Monero is the top choice for cryptocurrency users and investors who value privacy. Just how private IS Monero? In September 2020, the Internal Revenue Service (IRS) offered to pay up to $625,000 to any person who can trace Monero or other privacy coins as well as Lightning and other Layer 2 off-chain cryptocurrency protocols. It’s the last month of 2021 and the IRS “bounty” has not been paid yet. If this doesn’t prove Monero’s privacy, then this simplified explanation of the technologies behind Monero will authenticate XMR’s guarantee.
Ring Confidential Transactions (RingCT)
Mastering Monero defines RingCT as a “cryptographic technology that conceals the amount of moneroj (plural of Monero) being sent in any transaction.” With most crypto transactions, the amount is visible. RingCT conceals the amount by enabling the sender to verify that they have enough XMR without disclosing the amount through cryptographic “commitments” and “range proofs.”
When you send XMR, you “commit” to the amount with particular information so the network can confirm the validity of a transaction without revealing the amount itself. “Range proofs” in the RingCT technology makes sure that the amount is greater than zero and less than a certain number.
Stealth addresses are used to maintain a recipient’s privacy. For every Monero transaction, a disposable one-time address is created. This is to prevent recording of a recipient’s wallet address on the blockchain. The recipient can get the funds by using the private keys he/she got during the creation of their wallets. Senders will use the public keys in your address when they want to send you funds. Together with some random data, this will create a one-time key. These one-time keys are the stealth addresses recorded on the blockchain. Even if you send funds to the same person, each transaction will have a unique stealth address.
Ring signatures, on the other hand, are used to maintain a sender’s privacy. Crypto transactions require digital signatures to verity the validity and source of a data. In other crypto, your data (message to the network about a transaction) and your private key as signature is on the network for verification. Monero uses ring signatures to complete the verification process. Monero’s group-signing method enables one member of the group to digitally sign verification on behalf of the group. The transaction is verified, but impossible to find out which of the group members digitally signed.
These technologies working together ensures that both Monero sender and recipient remain anonymous, the transaction amount is not disclosed, and where the funds came from and went are not trackable.
The privacy of Monero, however, will be rendered useless if you don’t mask your IP address. An IP address reveals a user’s physical location and identity. One way to bypass this is by using a virtual private network (VPN). VPNs send internet traffic through encrypted connections which your internet service provider, government, and others cannot monitor. Another option is to use The Onion Router (Tor). Tor routes your internet traffic through a private network of relay nodes. Tor is used by journalists, intelligence agencies, and others to avoid surveillance or censorship. It’s free, decentralized, and open-source.
The Monero community supports that development of Kovri, which will use encryption and routing techniques to create a private network across the internet. However, the integration of Kovri with Monero has not happened yet. Until it does, it will be in your best interest to use a VPN or Tor for your crypto transactions.
Privacy is every human being’s right and everyone has the right to keep any personal and financial information confidential to protect themselves from the “unjustified use of power.” Power is not limited to authorities and regulators. It could range from something as simple as selling your personal information for targeted ads on social media to malicious ones like identity theft or finances being wiped out. Apart from using VPNs or Tor, decentralized exchanges, and privacy-centric coins such as Monero, a secure wallet is also of vital importance. Use XMRWallet, an open-source free Monero wallet that allows you to send and receive XMR instantly while remaining in complete control of your coins and keys.