Monero, the fifth largest digital currency with a market cap of nearly $200 million, has successfully hardforked yesterday to add higher levels of privacy and anonymity by implementing an adapted version of Confidential Transactions.
The networks’ near 650 visible full nodes have made the transition without any noticeable problem so far, with the market responding positively as indicated by an increase in Monero’s price of more than 4.5% at the time of publishing.
Monero’s Price Following a Hardfork to Implement Confidential Transactions. Chat Courtesy of Poloniex
The network hardforked to implement Ring Confidential Transactions (RCT), an adapted version of Confidential Transactions described by Gregory Maxwell, a Bitcoin Core developer and Blockstream’s CTO as a “a cryptographic tool to improve… privacy and security.” Monero develops on Maxwell’s implementation by adapting Confidential Transactions to work with the currency’s already implemented ring signatures, an inbuilt mechanism which bundles sending and receiving public keys with a number of older actual transactions, thus operating as a mixer to obfuscate addresses.
Confidential Transactions add to ring signature’s inbuilt mixer by “hiding amounts, origins and destinations of transactions with reasonable efficiency and verifiable, trustless coin generation,” according to the peer-reviewed Ring Confidential Transactions paper, making any blockchain analysis difficult if at all possible.
The new invention is now enabled by default, with a planned hardfork in September enforcing the added level of privacy on all transactions, making monero one of the most anonymous digital currency, but it comes at a fairly high cost. One average monero transaction takes more than 4kb of space, increasing to around 6kb per transaction with RCT, compared to an average of 400 bytes per bitcoin transaction.
The nearly three years old currency already has a blockchain of around 10GB while barely having any transactions – around 2,600 a day, compared to bitcoin’s more than 250,000 a day. At bitcoin’s transaction levels Monero would add 1.5GB per day, consuming an average laptop disk space of 500GB in one year.
Although storage is relatively cheap with terabyte disk sizes now becoming more common, initial node synchronization may eventually become a problem, but the network is considering Lightning and TumbeBit, a more private version of Lightning, for more scalability, according to Othe, a pseudonymous Monero core developer. They have no plans to implement Segwit, Othe says, as the currency doesn’t have any transaction malleability problems and further consider sharding to be “a failed concept.”
On the other hand, the digital currency has an adaptive blocksize, avoiding the transaction capacity limitations of bitcoin’s fixed 1MB. It further has far lower confirmation times than bitcoin, making commerce slightly more convenient. Leading Silkroad like markets, such as AlphaBay and Oasis, to add Monero due to its anonymity features and as a potentially more convenient method of payment. The move brought attention to the currency and sent its price skyrocketing at the time, but if transaction volumes are any indication it does not appear to attract much use.
That might gradually change as bitcoin continues an apparent stalemate regarding scalability and general innovation, which has led to increased fees, unpredictable confirmation times and increased user annoyance, but whether miners will allow such stalemate to continue to the point where users begin leaving en mass for other public blockchains remains to be seen.
Image from Shutterstock.
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