important date for the community of Monero users and developers, as one
of the cryptocurrencies led the defense of anonymity for its users. As
already commented upon within previous posts,
Monero utilizes the CryptoNote protocol which was proposed in October
2013. This conceals who the sender and receiver are of the transaction
by utilizing circular signatures or a ring, which mixes the transactions
from different users. Furthermore, from January 2017, you can also
conceal the transferred balance in each transaction, by strengthening
the privacy with the implementation of Ring Confidential Transactions,
an improvement of its algorithm.
 |
| Figure 1. Iconography of the Monero project. |
This way, unlike other
cryptocurrencies such as Bitcoin, Litecoin or Ethereum, it is not
possible to consult the current balance of a Monero account by analyzing
the blockchain; nor for example, to maintain
a list of the richest addresses by reconstructing the transactions from the genesis block. In fact, when reviewing explorers of your blockchain such as Moneroblocks.info
and trying to analyze the content of a block, it means that in order to
see the content of a transaction we will need to know the associated
user’s view of the private key corresponding to their public address.
THE MAIN FORK
CHANGES
within its protocol. This change now means some of the blocks and
transactions are considered valid which would have previously been
considered invalid (or viceversa). Hardforks are considered, for
example, any alteration that changes the structure of the block (such as
the one proposed in BitcoinCash), the rules of difficulty or which
increase the set of valid transactions. This circumstance finally
requires that all of the nodes or users update the last version of the
software which implements the protocol. In other words, a hardfork
is a permanant alteration to the previous version of the blockchain,
and the nodes which run previous versions already will not be accepted
for the most recent version.
1 546 000 block which introduced some important changes.
Besides from the incorporation of the multi-sign addresses, more support
for hardware wallets and new features such as sub addresses; there was firstly, an adjustment of its consensus algorithm, which utilizes proof of work,
in order to stop whichever potential ASIC miners’ threat started to
concern an important part of the community; after the significant upturn
experienced by the network in recent months.
. As a result, the miners have had to update the applications which they
use to mine new blocks, i.e. the mining software which they use
to carry out the proof of work under the new rules.
Secondly, the minimum size of the ring signatures is elevated from 5 to 7
with the objective of equipping Monero transactions with increased
privacy. Thus, pool operators should ensure that the payments
which they use are a minimum size of a 7 ring, as otherwise they will be
refused by the network.
Implications of the PoW change
From there, they exposed their resistance to ASIC mining hardware. ASIC (Application Specific Integrated Circuit) is still a highly specialized type of mining hardware to perform this exact task; for example, the Bitcoin ASICs are specialized in calculating SHA256 hashes.
Due to the fact that they are physically designed for a specific use,
they generally have a great performance advantage in regards to the
general purpose of the hardware, as we use it when we use our CPU, GPU and even FPGA.
The fact that the domestic software remains profitable for mining
purposes contributes to the decentralization in order to maintain
incentivized current users of the currency.
Adding a bit about the history; the Monero code was a CryptoNote Fork,
used in order to create a more egalitarian mining network and to promote
decentralisaton, the original CrypNote developers
created the Cryptonight function, Proof of Work, in order to close the
breach amongst the CPU (the majority) and GPU/FPGA/ASIC (the minority)
miners. Whilst the CryptoNote authors admit that it is suitable that
some of the users can have a certain advantage above others; they
propose that their investments should grow at least linearly with the
network’s computational capacity, and not exponentially (as already
occurred with Bitocin which multiplied by 1000 times the computing
capacity within the network in a period of just 12 months). Therefore,
it is considered that any new ASIC Cryptonight development would not
foster the existence of a decentralized network.
One piece of evidence which suspects what is going on was the explosive growth of the hashrate within the entire Monero network throughout the last year. Although, it has also coincided with the malware, which was intended to be monetized through mining, there were some indications that this hashrate
increase represented a worryingly large amount of unknown mining energy
from anonymous sources, specifically motivated by the emergence of
specialized ASICs.
 |
| Figure 2. Timeline on Monero’s hashrate. |
Consequently, part of the Monero development team has already stated
their interest in carrying out the algorithm’s proof of work in a
periodic form in the future. This approximation that also entails their
risks; is precisely to minimize the chances of overly efficient ASIC hardware
being designed. Taking into account that each update can create
different blockchains and can lead to mismatches between the mining
community and developers. The method? Simple: to reduce the time of
potential, useful hardware, by limiting it as it passes between the versions.
With the change in PoW, suspicions have been confirmed and this indicator has plummeted in the following days to fork, on Friday 6th April. Considering that all of the miners may not have updated their mining software
yet, it is certain that these changes may not be definitive and that
the actual computational capacity will be adjusted as the days go by.
At least for now, bye, bye ASIC!
