Many electronic transactions in the existing financial system are structured such that hackers, spies, insiders, government entities or other motivated third parties could uncover a user’s purchase history, spending habits, or financial activities. Monero is a cryptocurrency network that provides guarantees against de-anonymization processes at the protocol level, facilitating fully private transactions. While many consider cryptocurrencies such as Bitcoin to offer an anonymous alternative, in reality, almost all are pseudonymous, as a record of each transaction is publically and permanently available on-chain and many participating wallet addresses can be de-anonymized with off-chain tools.
Monero uses a combination of stealth addresses, ring signatures and confidential transaction technology to obfuscate transaction details among participants. In October 2018, Monero updated the range proofs that it uses from Borromean ring signatures to a new design called Bulletproofs that significantly reduced transaction sizes and network fees while maintaining the same privacy guarantees. At a high level, parties in an XMR transaction cannot view each other’s address, asset holdings or transaction history, while having assurances through cryptographic guarantees that transactions are valid, there is no hidden inflation and XMR is not being double-spent. The Monero blockchain is secured by Proof of Work (PoW) mining using the RandomX hash algorithm that aims to be ASIC-resistant and supportive of CPU mining.
The Monero community has been resistant to allowing Application Specific Integrated Circuits (ASICs) mine on the network, out of concern that ASIC-dominated PoW networks become centralized over time. Monero has conducted two hard forks to deter ASIC mining, each implementing new hashing algorithms, one in April 2018, and the most recent in late-2019 that introduced the RandomX algorithm that has the additional goal of making CPU mining efficient. Monero’s block size is dynamic according to transaction demand and has a target block time of 1 minute. Monero employs a decreasing block reward structure to pay miners, which incentivizes their participation in securing the network and stabilizes at a 0.6 XMR reward per block in 2022.
Monero’s Core Team facilitates development by vetting donation-soliciting proposals on the project’s semi-official forum, allowing donors to anonymously back development initiatives. Monero is an open-source cryptocurrency and the Core Team’s relation to the project is not hierarchical. Although the Core Team is a set of distributed pseudonymous individuals with loose affiliations to the open-source currency, the Team also supports the project in several substantial respects on the de facto Monero website. The Core Team coordinates donation-based development funding, manages the project’s GitHub merges, and conducts scheduled hard forks every six months. Details on hard forks are announced via the Monero website. This practice of regular hard forking has made forks more a norm than exception with Monero and can speed up upgrade adoption periods. Monero has departed from the scheduled forking in certain cases, such as with the release of RingCT functionality. Outside of direct code changes, the Monero Research Lab is responsible for investigating potential future protocol upgrades and has a longer-term and broader research and development mandate for the Monero project.
The Monero network token, XMR, functions as a unit of account, medium of exchange and potential store of value. Monero launched in mid-2014 as an implementation of the CryptoNote protocol. There was no pre-mine or token sale of XMR and codebase development is facilitated by a group of independent, generally anonymous contributors. Monero’s privacy guarantees allow users to more freely engage in activities that may be illegal, making Monero one of the more controversial cryptocurrencies.