Monero acts as a currency, however, their primary goal is privacy. While the Bitcoin Network offers pseudo-anonymity, it is actually fairly easy to trace the path of tokens. With the myriad of security mechanisms Monero features, it is one of the best options to stay anonymous while transferring cryptocurrency. We’ll take a very abbreviated dive into the steps Monero takes in order to be the most private cryptocurrency available.
Ring signatures are a cryptographic tool used to obscure the addresses that are conducting transactions. Essentially, your address is thrown in with a bunch of other addresses. At that time, all of the addresses are mixed up. Think of it as a tumbler for addresses transacting within a block. Or better yet, think of it as a giant boggle board. Thrown in the characters used in all the addresses in the block, and shake them up. Ring signatures have proven to be a very effective tool in obscuring transacting addresses on the Monero network.
Another security mechanism that has to do with hiding the addresses of users is how Monero generates temporary addresses that are then thrown away after use. We’ve talked about HD wallets before, but if you missed that video, HD wallets have the ability to generate multiple public keys from a private key. Users in other networks, like Ethereum, are able to keep multiple addresses within the wallet and can continue to transact with them. Monero is specifically generating these temporary addresses to assure anonymity on the network.
We’ve already gone over how transactors identities are obscured, but there are other parts of transactions that Monero can also obfuscate. The most recent development in the network is a tool called bulletproofs. Bulletproofs allow the amount being transacted to be obscured, which is confusing at first because you would think that piece of material is crucial to make sure double spending cannot occur. Bulletproofs take care of this by creating a system where the amount transacted is unknown, but can still be checked against account balances to make sure that accounts cannot spend their funds twice.