Chances are that you are aware of the fact that Bitcoin isn’t truly anonymous. While it does offer some privacy protection, the transparency of the blockchain allows anyone to see what transactions you’ve carried out.
Unfortunately, monitoring the public ledger, analysis of KYC (know your customer) policies and anti-money-laundering laws can reveal quite a lot about certain bitcoin users, especially if they’re not careful in hiding their identities. While there are a couple of possible solutions, none have been implemented into the bitcoin code, and most bitcoinists don’t have the patience needed to intricately hide their marks.
During the last couple of weeks, a new digital currency has managed to pick up quite a lot of ground. Because of the issues outlined above, numerous bitcoin users have switched to an altcoin focusing on privacy, known by the name of Monero. In the bitcoin scenario, most bitcoin transactions are linked together in a way or another, as they consist of outputs and inputs, often generated by the same person. With this in mind, upon attempting to move funds from an address to another to generate more anonymity, trackers can easily identify the inputs and outputs, and hence, determine the addresses belonging to the person in question.
Monero takes a different approach to this issue, as the alternative currency is not based on Bitcoin’s main code. Instead, the digital currency released in 2014 is based on something known as the CryptoNote reference implementation, designed from scratch. Monero’s basic structure is a bit different, as inputs and outputs are rounded, thus giving different results upon calculation. This feature alone makes blockchain analysis significantly more difficult.
However, the actual magic comes from a different trick. A cryptographic signature scheme known by the name of ring signatures is implemented through iterations of the same key, still capable of proving who signed, send or received a transaction. The actual version being used by the altcoin is called Traceable Ring Signatures, which basically allows senders to freely complicate all transactions. In return, this makes Monero-based transactions almost impossible to link together. The best case scenario for the blockchain analysist would be to calculate the odds, yet again, this is time-consuming and inefficient.
At this moment in time, numerous members of the bitcoin market use the digital currency on black markets, and to carry out illegal activity. The alternative of an untraceable currency may sound good to most who either wish to stay out of the eyes of law enforcement, or would simply like to keep their financial information private, without needing to continuously generate bitcoin addresses, and mix bitcoins.
Based on everything that has been outlined so far, what do you personally think about the additional features that Monero offers? Should bitcoin developers consider adding better privacy measures to the blockchain, which will in turn, affect its transparency? Let us know your thoughts in the comment section below.