Analysis

Why Monero (XMR) is untraceable?

Anonymity and pseudonymity are similar concepts in blockchain design. Since the Bitcoin network uses a pseudonymous blockchain, private information about senders and receivers is not easily accessible, but transactions are publicly recorded on a ledger that is accessible to everyone. However, Bitcoin transactions are now easy to track thanks to advances in blockchain analytics. Blockchain analytics companies can determine which addresses belong to which individuals, making Bitcoin pseudonymous but not truly anonymous.

There are several known methods that involve combining publicly available transaction metadata, including addresses, timestamps, and amounts, with the user’s IP address to reveal the true identity of Bitcoin users. With the metadata, transactions can be traced back to their source, even if each user uses a different address for each transaction.

Important: IP address tracking is a method of using a user’s unique IP address to determine their location and origin. It has been around since the 1970s and 80s, when the Internet first emerged, and is used in cybersecurity, law enforcement, and network diagnostics.

Because of these shortcomings, the Bytecoin project forked in April 2014, giving birth to the Monero (XMR) network. One of the first blockchains, XMR exchange promoted complete anonymity, thereby solving the anonymity issues that plague networks like Bitcoin.

An overview of Monero’s anonymity and how to use it effectively is provided in this article. If you’re interested in learning more about the subtle differences between Monero (XMR) and Bitcoin (BTC), we cover them in more detail in our Bitcoin vs. Monero article. To refresh your principles, I recommend checking out Coin Bureau’s guide to the Monero protocol. Here’s a quick overview of Monero:

What is Monero (XMR)?

The first censorship-resistant, privacy-focused blockchain is called Monero. By default, all users of the Monero blockchain and their transactions remain anonymous. The core of the XMR protocol consists of two key elements:

Untraceability: for every incoming transaction, every potential sender is equally likely.

Unlinkability: it is difficult to establish that two transactions were sent to the same person.

Even with this anonymity, transaction proofs stored in a public database allow anyone to cryptographically verify that a transaction on the Monero blockchain was executed correctly.

Private transactions using Monero.jpg

Image of a Monero Explorer transaction. Private information is hidden on the blockchain.

Among the key attributes of the Monero blockchain are:

Privacy

XMR is the most ardent proponent of privacy. Using cryptographic techniques such as stealth addresses and ring signatures, the network anonymizes transaction amounts and hides the identities of senders and recipients.

Security

Monero (XMR) is a decentralized, permissionless proof-of-work mechanism. As a result, it benefits from the security features of comparable networks, such as the lack of a central authority and control over transaction data and user privacy.

Fair Mining

RandomX, the special POW mining method used by Monero, is ASIC-resistant. Here’s what that means:

The Bitcoin network’s mining protocol follows the principle of “one CPU, one vote.” In the early days of the network, when the computing power needed to run it was cheap and shallow, this argument worked quite well. But as more people used the network, specialized hardware known as ASICs emerged. ASICs are specifically designed to mine quickly and solve hash functions. Since then, Bitcoin mining has become a competition for the most powerful ASICs, where it’s clear that no CPU is created equal. As a result, mining activity has concentrated in pools and locations with inexpensive electricity.

ASIC-Resistant Mining on Monero

To remain ASIC-resistant, the RandomX mining algorithm regularly changes its code. RandomX makes mining memory-intensive, using RAM-intensive approaches. Adding RAM to ASICs is expensive and complex. RandomX’s memory resistance makes its consensus process more affordable than using expensive ASICs instead of traditional CPUs.

Resizable Block Size

With an adaptive block size that changes in response to transaction volume, Monero’s mining efficiency is maintained and the network can grow to meet demand. All users on the network benefit from this feature, which ensures that transactions are processed in a timely manner, even during periods of high demand.