Coin News

Japanese Fintech heavyweight SBI Holdings plans to launch a Ripple-powered mobile payment application called MoneyTap. In a tweet shared with his followers, Takashi Okita, CEO of SBI Ripple Asia shared the web page of the new payment application, which promises to offer "easy bank transfer application" without fees.

The exact launch date for the mobile app is uncertain, but the site gave an estimated timeline for the release of both the iOS and Android versions for Autumn of 2018.

Earlier this year, SBI Ripple Asia, a joint venture between SBI and Ripple, announced plans to create a "groundbreaking smartphone application" based on Ripple's blockchain technology which will allow bank customers to settle transactions instantly.

MoneyTap is expected to "provide on-demand payments" to Japanese customers through its consortium. The project is currently supported by the Japan Bank Consortium (JBC), a collection of 61 Japanese banks members brought together by SBI Holdings and SBI Ripple Asia. Some of these banks, namely, SBI Net Sumishin Bank, Suruga Bank and Resona Bank, will reportedly have priority to offer the service to its customers after launch, while the other banks will have access to the technology down the road.

The payment app hopes to increase the flexibility of domestic payments in Japan and eliminate the current time constraints imposed by traditional banking systems.

Once it goes live, the application will allow Japanese customers to conduct domestic transactions round the clock. In addition, the mobile app will eliminate "existing banking and ATM fees" that are currently applied to domestic transfers in Japan, making transfers faster and cheaper for consumers.

When the project was first announced, Okita stated his excitement, heralding that the mobile app and Ripple’s blockchain will "improve payments infrastructure in Japan."

“Together with the trust, reliability, and reach of the bank consortium, we can remove friction from payments and create a faster, safer, and more efficient domestic payments experience for our customers,” he added.

Emi Yoshikawa, director of joint venture partnerships at Ripple, added to Okita’s excitement.

“We’re proud to provide this production-ready technology that not only improves the international payments experience, but also have applications for domestic payments infrastructure.”

Japanese Fintech heavyweight SBI Holdings plans to launch a Ripple-powered mobile payment application called MoneyTap. In a tweet shared with his followers, Takashi Okita, CEO of SBI Ripple Asia shared the web page of the new payment application, which promises to offer "easy bank transfer application" without fees.

The exact launch date for the mobile app is uncertain, but the site gave an estimated timeline for the release of both the iOS and Android versions for Autumn of 2018.

Earlier this year, SBI Ripple Asia, a joint venture between SBI and Ripple, announced plans to create a "groundbreaking smartphone application" based on Ripple's blockchain technology which will allow bank customers to settle transactions instantly.

MoneyTap is expected to "provide on-demand payments" to Japanese customers through its consortium. The project is currently supported by the Japan Bank Consortium (JBC), a collection of 61 Japanese banks members brought together by SBI Holdings and SBI Ripple Asia. Some of these banks, namely, SBI Net Sumishin Bank, Suruga Bank and Resona Bank, will reportedly have priority to offer the service to its customers after launch, while the other banks will have access to the technology down the road.

The payment app hopes to increase the flexibility of domestic payments in Japan and eliminate the current time constraints imposed by traditional banking systems.

Once it goes live, the application will allow Japanese customers to conduct domestic transactions round the clock. In addition, the mobile app will eliminate "existing banking and ATM fees" that are currently applied to domestic transfers in Japan, making transfers faster and cheaper for consumers.

When the project was first announced, Okita stated his excitement, heralding that the mobile app and Ripple’s blockchain will "improve payments infrastructure in Japan."

“Together with the trust, reliability, and reach of the bank consortium, we can remove friction from payments and create a faster, safer, and more efficient domestic payments experience for our customers,” he added.

Emi Yoshikawa, director of joint venture partnerships at Ripple, added to Okita’s excitement.

“We’re proud to provide this production-ready technology that not only improves the international payments experience, but also have applications for domestic payments infrastructure.”

Can bitcoin be used for social good? If anyone thinks so, it’s Ray Youssef, the CEO of peer-to-peer bitcoin platform Paxful.

A successful entrepreneur in the crypto and blockchain space, Youssef comes from humble beginnings and understands the importance of maintaining control over one’s finances. Marred by memories of homelessness and extreme monetary strain, Youssef’s journey to build Paxful was an arduous one.

“When my mother got divorced and lost her home that she had put so much into, I went into higher gear,” he explained in an interview with Bitcoin Magazine. “My first two startups were successful, but then I had 11 failed projects in a row. I took risks and kept taking them until my savings were gone, and I was so busy working on Paxful, trying to get it to work, that when I lost my apartment I went for walks at night and slept in a new place when my friends couldn’t bunk me.”

Youssef says things took a positive turn when he and his business partner chose to get serious about entering the crypto scene. “A fellow bitcoin enthusiast told us about how you could sell bitcoins and make a profit,” he says. That encounter made him look more closely at the world of peer-to-peer bitcoin trading.

“We didn’t know its potential back then — we just saw that it worked for us and we wanted to make it even easier for other people to do the same, whether to start a business online or just get extra rent money.”

Today, Paxful is a peer-to-peer online bitcoin platform that connects BTC purchasers with sellers. Currently, the site offers over 300 ways to purchase bitcoin including credit and debit cards, PayPal, Western Union transfers and even Amazon gift cards.

Buyers start out by finding an offer they like. They then work one-on-one with an experienced seller who guides them through the purchase process via online chat. Once everything is set, they pay the seller directly from a selected account to receive their coins.Every seller is verified to offer customers the highest level of safety, and Paxful will soon implement KYC in an effort to further protect buyers.

Once his marketplace was ready, Youssef convinced his closest friends to give it try. Things began to grow from there, but his big break came from a phone call he would receive one fortuitous morning:

“I left my personal mobile number on the website to help people directly, but no one ever called until one lady desperately in need of bitcoins called me at 4 a.m. yelling at me in pain and claiming that she was down to her last $13. I believed her, and the crying baby in the background was the icing on the cake. We had to help her. The problem was she had no bank account, and sites like Coinbase and other bitcoin brokerages had no solution for the unbanked. She had gotten the run around for two days and needed just $5 in BTC.”

Youssef was able to provide the woman with the finances she needed, and the rest is history. He says that the company truly began the day she called.

“She led us to realize that gift cards were the perfect way to onboard the unbanked to crypto,” he says. “She and all the others that followed taught us that bitcoin is the universal currency the world needs, especially the unbanked. They were the people that bitcoin was supposed to help, but no one was helping them or even trying. My co-founder and I did not sleep for a week, and we redid the entire system to make it usable for the non-techy, unbanked user.

“Now, instead of me having to be on the phone with people for an hour to walk them through buying their first bitcoin and sending it to pay for something, people are able to figure it out themselves through Paxful’s tailor-made system. No one in crypto ever took the time to build a simple onboarding market and wallet for ‘normal people,’ let alone the unbanked. We did.”

Paxful has been operating in full-form ever since, and Youssef has never looked back. As the platform onboarded more customers, Paxful has given Youssef and his team the opportunity to extend their bitcoin services to much larger causes.

Among the company’s latest projects is its building a blockchain technology hub in Lagos, Nigeria. Youssef says that bitcoin has become extremely popular in several regions of Africa and has empowered young entrepreneurs to build wealth in ways nobody could have foreseen.

Furthermore, Youssef began #BuiltwithBitcoin in late 2017, an initiative designed to boost the cryptocurrency community’s involvement in humanitarian projects. The project got its start with Youssef donating roughly $50,000 of his own money toward the construction of a new school in Rwanda. This has led to plans for a second institution. Other projects include a scholarship initiative for Afghan refugees, a Rwandan water tank project and food drives in Venezuela, which Youssef confidently states could become the first official “bitcoin nation” in the future.

Youssef describes bitcoin as a “universal currency” whose potential has barely scratched the surface. He says there are “currency wars” brewing in countries like Venezuela and Turkey, and bitcoin is the strongest weapon.

“Wealth preservation is the first use case for bitcoin,” he explains. “People in currency wars can buy bitcoin to store their value and even use it to pay bills in other countries by ‘borrowing a bank account.’ This just means they sell it to a peer on Paxful and they use their bank account to pay a bill for them to another local bank.”

He also lists commerce as one of bitcoin’s biggest factors. People can sell their goods to anywhere they can ship them. They are then paid in bitcoin, which can be converted to fiat currency. There’s also a strong case for bitcoin’s use for remittance, in which someone can send money to family members abroad without processing times and banking fees.

“The best thing about bitcoin is that it’s the core part of the #p2pfinancial revolution, and this means wealth and opportunity for entrepreneurs all over the world that didn’t even think being an entrepreneur was possible,” Youssef comments.

“They can become vendors on #p2pfinance platforms and help onboard their communities to bitcoin while earning profit at the same time. This is how you really make a day-to-day difference in people’s lives. You show the ones most ready to act a better way, and their communities grow around them. There are single mothers who first came to bitcoin in fear and desperation, and now make five figures a month selling bitcoin. This is just the start.”

Overall, Youssef is grateful for his past hardships as they taught him lessons about survival, humility and what was “vital” in life. He says it was these past experiences that showed him how to make Paxful a success and understand where his customers would be coming from, mentally and emotionally.

An alpha version of the new Lightning desktop app has been released. The application includes a redesigned and optimized backend for light clients, as well as a simplified interface for users with little to no cryptocurrency experience.

Lead application developer at Lightning Labs Tankred Hase joined the company in January 2018 and was assigned to oversee the app’s redesign. Speaking with Bitcoin Magazine, Hase explains that the application preceding the current design was very much a prototype and built before his time with the company.

“The aim was to expose the core functionality of Lightning, which would have otherwise been available only via the command line,” he said. “This new redesigned version was developed with the average user in mind. We applied the design sprint methodology to prototype and test the user’s interface before writing the application code. This allowed us to validate some core assumptions about our user personas and get feedback from real users by doing research with both experienced and novice bitcoin users.”

Sprint methodology refers to a five-day process in which critical business questions are resolved through designing, prototyping and testing ideas with customers. According to Hase, this is what caused the team to simplify the interface and make it easier to understand for those who are new to crypto. He says that the updated interface is “less cluttered” than other bitcoin wallets, tacking design and UX cues from more mainstream payment apps like PayPal or Venmo.

To make a payment, all a user must do is paste a bitcoin address or a Lightning invoice into the payment screen. The app then takes the appropriate next steps for the customer.

“We’re working on making the routing of payments more reliable, and I think this process will keep us busy for some time since this is a fundamentally hard problem,” Hase said. “Once we have solved it, many of the technical details that are still visible to the user today will hopefully disappear, or at least be available only under advanced settings. This should make things much more seamless for newcomers and non-technical users,” Hase stated.

“I’m really optimistic that this will allow us to make bitcoin and Lightning more accessible,” he continued.

One of the main issues surrounding the Lightning app is that it’s a hot wallet, meaning a user’s private keys are stored in the wallet and not in offline cold storage. Thus, the application is vulnerable to cyber theft. Looking to mitigate the risk of such events, Hase says the maximum amount of BTC the wallet can hold is limited to 0.16, making it a “small target” for criminals.

The program is also written in JavaScript and utilizes Electron software, which has had many vulnerabilities in the past. To prevent problems, Hase and the team are using a multi-process architecture that ensures a user’s private keys remain protected should the wallet ever be compromised.

Hase says they also employ auto-updates to keep vulnerabilities to a minimum. The app undergoes a rigorous engineering process that involves a high level of testing, and Hase explains they wouldn’t put an application out unless they felt extremely sure its security was airtight. The wallet’s code has also undergone heavy peer review, and a third-party security audit will occur before the wallet leaves its beta stage.

The alpha release of the wallet is now available to try on testnet. Interested users can download the latest release here.

Based on blockchain technology, most cryptocurrencies have an open and public ledger. While this is required for these systems to work, it comes with a significant downside: Privacy is often quite limited. Government agencies, analytics companies and other interested parties — let’s call them “spies” — have ways to analyze the public blockchains and peer-to-peer networks of cryptocurrencies like Bitcoin, to cluster addresses and tie them to IP addresses or other identifying information.

Dissatisfied with Bitcoin’s privacy features, several cryptocurrency projects have launched with the specific goal to improve on them over the years. And not without success. Several of these privacycoins are among the most popular cryptocurrencies on the market today.

However, as detailed in this month’s cover story, Bitcoin’s privacy features have recently seen significant improvements as well and are set to further improve over the coming months and years. This miniseries compares different privacycoins to the privacy offered by Bitcoin.

In part two: Monero

Background

Monero (XMR) is a privacy-focused cryptocurrency. It is based on the innovative CryptoNote protocol which was first used in Bytecoin, but that project was secretly 80 percent premined. Without any such premine, Monero launched in 2014 (initially as “Bitmonero”), in effect as the “honest” implementation of the CryptoNote protocol.

As such, Monero was one of the first altcoins not based on Bitcoin’s codebase, and it still differs from Bitcoin in several ways. For example, Monero does not have a limited supply; instead, it has an emission schedule that will slightly inflate the money supply forever. Monero rolls out scheduled hard forks about twice a year, and its latest version also has an ASIC-resistant, proof-of-work algorithm, meaning the cryptocurrency is mined by GPUs only.

While created by the pseudonymous developer thankful_for_today, this founder quickly wanted to take Monero into a direction the brand new community did not agree with; he was subsequently “fired” weeks after launch when the project was forked. Monero has since been led by a core team of about half a dozen developers. The best-known and visible of the group is Riccardo “Fluffypony” Spagni — though Spagni is not as active in Monero development as he used to be. Most of the other core team members are pseudonymous.

XMR is accepted as payment on several dark net markets, for better or for worse, making it one of few altcoins that has found a non-niche use case beyond trading. Down from a top-five spot in early 2017, Monero claims the tenth spot on altcoin market cap lists at the time of writing, making it the biggest privacy-centric coin on the market.

Privacy

Monero has privacy embedded in its protocol. Where Bitcoin and other coins offer privacy features as an option, Monero is one of few cryptocurrencies where privacy is both default and required. (Though users can opt to give up some of their privacy by sharing a so-called “view key.”)

Monero achieves its privacy in two ways.

Most notably, Monero achieves privacy through a clever trick called “Ring Confidential Transactions” (RingCT). RingCT is, in turn, best understood as a combination of two other cryptographic tricks: “ring signatures” and “Confidential Transactions.”

Like regular cryptographic signatures, ring signatures prove ownership of coins that are spent in a transaction (“inputs”). But with ring signatures, completely different coins can be added to the same transaction as “decoys,” without revealing which one was really signed. This effectively “mixes” the coins, so spies don’t know which coin was really spent and which were decoys. Right now, six decoys are added to each Monero transaction, and this will soon be increased to 10.

On top of ring signatures, Confidential Transactions let users hide (“blind”) the amounts in a transaction. Using a cryptographic trick called the Pedersen commitment, anyone can still perform math on the blinded amounts. This lets Monero users verify that the sending and receiving end of the transaction equal out; hence, ensuring no coins were created out of thin air. But only the sender and receiver of a transaction know how much money changed hands.

Additionally, Monero uses stealth addresses, as special types of addresses that are perhaps best understood as pieces of a cryptographic puzzle. In short, using a stealth address, the sender of a transaction can generate a new Monero address to send XMR to, with some additional data. This additional data can, in turn, be used by the owner of the stealth address (and only the owner of the stealth address) to generate the corresponding private key and access these funds. Importantly, no one but the sender and receiver know that the stealth address and the actual Monero address match. And because every sender would generate a new and unique receiving address, Monero users can post their stealth address anywhere, without worrying that corresponding transactions on the blockchain can be linked to them.

Bitcoin

Monero as a project takes privacy seriously, and the general commitment to hard forking in new or improved features whenever available has resulted in top-notch privacy overall. At the same time, while Bitcoin takes a much more conservative approach, its recent and upcoming privacy improvements are starting to offer some real competition.

For example, stealth addresses are available on Bitcoin as well: Samourai Wallet offers stealth addresses as an option. But even generating a new address for each transaction (which many Bitcoin wallets do automatically) and not sharing it with anyone but the payer (which shouldn’t be too difficult), goes a long way to realize similar privacy benefits. Stealth addresses are mainly useful where refreshing addresses isn’t an option, like donation addresses posted on a website.

Consequently, RingCT is Monero’s main selling point. Bitcoin’s closest equivalent to RingCT is probably the Chaumian CoinJoin framework ZeroLink, which is (or will be) offered by Wasabi Wallet, Bob Wallet and Samourai Wallet. ZeroLink lets users mix their coins, without needing to trust anyone with these coins or with their privacy.

RingCT and ZeroLink both have their own strengths and weaknesses.

In short, ZeroLink can be used with many more participants at the same time (a hundred on Wasabi Wallet) versus Monero’s much smaller number of six or ten decoys. In general, it’s better to mix with more people.

On the flipside, ZeroLink doesn’t hide amounts. This means that all amounts in a mix must be equal, thereby meaning it can only be used for the specific purpose of mixing (as opposed to making direct payments). Both RingCT’s and ZeroLink’s strengths and weaknesses come with counter-strategies and improvements to make for a complex, scenario-dependent comparison.

The more important differentiator, and probably Monero’s main selling point, is that RingCT is default and mandatory, while ZeroLink is optional.

Therefore, on Bitcoin, only users who care about their privacy will likely mix their coins; those that feel they have “nothing to hide” will not. By extension, it’s entirely possible that the very act of mixing itself would come to be seen as suspect. And while ZeroLink breaks the link of transaction history, that history of mixing is still visible on the blockchain.

On Monero, in contrast, even users who don’t care about privacy use RingCT and have their coins used as decoys. This increases anonymity for Monero users that do care about their privacy: they’re not suspect for using RingCT. (Though like Zerolink mixing on Bitcoin, using Monero could, of course, be considered suspect in and of itself; there are indications that this is indeed the case.)

And there is another flip side to the “mandatory privacy” solution. If too many Monero users that do not care about their privacy will go so far as to give up their privacy to spies, their combined data could go a long way in piecing together which coins in all other transactions act as decoys. This risk could become meaningful if about half of all Monero activity is compromised. In a world where exchanges and other regulatory compliant companies are among the biggest Monero users, this risk can’t be dismissed.

This risk can be mitigated by increasing the ring size, that is, the number of decoys included in each transaction. Indeed, the ring size was increased to seven through the previous hard fork for this very reason, and it is why the ring size will increase to 11 soon. At that point, well over half of all Monero activity must be compromised before the risk becomes meaningful. The Monero core team considers this scenario very unlikely.

Ideally, Monero’s ring size would be increased even more — perhaps even to 100, putting it on par with Wasabi’s ZeroLink implementation — however, that’s not really possible. On Monero, increasing privacy comes at the cost of scalability.

Scalability

A big downside of Monero’s RingCT format is that it makes the system a magnitude less scalable than Bitcoin and just about every other cryptocurrency. Because all decoy coins must be included in a transaction, and the CT math used in these transactions is data heavy, Monero transactions are currently in the ballpark of 30 times bigger than Bitcoin transactions.

This size will decrease considerably as the upcoming hard fork introduces a cryptographic efficiency trick called “Bulletproofs,” which should shrink the size of transactions by about 80 percent. But even with the increased ring size, Monero transactions will be roughly 10 times the size as Bitcoin’s. All this data must be transmitted and verified by all nodes (and miners) on the network.

Making matters worse, the Monero blockchain cannot be pruned in its entirety. Where Bitcoin’s full node users can opt to get rid of old transaction data, much of Monero’s transaction history remains relevant and must, therefore, be stored forever. This is currently 20 gigabytes and growing. (The total Monero blockchain is currently 60 gigabytes.)

This is probably not an immediate problem, but only because Monero usage is two orders of magnitude below Bitcoin’s: Monero only processes a couple thousand transactions per day, versus over 200,000 for Bitcoin. However, if the number of Monero transactions were to grow by a serious degree, the system could run into bottlenecks, for example, making it increasingly difficult for regular users to run Monero nodes.

Many of these Monero users could instead opt for more lightweight solutions, such as remote nodes or light wallets. But both of these come with privacy trade-offs, with their own risks and nuances. In short, relying on remote nodes is fairly secure and private in most cases, but a user could get unlucky if he relies on a spying node too much. Lightwallets are less private to begin with as they give up their view key, and they are particularly not recommended for cases where privacy is of particular importance.

In the end, Monero is undoubtedly one of the best privacycoins available — if not the best one. Still, if Bitcoin is used in a privacy-conscious manner, the difference between the two is probably smaller than some would expect. Monero’s mandatory privacy and blinded amounts arguably still give it a leg up — but these features are in direct competition with scalability. How this situation evolves over time depends a lot on future technologies and is, therefore, hard to predict. It’s not obvious that Monero’s trade-offs will provide a more private system forever.

Based on blockchain technology, most cryptocurrencies have an open and public ledger. While this is required for these systems to work, it comes with a significant downside: Privacy is often quite limited. Government agencies, analytics companies and other interested parties — let’s call them “spies” — have ways to analyze the public blockchains and peer-to-peer networks of cryptocurrencies like Bitcoin, to cluster addresses and tie them to IP addresses or other identifying information.

Dissatisfied with Bitcoin’s privacy features, several cryptocurrency projects have launched with the specific goal to improve on them over the years. And not without success. Several of these privacycoins are among the most popular cryptocurrencies on the market today.

However, as detailed in this month’s cover story, Bitcoin’s privacy features have recently seen significant improvements as well and are set to further improve over the coming months and years. This miniseries compares different privacycoins to the privacy offered by Bitcoin.

In part two: Monero

Background

Monero (XMR) is a privacy-focused cryptocurrency. It is based on the innovative CryptoNote protocol which was first used in Bytecoin, but that project was secretly 80 percent premined. Without any such premine, Monero launched in 2014 (initially as “Bitmonero”), in effect as the “honest” implementation of the CryptoNote protocol.

As such, Monero was one of the first altcoins not based on Bitcoin’s codebase, and it still differs from Bitcoin in several ways. For example, Monero does not have a limited supply; instead, it has an emission schedule that will slightly inflate the money supply forever. Monero rolls out scheduled hard forks about twice a year, and its latest version also has an ASIC-resistant, proof-of-work algorithm, meaning the cryptocurrency is mined by GPUs only.

While created by the pseudonymous developer thankful_for_today, this founder quickly wanted to take Monero into a direction the brand new community did not agree with; he was subsequently “fired” weeks after launch when the project was forked. Monero has since been led by a core team of about half a dozen developers. The best-known and visible of the group is Riccardo “Fluffypony” Spagni — though Spagni is not as active in Monero development as he used to be. Most of the other core team members are pseudonymous.

XMR is accepted as payment on several dark net markets, for better or for worse, making it one of few altcoins that has found a non-niche use case beyond trading. Down from a top-five spot in early 2017, Monero claims the tenth spot on altcoin market cap lists at the time of writing, making it the biggest privacy-centric coin on the market.

Privacy

Monero has privacy embedded in its protocol. Where Bitcoin and other coins offer privacy features as an option, Monero is one of few cryptocurrencies where privacy is both default and required. (Though users can opt to give up some of their privacy by sharing a so-called “view key.”)

Monero achieves its privacy in two ways.

Most notably, Monero achieves privacy through a clever trick called “Ring Confidential Transactions” (RingCT). RingCT is, in turn, best understood as a combination of two other cryptographic tricks: “ring signatures” and “Confidential Transactions.”

Like regular cryptographic signatures, ring signatures prove ownership of coins that are spent in a transaction (“inputs”). But with ring signatures, completely different coins can be added to the same transaction as “decoys,” without revealing which one was really signed. This effectively “mixes” the coins, so spies don’t know which coin was really spent and which were decoys. Right now, six decoys are added to each Monero transaction, and this will soon be increased to 10.

On top of ring signatures, Confidential Transactions let users hide (“blind”) the amounts in a transaction. Using a cryptographic trick called the Pedersen commitment, anyone can still perform math on the blinded amounts. This lets Monero users verify that the sending and receiving end of the transaction equal out; hence, ensuring no coins were created out of thin air. But only the sender and receiver of a transaction know how much money changed hands.

Additionally, Monero uses stealth addresses, as special types of addresses that are perhaps best understood as pieces of a cryptographic puzzle. In short, using a stealth address, the sender of a transaction can generate a new Monero address to send XMR to, with some additional data. This additional data can, in turn, be used by the owner of the stealth address (and only the owner of the stealth address) to generate the corresponding private key and access these funds. Importantly, no one but the sender and receiver know that the stealth address and the actual Monero address match. And because every sender would generate a new and unique receiving address, Monero users can post their stealth address anywhere, without worrying that corresponding transactions on the blockchain can be linked to them.

Bitcoin

Monero as a project takes privacy seriously, and the general commitment to hard forking in new or improved features whenever available has resulted in top-notch privacy overall. At the same time, while Bitcoin takes a much more conservative approach, its recent and upcoming privacy improvements are starting to offer some real competition.

For example, stealth addresses are available on Bitcoin as well: Samourai Wallet offers stealth addresses as an option. But even generating a new address for each transaction (which many Bitcoin wallets do automatically) and not sharing it with anyone but the payer (which shouldn’t be too difficult), goes a long way to realize similar privacy benefits. Stealth addresses are mainly useful where refreshing addresses isn’t an option, like donation addresses posted on a website.

Consequently, RingCT is Monero’s main selling point. Bitcoin’s closest equivalent to RingCT is probably the Chaumian CoinJoin framework ZeroLink, which is (or will be) offered by Wasabi Wallet, Bob Wallet and Samourai Wallet. ZeroLink lets users mix their coins, without needing to trust anyone with these coins or with their privacy.

RingCT and ZeroLink both have their own strengths and weaknesses.

In short, ZeroLink can be used with many more participants at the same time (a hundred on Wasabi Wallet) versus Monero’s much smaller number of six or ten decoys. In general, it’s better to mix with more people.

On the flipside, ZeroLink doesn’t hide amounts. This means that all amounts in a mix must be equal, thereby meaning it can only be used for the specific purpose of mixing (as opposed to making direct payments). Both RingCT’s and ZeroLink’s strengths and weaknesses come with counter-strategies and improvements to make for a complex, scenario-dependent comparison.

The more important differentiator, and probably Monero’s main selling point, is that RingCT is default and mandatory, while ZeroLink is optional.

Therefore, on Bitcoin, only users who care about their privacy will likely mix their coins; those that feel they have “nothing to hide” will not. By extension, it’s entirely possible that the very act of mixing itself would come to be seen as suspect. And while ZeroLink breaks the link of transaction history, that history of mixing is still visible on the blockchain.

On Monero, in contrast, even users who don’t care about privacy use RingCT and have their coins used as decoys. This increases anonymity for Monero users that do care about their privacy: they’re not suspect for using RingCT. (Though like Zerolink mixing on Bitcoin, using Monero could, of course, be considered suspect in and of itself; there are indications that this is indeed the case.)

And there is another flip side to the “mandatory privacy” solution. If too many Monero users that do not care about their privacy will go so far as to give up their privacy to spies, their combined data could go a long way in piecing together which coins in all other transactions act as decoys. This risk could become meaningful if about half of all Monero activity is compromised. In a world where exchanges and other regulatory compliant companies are among the biggest Monero users, this risk can’t be dismissed.

This risk can be mitigated by increasing the ring size, that is, the number of decoys included in each transaction. Indeed, the ring size was increased to seven through the previous hard fork for this very reason, and it is why the ring size will increase to 11 soon. At that point, well over half of all Monero activity must be compromised before the risk becomes meaningful. The Monero core team considers this scenario very unlikely.

Ideally, Monero’s ring size would be increased even more — perhaps even to 100, putting it on par with Wasabi’s ZeroLink implementation — however, that’s not really possible. On Monero, increasing privacy comes at the cost of scalability.

Scalability

A big downside of Monero’s RingCT format is that it makes the system a magnitude less scalable than Bitcoin and just about every other cryptocurrency. Because all decoy coins must be included in a transaction, and the CT math used in these transactions is data heavy, Monero transactions are currently in the ballpark of 30 times bigger than Bitcoin transactions.

This size will decrease considerably as the upcoming hard fork introduces a cryptographic efficiency trick called “Bulletproofs,” which should shrink the size of transactions by about 80 percent. But even with the increased ring size, Monero transactions will be roughly 10 times the size as Bitcoin’s. All this data must be transmitted and verified by all nodes (and miners) on the network.

Making matters worse, the Monero blockchain cannot be pruned in its entirety. Where Bitcoin’s full node users can opt to get rid of old transaction data, much of Monero’s transaction history remains relevant and must, therefore, be stored forever. This is currently 20 gigabytes and growing. (The total Monero blockchain is currently 60 gigabytes.)

This is probably not an immediate problem, but only because Monero usage is two orders of magnitude below Bitcoin’s: Monero only processes a couple thousand transactions per day, versus over 200,000 for Bitcoin. However, if the number of Monero transactions were to grow by a serious degree, the system could run into bottlenecks, for example, making it increasingly difficult for regular users to run Monero nodes.

Many of these Monero users could instead opt for more lightweight solutions, such as remote nodes or light wallets. But both of these come with privacy trade-offs, with their own risks and nuances. In short, relying on remote nodes is fairly secure and private in most cases, but a user could get unlucky if he relies on a spying node too much. Lightwallets are less private to begin with as they give up their view key, and they are particularly not recommended for cases where privacy is of particular importance.

In the end, Monero is undoubtedly one of the best privacycoins available — if not the best one. Still, if Bitcoin is used in a privacy-conscious manner, the difference between the two is probably smaller than some would expect. Monero’s mandatory privacy and blinded amounts arguably still give it a leg up — but these features are in direct competition with scalability. How this situation evolves over time depends a lot on future technologies and is, therefore, hard to predict. It’s not obvious that Monero’s trade-offs will provide a more private system forever.