Transactions on Monero are automatically private, meaning that the privacy technology employed works in the background and is not optional when sending or receiving XMR — the native Monero coin.
At the blockchain layer, there are primarily 3 areas that need to be addressed to achieve anonymity and fungibility: Transaction Origin, Transaction Destination and Transaction Amounts
Monero’s main privacy implementations address all 3 areas, and their recent integration of bulletproofs — a form of zero-knowledge proof — supplements the network’s privacy and efficiency further.
Transaction origins and destinations are masked in Monero by a combination of stealth addresses and Ring CTs. Stealth addresses are unique, one-time addresses created by the sender for a transaction on behalf of the recipient, providing unlinkability of addresses. RingCTs are an optimized form of ring signatures which muddle the key used to sign a transaction among a group of users — making it computationally infeasible to discern the actual signer of a transaction.
RingCTs even enable the masking of transaction amounts with reasonable efficiency. To improve the efficiency and privacy assertions of Monero transactions bulletproofs were implemented into the protocol in 2018, which have helped to reduce the large transaction sizes in Monero by up to 80 percent.
Confidential transactions are, on average, larger than standard cryptographic transactions (i.e., in Bitcoin) due to the commitments required to mask transaction details. While very new, bulletproofs in Monero are widely observed as a significant boost for the network.
The Monero Research Lab has published numerous academic papers on financial privacy and technology and plays an important role in the network’s future trajectory.
