Monero, the popular privacy-focused cryptocurrency protocol, is preparing for a major network upgrade this weekend (targeted for Saturday, August 13). Monero, whose native token is monero (XMR), is an open-source project that launched in 2014 as “Bitmonero.” It claims XMR is a secure, private and untraceable cryptocurrency that keeps financial transactions confidential.
— Monero (XMR) (@monero) August 11, 2022
The upgrade will be implemented via a hard fork – a permanent change to the blockchain that isn’t backwards-compatible (nodes either accept the change or split off onto a separate blockchain).
“Upgrade your software today to Monero v0.18,” said one Monero developer in an interview with CoinDesk on Friday. He added that users should familiarize themselves with the Monero blog post published in April that explains the upgrade in detail.
Read more: Monero: The Privacy Coin Explained
How does Monero work?
Monero uses innovative cryptography to offer a high level of privacy and security to its users. Some of the cryptocurrency’s key features include:
Ring signatures: digital signatures that can be produced by any member in a group. It should be computationally infeasible to determine which key (from that group of keys) was used to create the signature. Ring signatures make it impossible to trace the origin of a Monero transaction (untraceability).
Stealth addresses: one-time addresses that are automatically generated for each new transaction. A Monero user can publish a single address yet receive all incoming funds in different addresses. Those different addresses can’t be linked back to the user’s published address (or any other transaction address for that matter). Only the sender and receiver know the address the payment was sent to (unlinkability).
Bulletproofs: zero-knowledge proofs that enable confidential transactions on Monero and other protocols. A confidential transaction is one where the amount being transferred has been cryptographically concealed.
Dandelion++: a feature in Monero that hides the connection between transactions and node IP addresses. This increases transaction privacy.
Wallets and exchanges: Several key exchanges such as Bittrex and Kraken (in the UK) have delisted monero (and similar privacy-protecting cryptocurrencies). Other exchanges such as Coinbase (COIN) won’t even list monero. The reason for this revolves around the inability to conduct know-your-customer (KYC) and anti-money laundering (AML) checks on monero users.
Wallets that support monero include Ledger and Trezor, two popular hardware wallets. Cake wallet is a hot wallet that was originally exclusive to monero but now also supports bitcoin (BTC), litecoin (LTC) and haven (XHV).
Saturday’s scheduled upgrade will introduce several features. Here are some of the expected changes and improvements:
The number of signers for a ring signature will increase from 11 to 16 for every transaction.
Bulletproofs+, an upgrade to the current Bulletproofs algorithm, will be introduced. Bulletproofs+ reduces transaction size and increases transaction speed. Overall performance is expected to improve by 5%-7%.
View tags will be a new way to speed up wallet syncing by 30%-40%.
Fee changes will minimize fee volatility and improve overall network security.
Multisignature functionality will be improved and critical security patches will be added.
Monero use cases
According to Monero community site, Monero Outreach, people in regions with oppressive regimes or depressed economies benefit the most from a private, secure and low-fee cryptocurrency like XMR.
Alex Gladstein, Chief Strategy Officer for the Human Rights Foundation (HRF) has praised bitcoin (BTC), monero and other cryptocurrencies as financial tools for journalists and activists. He wrote a blog post in 2018 titled, “Why Bitcoin Matters for Freedom.” Gladstein’s article describes how Bitcoin protects citizens in countries like Zimbabwe against hyperinflation. He also praises Monero’s privacy-enhancing features, hailing them as a “countering force” against censorship by oppressive regimes in Venezuela, Iran, and North Korea.
Privacy is, of course, a double-edged sword, and Monero has seen its fair share of illicit use. Chainalysis, a blockchain security company, reported that XMR is the most popular cryptocurrency with “cryptojackers” – a form of malware that hijacks computing resources from unsuspecting users and exploits those resources to mine XMR (the cryptocurrency uses proof-of-work for consensus).
“...Funds are moving directly from the mempool to mining addresses unknown to us, rather than from the victim’s wallet to a new wallet,” wrote Chainalysis.
The article by Chainalysis reports that 5% of all monero in circulation was mined by cryptojackers, representing over $100 million in illicit gains and making cryptojackers the most popular cryptocurrency-focused malware.
The Monero community
Riccardo Spagni, also known as “fluffypony,” may be the person who comes to mind when the name Monero is mentioned. He joined the project in 2014 and stepped down from the lead maintainer role in December 2019. Spagni is currently dealing with legal problems from a 2021 fraud charge.
The Monero project is obviously much bigger than Spagni alone. More than 300 developers worldwide have contributed to Monero. This latest upgrade was a collaborative effort involving 71 developers, which speaks to the robustness of the Monero developer community.
Other privacy-focused projects such as Tornado Cash have had at least one developer arrested. Tornado Cash was recently blacklisted by the U.S. Treasury Department. Could Monero suffer a similar fate?
“At the moment, I'm not concerned about immediate legal action,” one Monero contributor told CoinDesk in an interview. “There is no direct financial incentive … for developers, unlike [the situation with] the Tornado Cash developer.”
He also advised all open-source contributors working on privacy-preserving projects to seriously consider protecting their own personal privacy and identity.