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When analyzing a project, the Eden Labs team looks for projects that do something unique or do it much better than its competition. Quality projects should be able to explain complex ideas simplified to their audience. In addition, projects that rely heavily on a broad user base have to have an incentive for the first ten people to join the network before a million users is ever achievable. No project will succeed if it requires a million participants to bring any value to its users.

Summary

Monero (XMR) is a DLT project lauded as the world’s most privacy-centric coin. Monero utilizes ring signatures and stealth addresses to create untraceable transactions where third-party onlookers cannot identify the sender, receiver, or transaction amount. By perpetually protecting both the sender’s and receiver’s information, Monero maintains an inherent advantage when compared to other cryptocurrencies, due to its strong privacy and fungibility properties.

Tags: Security, Privacy, Decentralization

Industry Need

The idea that cryptocurrencies and DLT solutions are all anonymous and private could not be further from the truth. Bitcoin, for example, is arguably one of the most transparent financial protocols that has ever existed. Third-party onlookers can view every transaction, amount, sender and receiver address. With this wealth of available information, users can be tracked, and transactions can be followed relatively easily. Provided the original address is linked to a real-world identity (with a credit card perhaps), Bitcoin is neither private nor anonymous. This hurts the fungibility of transparent DLT solutions such as Bitcoin. As blockchain analytics programs become increasingly proficient, the lineage of coins in the blockchain becomes more visible. If specific coins are marked as “tainted” due to a connection to previous illicit activities, merchants and exchanges could refuse to accept them out of fear of potential legal issues. This hurts the intrinsic value and fungibility of the coins in such a system. 

Solution

Monero offers a solution to the issues facing traditional cryptocurrencies by implementing a platform where privacy is paramount. Because of its inherent privacy features, the Monero token (XMR) is intrinsically valuable to the ecosystem and cannot lose any of its fungibility due to potential illicit involvement in its past. 

Tech Analysis

The Monero platform employs several unique technical aspects which enable it to function securely and privately. Among these are Ring Signatures, Stealth Addresses, and Ring Confidential Transaction (Ring CT). 

To maintain anonymity in the network, Monero adopts ring signature technology. Ring signatures provide privacy by allowing senders to join a group and sign a transaction as a single unit. This method anonymizes the sender by blending them in with the crowd. Verifiers can prove that an output exists and that one of the participants in the group is the authentic signer. However, they cannot determine which member is the signer. As the ring signature group size increases, the probability of each member being the authentic signer decreases proportionally. This method protects the identity of the sender and ensures privacy within the Monero platform. 

To protect the privacy of the recipient, Monero uses stealth addresses. Stealth addresses allow for unique, one-time destination addresses for outgoing transactions. This prevents the reuse of addresses and therefore increases privacy for users. The stealth address method will enable recipients to publish a single address and receive unlimited anonymous payments to it without having to worry about revealing their transaction history. 

By using ring signatures and stealth addresses, Monero can protect both the sender and recipient from snooping eyes. However, there is one crucial aspect still missing: privatizing transaction amounts. Despite all the previously mentioned privacy features, transaction amounts are not anonymous. While it’s unlikely that this would cause too many issues, specific transactions could still certainly be linked to various purchases. To address this problem, Monero utilizes Ring Confidential Transactions (Ring CT). Ring CT conceals transaction amounts to anyone other than the sending or receiving parties. This is accomplished through a method similar to public-key encryption; the sender encrypts the transaction values using a shared secret between the transacting parties, and the recipient can decrypt the value using a combination of their private key and the transaction’s public key. Ring CT is the final piece which completes the privacy requirements necessary for the truly private and secure decentralized network. 

Verdict

By combining ring signatures, stealth addresses, and Ring CT, Monero can provide privacy and security for senders, receivers, and transaction amounts. By obscuring these three areas, the Monero protocol has almost achieved full privacy. IP privacy is, however, still an issue which Monero has been working to solve, and it will be addressed in near-future implementations. Kovri will hide all Monero traffic through a hidden network similar to Tor with several technical differences. It will be integrated into Monero once development is complete. Once incorporated, Monero will be a strong competitor in the industry of secure, private, and decentralized ledger services.

Roadmap

The Monero project’s roadmap is clear and concise. The team has laid out their completed tasks, ongoing tasks, and upcoming tasks for all to see. The project has been in development since 2014, so there has been substantial time for development. One point to highlight is that the project does not mention any dates for the completion of current and upcoming tasks. That’s definitely an issue.

Token Economics

Token Acronym: XMR

Circulating Supply: 16,266,706 XMR

Total Supply: ~18,400,000 XMR

Marketcap: $1,606,422,500 USD 

Intrinsic Token Value? – The Monero token is intrinsically valuable due to its inherent privacy features and its role as an anonymous medium of exchange. There is no other way to conduct transactions on the Monero network without XMR tokens. This means that users must acquire XMR to benefit from the features that the Monero network provides.

Verdict

The distribution of XMR is impossible to find due to the implementation of one-time-use stealth addresses in the network. This is not a big issue, but it is worth noting. Monero is currently being regularly mined as more tokens are added into the circulating supply daily. Once the total supply amount is reached, Monero will stop decreasing the mining reward and maintain a rate of 0.3 XMR/minute. This is done as an incentive to keep the blockchain secure through computation power. XMR’s intrinsic value is self-evident; without XMR transactions cannot be performed within the network.

Team & Leadership

• Riccardo “fluffypony” Spagni – Project Lead
  • Academic background in informatics and logistics
  • Many years of experience as a software developer
  • Github
  • Reddit
  • Twitter
• Francisco “ArticMine” Cabanas
  • Github (Empty)
  • Reddit
• Othe
  • Reddit
• Javier Smooth
  • Github
  • Reddit
• binaryFate
  • Github
  • Reddit
• Luigi1111
  • Github
  • Reddit
• NoodleDoodle
  • Github
  • Reddit
• The Monero project has well over 400 contributors.

Verdict

The individuals behind one of the leading privacy coins on the market are mostly anonymous. There is scant information to be found on the individuals behind Monero, and this is likely a conscious decision made by them to avoid associating specific names and faces with a potentially controversial cryptocurrency. Currently, only the project lead, Riccardo has revealed his identity to the public. The team members listed are all active on Reddit and regularly interact with the cryptocurrency community. All but one of their Github’s are full of contributions and repositories. This indicates that they are all proficient programmers that have taken the Monero project under their wing. 

Marketing & Social

Twitter – 304,000 Followers 

Facebook – 25,923 Likes

Reddit – 136,168 Readers

Telegram – 7,264 Members

Github – 170 Contributors, 16 Repositories, 1,611 Forks

Verdict

Monero has a large following distributed across its various social media platforms. The project is active on all of the listed platforms, but places a heavier emphasis on Twitter and Reddit. The project’s Github is extensive and full of eager contributors. As one of the more popular projects in the industry, their social media activity is not as necessary or vital as it would be for an unknown project. But nevertheless, it is valuable, and it provides comfort to the community that they can interact with the project even though most members are anonymous.

Red Flags

1. Ring Sizes
   1. A potential issue regarding ring signature must be highlighted. When confronted with low ring sizes (group sizes in ring signatures) the probability of an onlooker determining the authentic sender is increased. Since bigger ring sizes required higher fees, users might be inclined to opt for smaller ring sizes without being aware that their transactions become more vulnerable to attack that way.
2. Exchange Transfers
   1. Transmission of XMR funds through exchanges could potentially be exploited by attackers. Since exchanges store KYC information and would know a user’s one-time ring signature; if an attacker could access this, they would be able to cross-reference that information and attribute it to a specific user. 
3. Team Anonymity 
   1. The people behind the Monero project have opted to remain anonymous – erhaps as an homage to Mr. Nakamoto. Nevertheless, their anonymity raises questions as to who runs the show and what kind of influence each core member has over the project. It is unlikely that the core members will step into the light. However, this concern is mitigated by their active community engagement.

Conclusion

The Monero project’s privatization of sender, recipient, and transactional information provide a high level of anonymity making XMR well positioned to be the world’s leading privacy coin. The developers behind the project have proven themselves to be adept and committed to the project. Currently, Monero is achieving its goal of providing secure and private transaction capabilities to the world, and its support only continues to grow. As a first mover in the space, Monero has already achieved the status of a leading privacy coin. With their strong commitment to development and research, it will likely continue to be an industry leader among privacy coins. 

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Disclaimer: This is not investment advice, merely our opinion and analysis on the project. Do your own research.