Monero (; XMR) is a decentralized cryptocurrency. It uses a public distributed LEDGER with privacy-enhancing technologies that obfuscate transactions to achieve anonymity and fungibility. Observers cannot decipher addresses trading monero, transaction amounts, address balances, or transaction histories.
The protocol is open source and based on CryptoNote, a concept described in a 2013 white paper authored by Nicolas van Saberhagen. The cryptography community used this concept to design Monero, and deployed its mainnet in 2014. Monero uses ring signatures, zero-knowledge proofs, "stealth addresses", and IP address obscuring methods to obfuscate transaction details. These features are baked into the protocol, though users can optionally share view keys for third party auditing. Transactions are validated through a miner network running RandomX, a proof of work algorithm. The algorithm issues new coins to miners, and was designed to be resistant to ASIC mining.
Monero has the third largest developer community among cryptocurrencies, behind bitcoin and Ethereum. Its privacy features have attracted cypherpunks and users desiring privacy measures not provided in other cryptocurrencies. It is increasingly used in illicit activities such as money laundering, darknet markets, ransomware, and cryptojacking. The United States Internal Revenue Service (IRS) has posted bounties for contractors that can develop monero tracing technologies.
Background
Monero's roots can be traced back to CryptoNote, a cryptocurrency protocol first described in a white paper published by Nicolas van Saberhagen (presumed pseudonymous) in October 2013. The author described privacy and anonymity as "the most important aspects of electronic cash" and called bitcoin's traceability a "critical flaw". A Bitcointalk forum user "thankful_for_today" coded these ideas into a coin they dubbed BitMonero. Other forum users disagreed with thankful_for_today's direction for BitMonero, so forked it in 2014 to create monero. Monero translates to coin in Esperanto, and the Esperanto moneroj is sometimes used for plural. Both van Saberhagen and thankful_for_today remain anonymous.Monero has the third largest community of developers, behind bitcoin and Ethereum. The protocol's lead maintainer was previously South African developer Riccardo Spagni. Much of the core development team chooses to remain anonymous.
Monero's key features are those around privacy and anonymity. Even though it is a public and decentralized ledger, all transaction details are obfuscated.This contrasts to bitcoin, where all transaction details, user addresses, and wallet balances are public and transparent. These features have given monero a loyal following among crypto anarchists, cypherpunks, and privacy advocates.The addresses of users sending monero are protected through ring signatures, which groups a sender's address with other addresses. Obfuscation of transaction amounts began in 2017 with the implementation of ring confidential transactions (RingCTs). Developers also implemented a zero-knowledge proof method, "Bulletproofs", which guarantee a transaction occurred without revealing its value. Monero recipients are protected through "stealth addresses", addresses generated by users to receive funds, but untraceable to an owner by a network observer. These privacy features are enforced on the network by default, though users have the option to share a private view key to permit third party auditing of their wallet, or a transaction key to audit a transaction.Monero uses Dandelion++, a protocol which obscures the IP address of devices producing transactions. This is done through a method of transaction broadcast propagation; new transactions are initially passed to one node on monero's peer-to-peer network, and a repeated probabilistic method is used to determine when the transaction should be sent to just one node or broadcast to many nodes in a process called flooding. This method was motivated by the growing blockchain analysis market and the potential use of botnets for analysis.
Efforts to trace transactions
In April 2017, researchers highlighted three major threats to monero users' privacy. The first relies on leveraging the ring signature size of zero, and ability to see the output amounts. The second, "Leveraging Output Merging", involves tracking transactions where two outputs belong to the same user, such as when they send funds to themselves ("churning"). Finally, "Temporal Analysis", shows that predicting the right output in a ring signature could potentially be easier than previously thought. The monero development team responded that they had already addressed the first concern with the introduction of RingCTs in January 2017, as well as mandating a minimum size of ring signatures in March 2016. In 2018, researchers presented possible vulnerabilities in a paper titled "An Empirical Analysis of Traceability in the Monero Blockchain". The monero team responded in March 2018.In September 2020, the United States Internal Revenue Service's criminal investigation division (IRS-CI), posted a $625,000 bounty for contractors who could develop tools to help trace monero, other privacy-enhanced cryptocurrencies, the bitcoin Lightning Network, or other "layer 2" protocols. The contract was awarded to blockchain analysis groups Chainalysis and Integra FEC.
Monero uses a proof of work algorithm, RandomX, to validate transactions. The method was introduced in November 2019 to replace the former algorithm CryptoNightR. Both algorithms were designed to be resistant to ASIC mining, which is commonly used to mine other cryptocurrencies such as Bitcoin. Monero can be mined somewhat efficiently on consumer grade hardware such as x86, x86-64, ARM and GPUs, a design decision which was based on Monero project's opposition to mining centralisation which ASIC mining creates, but has also resulted in Monero's popularity among malware-based non-consentual miners.
