From its latest ring signature construction, CLSAG (Concise Linkable Ring Signatures and Forgery Against Adversarial Keys), to the reduction in transaction sizes, this hard fork could be monumental to the future of the network.
In a world where blockchain projects foam at the mouth for regulatory approval from governments, Monero laughs in the face of transparency; Privacy is Monero’s first and last name.
Contrary to popular belief, cryptocurrencies don’t necessarily allow for completely anonymous transactions. While there have been efforts to create privacy-enabled layers on blockchains like Bitcoin and Litecoin (using a protocol called MimbleWimble), they aren’t anonymous by default.
The word most commonly used to describe networks like Bitcoin is ‘pseudonymous,’ meaning they provide partial anonymity while making transactions. However, transactions on the blockchain are public, and any transfer is traceable to the address that initiated it.
Monero (XMR), on the other hand, offers complete anonymity. At the start of the year, Jerek Jakubcek, an analyst from the European Union Agency for Law Enforcement Cooperation (Europol), claimed that the coin was utterly untraceable when routed through an onion network.
Over the years, various blockchain data analysts have made similar claims, leading many members of the blockchain community to wonder if this could impact the way governments regulate cryptocurrencies – if they decide to regulate them at all. While there are other privacy coins out there like Dash, Zcash, and Verge, they don’t come close to the popularity garnered by XMR.
When a decentralized network goes through an upgrade, it can do so in two ways – a hard fork or a soft fork. Both make changes to how the system functions, but in significantly different ways.
A soft fork implements a change that does not replace any pre-existing rules on the network and adds opt-in features that are not mandatory for nodes to communicate with each other. A hard fork is more destructive in that the upgraded chain becomes incompatible with the previous version due to possible changes to earlier features.
In 2017, Bitcoin was hard forked due to a community disagreement regarding the size of blocks in the chain. This resulted in the creation of a new chain with its own coin (BCH). The forked chain, dubbed ‘Bitcoin Cash,’ has been running in parallel with Bitcoin for the last three years and might itself face a hard fork later this year.
During a hard-fork, members running full-nodes choose whether or not they want to upgrade their software and support the upgrade. Like Bitcoin, Ethereum also underwent a major hard-fork in 2016, resulting in Ethereum Classic (ETC). Unlike the Bitcoin and Ethereum hard forks, however, Monero’s upgrade was non-contentious and did not result in a chain split or the creation of a new coin.
The implementation of a new signature scheme (CLSAG) has many implications for XMR. The previously employed MLSAG (Multilayered Linkable Spontaneous Anonymous Group) signatures used separate computations to sign transactions and commit them to the blockchain. This made transactions slower, which isn’t ideal for any public payment network.
CLSAG allows users to hide their transaction outputs alongside other unrelated ones, and this can be done without the participation of anyone else. By unifying the computation process, transaction sizes on the blockchain are now 25 percent smaller, leading to a 10 percent reduction in the time it takes to verify a transfer.
With the proposed Triptych algorithm in development, Monero is dominating the privacy coin space. In fact, XMR’s market capitalization is worth more than that of Dash, Zcash, DigiByte, and Verge combined. As Monero continues to implement counter-tracing methods, conceal users’ transactions and stump blockchain analysts, the future of anonymous payments appears to be quite identifiable.
This isn’t the first time Monero has performed a hard fork, and likely won’t be the last. In late 2019, Monero upgraded its mining algorithm to the ASIC-resistant RandomX to lower the barrier for entry to miners. This too was a non-contentious hard-fork and didn’t cause a chain split or create a new coin.
In August 2020, renowned blockchain auditing and security firm CipherTrace announced that they had developed the world’s first Monero tracing tool in collaboration with the United States Department of Homeland Security. This sparked concern in the Monero community, with many members questioning how the tool functioned.
In an online discussion with CipherTrace CEO Dave Jevans, Sarang Noether, a researcher from MRL (Monero Research Lab), said, “What is the math behind this? Saying that this is a 90% or not 90% [for example] likelihood of signing depends entirely on the metrics you are using—it’s very subjective.”
The Monero dev team quickly responded to CipherTrace’s announcement, revealing that a new algorithm called ‘Triptych’ was in development, which promised to protect users against the reported detection methods. With the amount of effort security firms are putting into tracking this elusive currency, Monero will likely continue to implement network upgrades in the future to maintain its users’ anonymity.