There are a great number of Cryptocurrencies available for transactions. It has now become essential to compare some of the most promising digital currencies with Bitcoin in terms of security and privacy. Privacy aspects of Cryptocurrencies provide an effective cover from blockchain analysis.
In view of this, Monero has gained significant attention of investors and operators of darknet operators. This can be essentially attributed to its better security aspects in comparison with Bitcoin.
One is not required to go for an in-depth technical analysis to understand how Monero overtakes Bitcoin in terms of privacy enabling features. The following key factors can offer a fair insight into the attractive privacy enabling aspects of Monero.
Superior masking with dual-key address
Digital currency related transactions can be viewed on blockchain as any Bitcoin transaction is traceable in terms of the receiving address. The stealth address used by Monero is based on dual-key functionality to help users shield the transaction on blockchain.
For every payment that is executed, a receiving address has to be generated by the public address in digital currency related transactions. The receiving address is designed for single use as it pertains to a single transaction.
Although, the receiving address of a Monero transaction is capable of being viewed, it’s single-use address is not linked to user’s public address. This provides a greater privacy to user who is dealing in Monero. The receiving address is one-use address and generated automatically in a Monero transaction.
Although, generation of new single use address is possible in case of Bitcoin, the same is not executed automatically. This feature is available by default in Monero.
Shielding the origin with ring signatures
Ring signature is yet another feature of Monero that commands attention of users who wish to harden privacy of transactions. From the outsider’s perspective it is impossible to know the exact origin of transaction although he can find few potential origin as the clarity of specific outputs is absent in blockchain analysis of Monero transactions.
What’s more, the level of privacy is designed to get more intense with every new transaction because from the viewer’s perspective, actual spending of outputs hardly takes place.
Similar feature is being offered by Bitcoin and is known as CoinJoin. However, Bitcoin transaction lacks default implementation of the feature. Moreover, in order to access CoinJoin, the user must establish an active communication with other users that are willing to mix unspent transaction outputs or UTXOs. Ring signature is Monero’s answer to Bitcoin’s CoinJoin and it is enabled by default.
Shielding transaction amounts
It is also necessary to mask the total amount of any transaction in order to provide seamless anonymity of the transaction to users. This calls for RingCT which is also known as Ring Confidential Transactions.
RingCT proposes to hide the transaction amounts because if the amounts are open to viewers, then it will be easy to trace the transaction by knowing who has sent as well as who has received the particular amount. This underlines the essence of hiding amounts in transactions.
Feature of RingCT will be available for Bitcoin users with help of a soft fork in a near future. On the contrary, Monero users leverage JoinMarket, which is one of the most sought after tools to hide amounts by using a mixing transaction to match output and input amounts. Usually the splitting of inputs into similar denominations serves the purpose. The feature of RingCT is already available for users of Monero.
Shielding address of origin
Any transaction can be traced back to its address of origin if sufficient care is not exercised to mask IP addresses. Blockchain analysts can easily determine location of the sender by analyzing IP address. Monero is found to leverage i2p, which essentially helps shield original IP address of the transaction.
In terms of its features i2p bears close resemblance with Tor since both are leveraged for adding anonymity to communications that are associated with online transactions of digital currencies. Although, users of Bitcoin have access to use Tor for anonymizing the transactions, the attribute is not available out of the box.
Understanding security of Monero and Bitcoin
Bitcoin enables users execute transactions without sharing identities as they are only required to provide digital addresses. The real culprits are these addresses because they can get registered in public ledgers and miners can certainly use sophisticated methods to decipher the addresses and identify users.
Privacy is the default feature of Monero, unlike Bitcoin which requires users to take special precautions and measures to transact with absolute anonymity. Secondly, Bitcoins can be blacklisted in the event of a theft or hacking incidence. The blacklisting is only possible by identifying and tracking the lost Bitcoins.
Such a phenomenon would never occur in case of Monero, as it is not possible to trace or identify the Monero coins. These features make Monero a leader in the privacy segment.