At the moment, there are quite a few cryptocurrencies that are considered relatively anonymous, for example: Monero, Dash, Zcash, SmartCash, Komodo, Horizen, Verge, NavCoin, PIVX, PIRATE and Zcoin. In this series of articles I will focus only on the first three, as they are the most popular.
But first you need to figure out why, for example, Bitcoin is not considered anonymous? Bitcoin is anonymous in the sense that you do not know the identity of the person who sent you the coins and he does not know the identity of the person whose wallet the coins arrived in. This is where the anonymity ends. Bitcoin was not developed as a means of anonymous payments, it was developed as a means of making payments without an intermediary in the form of a bank. All transactions in the Bitcoin blockchain can be viewed. Absolutely anything and anyone can do it.
Monero:
Source code: open.
How is anonymity ensured?
Three factors are key:
1. Recipient addresses are stealth addresses. An outside observer will not be able to determine which wallet the funds ultimately went to, since transactions on the Monero network are carried out through unique one-time “stealth addresses” (hidden addresses) that create the senders’ wallets. Coins are sent to this address. Addresses hide the relationship between the sender's address, the recipient's address, and any other transactions/addresses. The recipient will not lose anonymity if he accepts multiple payments to one address, since incoming payments will go through different hidden addresses.
2. Ring signatures are used. The essence of ring signatures is that a message is signed by one of the members of the list of potential signers, but who exactly is not disclosed. A list is formed of an arbitrary number of different persons, including the real signatory. The signer does not require permission, cooperation or assistance from the persons included in the list to apply a signature. A ring signature is a type of digital signature—a way to prove your authority to make transactions on the blockchain. In life, for this purpose, we present our passport, sign or enter a PIN code. The peculiarity of a digital signature in the blockchain is that it makes it possible to confirm one’s identity without disclosing one’s data. The address on the blockchain belongs to the one who knows the private key for it. To prove that you have it and not reveal it to anyone, use a digital signature. Also, ring signatures in Monero include impurities in the transaction in the form of other people's transactions made previously. They help to confuse the tracks: it is impossible to accurately determine where in the transaction there are “impurities” and where the real funds are.
3. Ring confidential transactions or the RingCT protocol are used. Confidential Transactions (CT) technology hides the time, payment amount and addresses involved.
There are other technologies that ensure the anonymity of transactions in Monero, but the purpose of this article is for informational purposes only.
But, unfortunately, not everything is so smooth. It’s not for nothing that Edward Snowden said about Monero that it is an “amateur cryptocurrency.” A team of researchers from some of the world's leading universities, including Princeton, Carnegie Mellon University, Boston University, the Massachusetts Institute of Technology and the University of Illinois at Urbana-Champaign, has released a study highlighting the shortcomings of the mixing algorithm that allow individual transactions to be tracked. .
And the problem concerns not only those who were going to pay with Monero today - everyone who has ever used the system is at risk, since all payment data is forever recorded in the blockchain and is available for analysis.
Researchers note that things were especially bad before the update released in February 2017 (the use of the RingCT protocol was added). Transactions made before this point are very vulnerable, but payments made after the update also do not provide the confidentiality that users of the system expect. One of the paper's authors, Andrew Miller of the University of Illinois at Urbana-Champaign, says:
“People tend to be simplistic, so they believe that Monero transactions guarantee their anonymity. In fact, there is open information that is not encrypted by network means.”
He said this due to the fact that in the old days the user was given a choice of how to conduct a transaction and the option with a lower level of anonymity required a lower commission, which is why it was chosen more often.
