syllabus

Monero

Introduction

1Introduction

Welcome to the Monero syllabus! Monero starts with many of the same principles of Bitcoin and takes privacy and decentralization further. However, unlike many projects, Monero is not based on Bitcoin’s code. It was instead forked from CryptoNote, which was created in early 2014.

Monero is one of the largest open-source projects in the world, with over 12,500 commits by over 300 contributors at the time of writing.

Prerequisites

6Prerequisites

This is a beginner syllabus! No prior background knowledge of Monero is required. If you are new to the cryptocurrency world, it’s recommend you look into a few topics like Blockchain and Cryptography. They are not necessary to know for purchasing Monero, but the more you understand, the better you can invest your time and money into it.

From Bitcoin to Monero

3From Bitcoin to Monero

Bitcoin revolutionized the world by introducing a system where the security of one’s funds were secured without having to trust any participant on the network. It uses a shared ledger called a blockchain that simply records a history of transactions that have occurred. With Bitcoin, it shows explicitly that a certain amount of Bitcoin was transferred from one address to another. It is completely transparent.

Monero functions the same way, except the information stored on the blockchain is indiscernible to an outside observer. Monero uses a different mining algorithm to secure the network called CryptoNight. Through this process, Monero provides the same services as Bitcoin, and does not rely on any trusted party.

Fungibility and Privacy

4Fungibility and Privacy

Fungibility is an important property of money. It simply states that two people should be able to exchange equal value (eg: 1 XMR for 1 XMR) without either party losing out. Suppose that someone offered to trade money obtained from the WannaCry ransomware attack for the same amount of your own. Would you accept it?

Non-Private Cryptocurrencies

Bitcoin and every other non-private cryptocurrency lack this important quality, since people can track what the money was used for in the past. This places the receiver in an unfortunate situation where they need to audit all incoming funds or else risk receiving funds they cannot use. Perhaps even more importantly, they want to avoid having any association with any of the illicit actions of these “tainted coins”.

Workgroups and Resources

6Workgroups and Resources

Monero is a decentralized, open-source project led by the Monero Core Team. It is self-organized into several unofficial, volunteer workgroups. There are no requirements to make one, and few have requirements to join.

Most Monero contributors work pro-bono. However, for those who do need funding for their work, people can use the Forum Funding System (FFS). In a GoFundMe-like fashion, people can pitch ideas, ask for donations, and receive payment when set milestones are reached. At the time of writing, over 38,977 XMR has been crowdfunded since the start of this initiative, totalling $17.7 million in current prices.

Nodes and Miners

5Nodes and Miners

Like Bitcoin, Monero relies on two important infrastructure elements: nodes and miners.

Nodes

Nodes simply store a copy of the blockchain. They communicate with other nodes and wallets to process these transactions. It is important to run your own node if you can, since it offers the best security and privacy.

Ring Signatures, RingCT, and Stealth Addresses

5Ring Signatures, RingCT, and Stealth Addresses

Let us take a quick dive into the three major technologies that obfuscate information on the blockchain. In the simplest sense, ring signatures, RingCT, and stealth addresses protect the sender, receiver, and amount, respectively.

Analogy

Think first about giving money to someone in real life. If you owe someone $5, you simply hand them a $5 bill. Pretty simple. With Monero, everything works the same way, except instead of a bill with a set denomination, you give them an output with a loaded amount on it. This output is now theirs to spend in whatever way they want.

Kovri

4Kovri

Kovri is an open-source side project that attempts to bring more network security and privacy to cryptocurrencies. Though it is being built for Monero, it will feature a common API that can be used by any cryptocurrency or project.

Kovri is an anonymizing router that protects network participants from leaking unwanted information. With Monero, it will mostly be used to break the possible association between transactions and the IP addresses that send them. However, it could be used in extreme cases to hide all Monero traffic, allowing people to run nodes privately.

Dynamic Block Size and Fees

4Dynamic Block Size and Fees

Many cryptocurrencies have an arbitrary block size limit. Although Monero has a limit, it is adaptive based on the past 100 blocks. Similarly, fees change based on transaction volume.

As more transactions are processed on the Monero network, the block size limit slowly increases and the fees slowly decrease. The opposite effect holds true.

Buying, Selling and Storing Monero

3Buying, Selling and Storing Monero

Now that you have a complete understanding of the Monero currency, you may be interested in buying, selling or (hopefully) receiving them!

Currently, there are few options to directly buy Monero with cash. Most exchanges (places where you can buy a variety of coins such as Monero), only let you purchase Monero with Bitcoin, Ethereum, and Litecoin. Kraken supports direct pairs to fiat, but you need to make a wire transfer.

Getting Involved in the Monero Community

10Getting Involved in the Monero Community

In the age of decentralization, everyone has a part. As Monero grows and receives more press, we’ll see an increase in people flocking to the Monero communities. To keep the project strong, we need to keep the community surrounding it educated.

You can help out by getting involved in the Monero community. Now that you are educated, you can pass on your newly acquired knowledge to new learners.

The Future of Monero

5The Future of Monero

Monero will stick to its core competency of being safe money for everyone. It will incorporate improvements to improve decentralization, security, privacy, and efficiency.

Reduction in Transaction Size

Currently, Monero transactions are relatively large at about 13kB. Research on bulletproofs, a more efficient range proof for RingCT, is expected to reduce transaction size (and fees) by 80-90%. The code is live on testnet and is undergoing peer review.

Justin Ehrenhofer
MENTOR
I am a student at the University of Minnesota studying finance and management information systems. I am the co-president of [email protected], a student group with the mission of promoting education, advocacy, and community. I was drawn to Monero in early 2015, and I was swept by the incredible team and ideologies. I organize the Monero community workgroup, and I speak to people around the world about cryptocurrencies. BMC logoBuy me a coffee