The Monero team, on their website, states that the cryptocurrency is ‘fast, private and secure’. They also say that ‘you are your own bank’ and ‘others cannot see your balances or track your activity. However, there have been allegations against Monero that their transactions are no longer private and that it can be traced.
In a paper titled ‘An Empirical Analysis of Linkability in the Monero Blockchain’ which was released in April 2017, Andrew Miller, Malte Moser, Kevin Lee and Arvind Narayanan came up with a report that empirically evaluates two weaknesses in Monero’s ‘mixin’ sampling strategy. ‘Mixins’ are fake coins which are used by users to obscure the transactions.
A website named ‘monerolink’ claimed to have identified the real coins in about 62% of all transactions excluding the ones in which real coins are used. They found out that among these coins, the newest ones are the real ones 90% of the time.
The paper stated:
“About 62% of transaction inputs with one or more mixins are vulnerable to “chain-reaction” analysis — that is, the real input can be deduced by elimination.”
It continues to read:
“This becomes possible as the mixins they include are spent by 0-mixin transactions. Second, Monero mixins are sampled in such a way that the mixins can be easily distinguished from the real coins by their age distribution; in short, the real input is usually the “newest” input.”
As a response, the Monero team came up with the idea of ‘RingCT’, a confidential signature technology, which became mandatory through the September hard fork in 2017. But, this time, a bigger team of people published another paper titled ‘An Empirical Analysis of Traceability in the Monero Blockchain’ which found out the importance of mining pools and the former anonymous marketplace AlphaBay (a Dark Web market) on the transaction volume. After removing mining pool activity, there remains a large amount of potentially privacy-sensitive transactions that are affected by these weaknesses.
Gingeropolous, the core developer of Monero commented on the article:
“…should read – Cryptonote is less untraceable than it seems, so monero has been altruistically making improvements”
Justin Ehrenhofer, a developer stated as a response to this paper that the vulnerabilities were found out two years which were mitigated over a year ago and was resolved before the first edition of the paper was published.
The paper also fails to take into account the full effectiveness of RingCT where it almost completely reduced the instance of linked transactions and the upcoming hard fork will eliminate those instances altogether. Moreover, Monero developers stated that the algorithm used by the paper’s research team was outdated.
However, the recent paper mentions Monero’s RingCT and provides a number of recommendations for improving Monero’s future. A new algorithm is suggested which could reinforce the existing ring signature scheme and a new ‘mixin’ method for sampling random inputs. Other methods include avoiding payouts from public pools and notifying the users that transactions prior to early 2017 are vulnerable to tracing analysis.
A Twitteratti says:
“Someone is trying hard to bring down @monerocurrency price further! Just ignore the FUD”
Another Twitteratti commented:
“lmao unfortunately true. But the point is its been resolved and we have our private blockchain back on track. Anyways it was a bit frightful.”
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