Overview

Monero (/məˈnɛroʊ/; abbreviation: XMR) is a blockchain-based cryptocurrency which is private, untraceable, fungible, and decentralized.

The protocol is open source and based on CryptoNote v2, a concept described in a 2013 white paper authored by Nicolas van Saberhagen. Developers used this concept to design Monero, and deployed its mainnet in 2014. The Monero protocol includes various methods to obfuscate transaction details, 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 against application-specific integrated circuit (ASIC) mining.

Monero's privacy features have attracted cypherpunks and users desiring privacy measures not provided in other cryptocurrencies. A 2022 study in FSI Digital Investigations concluded "For now, Monero is untraceable. However, it is probably only a matter of time and effort before it changes." Due to its perceived untraceability Monero is gaining increased use in illicit activities such as money laundering, darknet markets, ransomware, cryptojacking, and other organized crime.

Background

Monero's roots trace back to CryptoNote v2, a cryptocurrency protocol first introduced in a white paper published by the presumed pseudonymous Nicolas van Saberhagen in October 2013. In the paper, the author described privacy and anonymity as "the most important aspects of electronic cash" and characterized bitcoin's traceability as a "critical flaw". A Bitcointalk forum user known as "thankful_for_today" implemented these ideas into a coin they called BitMonero.

However, other forum users disagreed with thankful_for_today's direction for BitMonero and decided to fork it in 2014, leading to the creation of Monero. Monero translates to coin in Esperanto. The plural of monero ("moneroj") is likewise formed using Esperanto grammar. 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.

Privacy

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 transaction outputs, or notes, of users sending Monero are obfuscated through ring signatures, which groups a sender's outputs with other decoy outputs. Encryption 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", public keys generated by the sender that are untraceable to the receiver by a network observer.

These privacy features are enforced on the network by default.

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.

Transaction tracing research

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.

In 2018, researchers presented possible vulnerabilities in a paper titled "An Empirical Analysis of Traceability in the Monero Blockchain".

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" protocol. The contract was awarded to blockchain analysis groups Chainalysis and Integra FEC.

In 2021, researchers presented a transaction-flooding attack against Monero’s transaction-graph privacy at the IEEE International Conference on Blockchain and Cryptocurrency. Under specific assumptions about transaction structure and fees, the "FloodXMR" attack modelled how an adversary who floods the blockchain with their own transactions could, over time, deanonymize a substantial fraction of new transaction inputs at relatively low cost.

Mining

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-consensual miners.