An In Depth Look At Monero
Fungibility is the idea that every unit of Monero is indistinguishable from every other Monero. Fungibility is a very important aspect when it comes to digital currency. Without it prying eyes can figure out a person’s income, where they work, their spending habits, how much debt they have, and much more. Bitcoin and other popular cryptocurrencies are not fungible. When someone gives out a Bitcoin address anyone is able to look it up online and figure out everything listed above. This is why fungibility is a defining feature within Monero – with it Monero is true, sound money.
A ring signature is security method used when someone is trying to hide a secret among a group of people. The requirement of a ring signature is that a 3rd party should not be able to tell which person initiated the transaction.
Ring signatures help to hide the sender of a transaction. When a transaction is sent in Monero, the wallet will randomly grab past addresses from the blockchain. Together these addresses will form a “ring” that the original address will be a part of, right now the default is set to 11 ring members. After forming a ring, a third party is not be able to distinguish which address in the ring is the real sender of the transaction. Ring signatures help fungibility by ensuring that people are not able to monitor certain addresses for outgoing transactions.
See the video to the right for a further explanation of ring signatures.
If it’s important to try and hide the sender, it’s equally as important to hide the amount being transacted.
Confidential transactions allow the amount being sent to be hidden while at the same time: Proving that the amount being sent and received is equal to zero and that the value is above zero. All without giving away the actual value being transacted. Monero accomplishes this using very fancy math known as “bulletproofs“. Bulletproofs allow an individual to prove they have a number that falls between a two different numbers, and is greater than zero without ever revealing the actual number.
This helps with fungibility by stopping third parties from being able to trace specific Monero from transaction to transaction. Watch the video on the left to get a better understanding of confidential transactions.
Lastly the final piece in the fungibility puzzle is hiding who the receiver is. This is accomplished via stealth addresses. When sending Monero to a public address, instead of sending Monero directly to that address, a wallet will actually generate a new one time use public address that only the receiving wallet will recognize. Only the person who sent the transaction will know this one time address and only using their viewkey is the receiver able to tell which transaction belongs to their wallet..
Monero is unique among cryptocurrencies because it is private by default. While this is a great feature for money, the ability to allow optional transparency adds even more value to Monero. When given the viewkey to a Monero address, a person is able to look at all the incoming transactions to a given wallet while not being able to spend from that wallet. This is a very useful feature for auditing. Whether you are a charity trying to gain public trust, a corporation proving you have made a purchase, or a parent wanting to watch a child’s income, the viewkey is a pivotal part of Monero.
Dynamic Block Size
Many people don’t talk about or realize that Monero has a dynamic block size solution built in. Hopefully in the future Monero is able to use this to push development and avoid the conflict that has plagued other cryptocurrencies. Monero’s block size is influenced by the amount of fees waiting to be paid compared to the block reward at that time.
The dynamic block size works off the idea that miners always want to take the most profit they can from a block. Even if it means sacrificing the block reward. When blocks start to become full on the Monero network and fees start to rise as a result. The miners have the option to increase the block size (only up to a certain amount based on the existing block size) to allow for more transactions. Getting a larger fee reward as a result. The catch to this is if miners choose to increase the block size they will sacrifice the mining reward for that block. So miners have to wait until there are enough transaction fees waiting to be added to the blockchain to justify sacrificing that block reward.
Below is a simple example of this, the numbers are there just as examples and do not reflect the actual Monero network numbers.
Max Block Size: 1 Mb (100 transactions)
Block size: 0.7 MB (70 transactions)
Block Reward: 10 XMR
Avg Fee: 0.01 XMR
Total Fees: 1 XMR
Total Block Reward: 11XMR
Transactions waiting: 0
Higher Transaction Volume
Max Block Size: 1 MB (100 transactions)
Avg block Size 1 MB (100 transactions)
Block Reward 10 XMR
Avg Fee: 0.1 XMR
Total Fees: 10 XMR
Total Block Reward: 20 XMR
Transactions Waiting 200
Max Block Size: 2 MB (200 transactions)
Block Size 2 MB (200 transactions)
Block Reward: 0 XMR
Avg Fee: 0.11 XMR
Total Fees: 22 XMR
Total Block Reward: 22 XMR
Transactions Waiting 0
Due to the fact that some Monero may never be printed because the block rewards may be sacrificed in the future. Monero has what is called a “tail emission”. Once 18.4 Million Monero have been mined Monero will have a linear inflation rate of 0.6 XMR/2 mins. This is to ensure that the miners always have a block reward to compare to fees when deciding whether or not to change the size of a block. This is expected to happen sometime in 2020.
This chart shows Monero’s projected emission curve as compared to Bitcoins.
History Of Monero
Before Birth: Oct 2013 - April 2014
Oct 17, 2013 – Someone going by the anonymous pseudonym “Nicolas van Saberhagen” releases the CryptoNote white paper detailing a way to improve upon Bitcoin’s blockchain structure and introduce privacy.
March 12, 2014 – Bytecoin is announced on the BitcoinTalk forums, the first cryptocurrency to use the CryptoNote technology and the mining algorithm CryptoNight.
April 08, 2014 – Some users discovered that 80% of the Bytecoin had been secretly mined before being announced. Soon discussion begins on creating a fork with a fair distribution. User thankful_for_today posts that they will be starting a fork of ByteCoin soon with no pre-mine and asks for help from other users.
April 18, 2014 – Thankful_for_today launches their new CryptoNote coin, Bitmonero. Thankful_for_today was very adamant that certain things are not up for debate about Bitmonero. Some of those included: a one minute block time, the block reward scheme, and the name. People were uphappy with the haste in which thankful_for_today launched without being more open to discussion.
April 21, 2014 – The first public sale of Bitmonero takes place. 1.2 BMR for 0.025 BTC (worth about $12USD at the time).
April 23, 2014 – Thankful_for_today ignores all debate around the Bitmonero This angers some other forum users. User tacotime posts that discussions are happening off forum to change Bitmonero.
April 24, 2014 – Monero announcement thread is posted by user monero, an account controlled by trusted Monero people.
April 30, 2014 – thankful_for_today fights back at the new name Monero and won’t accept new changes. Other users tell him they agree with the new coin Monero.
June 18, 2014 – thankful_for_today comes back to the original Bitmonero thread to announce he will continue to work on his version of Bitmonero. However the thread soon goes quiet.
After Birth: April 2014 - Dec 2018
April 18th 10:49 am (UTC), 2014 – The first Monero block is mined.
April 25th, 2014 – The Monero announcement thread is made by members of the Bitmonero development team.
April 27th, 2014 – tacotime announces a reward of 1000 Monero for anyone willing to create a pool for Monero. At the time the only mining software was closed source for bytecoin used by individual miners.
May 01, 2014 – Mining programs begin to be worked on by community members. Specifically user NoodleDoodle is responsible for many early day mining optimizations.
May 08, 2014 – Open source mining software is released.
May 12, 2014 – Monero passes 0.002 BTC in price. The first Monero trade was unknown and done via private chat rooms.
May 13, 2014 – The first Monero mining pool goes into testing.
May 17, 2014 – Version 0.8.8.1 is released.
May 19, 2014 – Monero is listed on Poloniex.
May 21, 2014 – Monero is added to CoinMarketCap.
June 10, 2014 – Deterministic seeds are added allowing 24 word seeds rather then a random string of characters to be used to create a private key. Someone also sells a painting for 2500 XMR, the first known Monero transaction.
March 2015 – Monero’s tail emission curve is added allowing dynamically scaling blocks in the future
March 2016 – Monero increases block time to 2 minutes and doubles the block reward. It also creates a default ring size of 3 and no longer allows ring sizes of one.
September 19, 2016 – Version 0.10.0 is released. Ring sizes were increased to 5 members. Syncing the blockchain was sped up.
Dec 22, 2016 – The first version of the GUI wallet is released.
January 2017 – Confidential transactions are added allowing the amounts being transacted to be hidden.
2017 – Monero mining programs are found in malware both on individuals computers as well as enterprise systems. Websites also get infected with Coinhive, a miner that uses a visitors computer to mine while they are browsing a website.
September 29, 2017 – Monerujo, the first Android wallet is released and made open source.
2018 – Monero is led by 49 developers and 3 researchers.
February 1st, 2018 – Cake wallet, the first IOS wallet is released and made open source.
April 6th, 2018 – Version 0.12.0 is released changing ring size default to 7. The mining algorithm also changed as it was rumored ASICs has been developed for Monero. After the algorithm change the mining hash rate dropped by approximately 70 – 80%.
June 4th, 2018 – Ledger adds Monero support.
October 18, 2018 – Monero version 0.13.0 upgrades to add bulletproofs, a new more efficient way of doing confidential transactions which lead to monero transactions and fees shrinking 80% in size. The ring size was also raised to 11 increasing privacy.
October 29, 2018 – Trezor adds support for Monero.
The Future: Jan 2019 - onward
The future of Monero seems bright with each new update making Monero both more efficient and more private. Having wallets on all major platforms is a huge bonus, having them all open source is an even bigger one. The wallets that will be seen in the future are sure to make Monero even easier to use.
This can’t happen though without help from people who want to see Monero succeed, if you want to see Monero succeed don’t hesitate to help out. See the “Helping Monero” page for more details.
See this post for more details on the history on Monero thanks to el_hispano.