algorithms.^[14]

However, several improvements were suggested by Monero Research Labs (a group of people, including core developers team), which covered the proper use of ring signatures for better privacy.^[15] Specifically, the proposals included "a protocol-level network-wide minimum mix-in policy of n = 2 foreign outputs per ring signature", "a nonuniform transaction output selection method for ring generation" and "a torrent-style method of sending Monero output".^[16] These changes, which were implemented in version 0.9.0 "Hydrogen Helix",^[17] can help protect user's privacy in a CryptoNote-based currency according to the authors.

As a consequence, Monero features an opaque blockchain (with an explicit allowance system called the viewkey), in sharp contrast with transparent blockchain used by any other cryptocurrency not based on CryptoNote. Thus, Monero is said to be "private, optionally transparent". On top of very strong privacy by default, such a system permits net neutrality on the blockchain (miners cannot become censors, since they do not know where the transaction goes or what it contains) while still permitting auditing when desired (for instance, tax audit or public display of the finances of an NGO).^[18] Furthermore, Monero is considered by many to offer truly fungible coins.^[19][20][21]

Monero developers are also working on implementing a C++ I2P router straight in the code. This would complete the privacy chain by also hiding the IP addresses.^[22]

Decentralisation

"Monero is powered strictly by Proof of Work, but specifically, it employs a mining algorithm that has the potential to be efficiently tasked to billions of existing devices (any modern x86 CPU)."^[23] Monero uses the CryptoNight Proof of Work (PoW) algorithm, which is designed for use in ordinary CPUs.^[24]

The smart mining forthcoming feature will allow transparent CPU mining on the user's computer, far from the de facto centralization of mining farms and pool mining, pursuing Satoshi Nakamoto's original vision of a true P2P currency.^[25]

Scalability

Monero has no hardcoded limit, which means it doesn't have a 1 MB block size limitation preventing scalability. However, a block reward penalty mechanism is built into the protocol to avoid a too excessive block size increase: The new block's size NBS is compared to the median size M100 of the last 100 blocks. If NBS>M100, the block reward gets reduced in quadratic dependency of how much NBS exceeds M100. E.g. if NBS is [10%, 50%, 80%, 100%] greater than M100, the nominal block reward gets reduced by [1%, 25%, 64%, 100%]. Generally, blocks greater than 2*M100 are not allowed, and blocks <= 60kB are always free of any block reward penalties.

The Monero Core Team also released a standard called OpenAlias,^[26] which permits much more human-readable addresses and "squares" the Zooko's triangle. OpenAlias can be used for any cryptocurrency and is already implemented in Monero, Bitcoin (in latest Electrum versions) and HyperStake, as well as several websites such as mymonero.com and coin.space.

Usage

XMR.TO allows to make payments to any Bitcoin address with the strong privacy provided by Monero.^[27]

Limitations

Since it is not based on Bitcoin, Monero cannot take advantage of the Bitcoin technological ecosystem, like GUI wallet or payment processors. As a consequence, everything has to be written from scratch.^[28] Presently (as of March 2015), Monero doesn't have feature parity with Bitcoin. Notably, there is no support to multisignature and no Monero payment processor (but in April 2015 it was announced on bitcointalk.org one is in the works by a member of The Monero Core Team).

Monero transactions take up more space on the blockchain than Bitcoin transactions, and transactions will be even larger with RingCT added.^[29] This makes it more expensive to run a full node.

Without RingCT implemented, it is still possible to deanonymize Monero transactions in some situations by analyzing the transaction amounts.^[30]

Ongoing work and side projects

• RingCT: a way to implement confidential transactions in Monero. Confidential transactions (CT) is a proposed method for hiding the value of transactions in Bitcoin.^[31]
• OpenAlias: an extensive aliasing blockchain-based system;^[32]
• Kovri: a privacy solution for integrating I2P in Monero;^[33]
• URS: the proof-of-concept of an anonymous voting system, based on ring signatures;
• 0MQ: a C API library used by clients to connect to the Monero daemon service.^[34]
• Electrum's mnemonic seeds for deterministic -key creation in webwallet;^[35]
• The Monero Core Team continues to depart from the original Bytecoin code with numerous patches and improvements to its implementation of the CryptoNote protocol.^[36]

Applications

CryptoKingdom is a MMORPG that uses Monero for entry into its economy.^[37]

MoneroDice is a dice gambling game that uses cryptography for provably fair randomness.^[38]

See also

References

External links

• Official website