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Monero (XMR) Overview (Feb. 2018)

Article taken from CoinPowr.com

Monero is decentralizedprivatedigital payment system in which the XMR coin is mined and used as currency. Below is a brief bullet-point style overview of the Monero (XMR), meant to provide broad-stroke understanding of the currency as well as resources for a deeper dive. 

Why Privacy Coin?

  • Many believe that ownership of one's transaction data as a basic right. 
  • Many countries don't have established financial and economic systems like the U.S. so people rely on P2P transactions.
    • Access is key and privacy may not be the primary focus. Still it is important if you do not trust central authorities in your country. 
  • Hiding transaction data is an essential for criminal activity.

Demand for Privacy

History and Development of Monero (XMR)

  • There has been a rapid influx of privacy-focused coins since the advent of bitcoin.
  • Monero is in a class of coins that use the privacy hash algorithm, CryptoNotes (Whitepaper). It specifically uses the CryptoNight PoW version.

https://en.wikipedia.org/wiki/CryptoNote

  • "Nicolas van Saberhagen" is the founder of CryptoNote. This is a pseudonym like Satoshi Nakamoto (Bitcoin founder). 
  • ByteNote (BCN) was the first implementation of Cryptonote. 
  • Many complained about the large pre-mine in Bytecoin, which benefits the few lucky miners who got in at the very beginning.
  • Pseudonymous founder "thankful_for_today" created Monero in April 2014. 
  • Monero was forked from Bytecoin on April 18, 2014 with a more "fair" distribution. (More on distribution and supply later).
  • CryptoNote was hacked in Sept. 2014. After a patch was released to fix it, Monero also implemented the patch.

Features and Technical Specifications

  • Runs on Windows, macOS, Linux, Android, FreeBSD.
  • Open source (Github: https://github.com/monero-project/monero)
  • Addresses of senders and receivers are hidden.
  • The amount in the transaction is also hidden.
  • These features are achieved by basically 4 key technical methods:
  1. RingCT hides the value of a transaction.
  2. Ring signatures hide the source of a transaction.
  3. Stealth addresses hide the destination of a transaction.
  4. Kovri obscures the transaction broadcast itself.

(https://medium.com/@coinrepeater/what-is-monero-a-k-a-xmr-16aec3247a9f)

Here is an explanation of how a Monero transaction hides the addresses and amount being sent taken straight from bitcointalk.org: https://bitcointalk.org/index.php?topic=583449.0

Bob decides to spend an output, which was sent to the one-time public key. He needs Extra (1), TxOutNumber (2), and his Account private key (3) to recover his one-time private key (4).

When sending a transaction to Carol, Bob generates its Extra value by random (5). He uses Extra (6), TxOutNumber (7) and Carol's Account public key (8) to get her Output public key (9).

In the input Bob hides the link to his output among the foreign keys (10). To prevent double-spending he also packs the Key image, derived from his One-time private key (11).

Finally, Bob signs the transaction, using his One-time private key (12), all the public keys (13) and Key Image (14). He appends the resulting Ring Signature to the end of the transaction (15).
 


(click to enlarge)

  • Mining:
    • ASIC Resistance (only CPUs and GPUs) - currencies that are not ASIC resistant have the likelihood of being mined by very centralized sources that can scale up the use of a specific hardware made just to mine a digital currency.
    • For example, bitcoin is largely mined in China, where 1)Jihan Wu patented an ASIC mining card which is faster at mining than CPUs and GPUs, 2) Electricity is relatively cheap. 
    • Fairness appears to be a key theme for Monero - both in initial distribution and ongoing mining process
    • Here is a link to stats about mining pool distribution (http://minexmr.com/pools.html)
      • We see a slight concentration of mining pools, but this is more decentralized than it was in 2016. 
  • Distribution:
    • There was an initial distribution of.19.4 Million XMR + ongoing creation of 0.3 XMR/minute. The ongoing production on XMR is to balance out the XMRs lost. (This can lead to slight inflation)
  • There is no wallet distribution data, which obviously should be the case for a privacy coin.
  • Here is a link to the distribution of nodes: (https://monerohash.com/nodes-distribution.html)
    • Note that a majority of the nodes are in the US and Europe (mainly France and Germany)
  • Transactions:
    • Fee: 0.004-0.02 XM/kB around $6 in January 2018 (As high as $20 per transaction in December 2017)
    • Transactions and block statistics can be found on: https://moneroblocks.info/
  • In the News
    • Monero does not get a lot of hype around it in social media, though it did get a lot of exposure in 2016 into 2017.
    • Here is a Bloomberg article from Jan. 2018: The Criminal Underworld Is Dropping Bitcoin for Another Currency
    • In 2017, Overstock.com started to accept Monero (XMR) along with several other cryptocurrencies.
  • Final Thoughts
    • Monero is one of the relatively stable cryptocurrencies and has the largest private coin community.
    • Many, including bitcoin core developers, praise the quality of Monero developers as well as the open-source, peer-review process.
    • subreddit evaluation of Monero pointed out that the amount of data required in XMR transactions is much larger than that in Bitcoin transactions, making it a hefty blockchain. 
    • Transaction fees are lower than Bitcoin, but still high.
    • Need improvements on wallet, interface, merchant on-boarding process, and other features to encourage adoption.

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