How Does Monero Work?

hello world it’s Suraj and Mineiro is the currency that I’m gonna talk about today so first I want to start off by saying one thing I do not condone any illegal usage of any cryptocurrency Manero is an untraceable cryptocurrency and definitely lots of people who like to sell things illegally on the internet use it but the reason that I’m talking about it is not for that the reason I’m talking about it is because you should be able to control your data and some of your data is transactional data and currently companies can mine that data for free and use that to make predictions about what you will buy and what you won’t buy so they can show you ads and stuff like that but ideally they pay you for this data right and the only way for them to pay you for that data is if you control it and the only way you can control it is if it’s anonymous and they have to ask you for permission to see your transaction history okay so Manero is the currency I’m gonna talk about today and I have this image here of this these three different features that I thought was the best high level description of Manero so it says decentralized private and digital and monaro is all three of these things so it’s decentralized because no one controls it it’s digital because you can run it over the Internet and it’s private because no one can tell who you are when you send a transaction that means no one can tell who sent a transaction who you sent it to and the amount that you sent so it’s all private unlike Bitcoin and these three kind of Venn diagram looking things are examples of assets or currencies that are examples of two of these right so bitcoin is decentralized because no one controls it it’s digital because it runs over the Internet fiat currency like the dollar is private because you could exchange it by hand it’s digital because you can do it over the Internet as well and gold is decentralized because no one authority controls it and it’s private because no one can tell you know if you just take some gold and give it to someone else there’s no third party involved so no one can tell anything about that transaction okay so Manero is all three of these things and there other cryptocurrencies that are all three of these things but in terms of popularity Manero is definitely at the top right now at least so let’s get into this technical analysis of how Manero works I’m gonna talk about all the features of Manero I’m gonna talk about how you can mine it I’m gonna talk about how you can buy it and mostly this is a technical talk so we’re gonna go into the technical details of how these transactions are private and what differences it has from Bitcoin okay so the first thing I want to talk about is the difference between Manero and Bitcoin so got this great list here of all these different features that Manero has and all the different features that bitcoin has and how they’re different right because they are very different some of them are very similar like they both use the proof-of-work algorithm to secure the network they’re both digital currencies they both have a transaction fee however Manero is is much less than bitcoins I don’t know what what is bitcoins now like $20 a transaction just crazy that’s crazy block time is much faster from the four monaro but the real difference here the real key difference is the the trackable factor Manero is untraceable and it’s unlink about bitcoin is not I’m gonna go into the details of what I mean like really into the details so so stick around so a lot of the hype around Bitcoin was that it says oh it’s a pseudonymous currency no one can’t note there’s no third party involved there’s no bank you own your currency you own your data you and your assets but but the truth is that Bitcoin is very very much traceable okay you can send Bitcoin by literally only pointing that transaction back to a previous transaction in the chain of blocks right a blockchain that’s the only way and that and so your transaction when you make one in the Bitcoin network points back to every transaction that came before it all the way back to the coinbase transaction the coinbase transaction is that transaction that occurs when a miner and only a miner can make a coinbase transaction receive a reward from mining some blocks so it’s like Bitcoin that comes from nothing but it I mean it come as a reward for performing the proof-of-work algorithm but right so you can trace any transaction back all the way to the coinbase transaction in the Bitcoin network and you might be saying well how am I able to do this well it turns out that you can look up any transaction in the blockchain Explorer so that’s that and this can be hard to do manually right I mean you say you sense Center transaction to somebody else and then they send it to somebody else right that’s two links in the chain it’s easy to just go click once and then click once again on the blockchain Explorer but as nodes are added the complexity increases exponentially right because as those funds are split and then those funds are split and then those funds are split it gets harder and harder and harder to tell where that transaction originated from and if you don’t believe me when I say that bitcoin is traceable just ask the founder of Silk Road the online dark web market for selling illegal items there are people literally sitting in jail right now because bitcoin is in fact a very very traceable system okay so Silk Road I mean there’s this whole story about Silk Road they should definitely make a movie about it the guy was ordering hits on people and he was doing all this crazy stuff which I don’t condone and I don’t think it’s cool but he’s sitting in jail right now and they probably will and probably have made a movie about it but my point is that bitcoin is traceable right so yes criminals don’t want to use a currency that is traceable but if but the thing is whether or not I make this video criminals will find a unfine and untraceable currency you just have to type into Google untraceable currency if you want to do bad you will do bad right I am NOT making this video for criminals I’m making this video for you you are my viewer right I’m making this video for people who want to understand all the technical details of how cryptocurrencies work and then use this knowledge to then do good for the world right this is just knowledge in your arsenal to do good ok so just remember that as a motivation behind this video so you could attend to make anonymous transactions in Bitcoin threeways so remember bitcoin is not anonymous its pseudonymous meaning even if someone traces back you the trail of transactions back to you that is still your public address that public address says nothing about your identity it’s not like the word Siraj is embedded in my public address right so how can you tell ownership well there’s a variety of ways IP addresses you know finding the endpoints of I’ll talk about it let me let me let me let me show you this so there are three ways to attempt anonymous transactions the first way is to create a new wallet after every transaction and coin based comm doesn’t does this like by default but as soon as that money is used the endpoint person could be squeezed for information right so if you send some money to somebody and you want to remain anonymous you’re creating wallets between every transaction eventually someone is going to use that money in the real world for you know paying a dentist or buying a soccer ball or whatever and then that is an endpoint person someone a real person that you know people with guns or whatever can say hey give me the information and then they can trace it back to you another way is to wash your money through a tumbler and a tumbler is a service that aggregates your money with many other funds and then sweeps them through large financial institutions so if I send money to a tumbler service other people send money to that tumbler service those funds are then aggregated together and then split up into little amounts and then they’re sent out through through these different gateways right so it’s very hard to tell who originated a transaction however in a court of law this could be deemed as supporting evidence for criminal intent by courts you could also wash your money wash your money by purchasing assets real-world assets you know a basketball court a house a car and then transferring that money back to Bitcoin or another currency and just doing that over and over again but that is illegal and yeah so these are all not good methods they’re possible methods but they’re mostly illegal and you will get caught okay so I is it untraceable the only good for criminals no no it is good for criminals yes so with paypal in the early days so was Bitcoin in the early days but there are legitimate use cases for non criminals like us right so distributed online payment vulnerability is an example so target right target the the corporation or you know any of these corporations they mine your transaction data to then use it for predictive analytics to predict what you’re gonna purchase and show you ads and other things to make you purchase things this is your data it’s very valuable and as everything gets automated your data will be the only agency you have in this new world it will be the only value of that you own right so you should be paid for it right and so if you understand where this is all going you’ll see that data is the most valuable asset we have right so watch my decentralized application video just search the centralized application Siraj and you’ll understand more about what I mean when I say just how valuable your data is but the point is that if your your transaction history is anonymous then they have to ask you for it which means they have to pay you for it and as you’re getting these payments from all these different institutions for your data you’re making something like a basic income right just from your data and that’s where we’re headed and that’s the reason we’d want to use an anonymous currency like Manero for example right so if user visits an online shop the online shop collects user data and then an algorithm predicts purchase probability you should be paid for this in short so let’s let’s get into the technical details now shall we so the crypto note protocol introduced the idea of anonymous not pseudonymous transactions so it all started with buy coins so by coin was the first implementation of an anonymous currency right it was this is a first implementation of the crypto no protocol is it’s white paper and then there were some offshoots up by coin right so first buddha coin and then paladin coin bull berry and then Manero and in Manero was the one that really took off right Manero i think is number 10 right now on coin market capcom it’s I think seven billion dollar market cap so it’s a lot of money and all of these currencies that follows were offshoots of Manero they were Forks of an arrow with added features but Manero is really the most stable and the most popular of the anonymous currencies out there okay so crypto no transactions cannot be followed through the blockchain in a way that reveals who sent or received addresses so Manero is a version of crypto note that hides the sender the amount the transaction broadcast and the receiver so the sender is made anonymous through the use of what are called ring signatures which I’ll explain the amount through ring confidential transactions that brought the transaction broadcasts like the location of where you are your IP address etc through an ITP router called Calvary and the receiver through the use of stealth addresses now I’m gonna explain how all four of these things work ok so let’s do that let’s get into this right so monaro has a lot of features the two main ones that really matter that make it unique or untraceable ‘ti and unlink ability unlink ability means if I have a public address in the Monaro network no transaction can be linked back to that public address so anyone can take my public address and they could say well what transactions were sent to and from this address and no one will know untraceable means that no one can tell where any transaction originated from so there are two separate of descriptions they’re very similar but not quite and I’ll talk about each right now so for unlink ability right so for unlink ability here’s how Bitcoin works in Bitcoin everyone has a public address 25 character public address and you use it to receive funds and anyone can see how much you received right because it’s a public ledger when sending funds you’ve announced to the entire Bitcoin network that the funds you own now belong to the recipients public address so that transaction is fully public the difference in Manero is this so this is an image of a very high-level image of how Manero works now get into the details in a second so in Manero everyone has a public address like this right so it’s a much longer public address hold on and unlike Bitcoin your funds are not associated with your public address so when you send funds to someone else’s public address you’re actually sending those funds to a randomly created one-time destination address right here the commitment public key so no public record of sending or receiving funds when I send funds to someone they’re actually sent to a one-time address it’s just created temporarily just for that transaction and that’s what’s public not my public key not that not the cent not the receivers public key but that commitment public key and so that public address will never appear so your public address will never appear in the public record of transactions instead a stealth address is recorded in a way that only you and the recipient can recognize the incoming funds so when the recipient checks for funds they need to scan the blockchain to see if any transactions are destined for them so the recipient has a secret view key which is used to check each transaction when they scan the blockchain to see if it was addressed to them and because the recipient is the only one that knows the secret view key only the recipients can see the funds that have been sent to them right so that’s why when you launch manera wallet it’s scanning the blockchain to see if any transactions have occurred for you as a recipient right so but anyone who has your secret view key can also see what funds you have received right so when you send the transaction right so it’s an input the output is going to be this commitment public key which is public and then these two secret view keys one for the sender so I can see how much I sent and one for the receiver so they can see how much they received but publicly speaking there’s just this one time address not linked to either you or the sender okay and so that’s the idea of stealth addresses and what that does is it hides the receiver okay right so it’s also untraceable so we talked about unlink ability but it’s also untraceable let me talk about untraceable ‘ti okay so for untraceable ‘ti that’s where the use of ring signatures come into play right so for ring signatures in Bitcoin when you when you have an input so some incoming transaction right it you it’s signed using a signature by some identity right and then all inputs are clearly linked to a previous transaction right so anyone can view this input and say oh that’s where it originated from but in Monaro when you when you receive an input it’s not just one input that you’re receiving it’s their several and they’re all linked together so as a ring and all these us all of these inputs are signed what using using what’s called a ring signature and then any input is going to be linked to more than one previous transaction so no one will be able to tell who that input originated from because it’s a part of a ring of transactions let me go into what I mean okay okay so here’s what I mean by ring signatures so the Monaro money supply is divided into outputs just like the US dollar is divided into dollar bills quarters dimes pennies Manero is divided into outputs divisions of currency and these outputs store a certain value of Manero each and the value they hold can change over time so suppose that these are all the outputs that exist and the one you control and can spend is highlighted in red so let’s say these are all the outputs all the green ones and I own this red one number eight which let’s say is the equivalent of light say three hundred dollars and some of these are like two hundred some of these are ten dollars and in monaro currency right and when I create a Manero transaction I’m using a ring signature to hide which input is actually being spent so and the way this is done is by making it seem like as if all the chosen inputs are the possible real sender so when I send an input when I send a transaction there are five other transactions that are picked by random from other nodes in the network and we don’t need their permission to choose those they’re just there to obfuscate where that transaction is coming from right they’re all linked together in a ring and they’re all signed using a ring signature so in the photo your real input is red and the five selected inputs are light blue and these inputs can be controlled by anyone else we don’t need their permission to add their input to the Ring signature we sign them all such that an outside observer cannot determine which is real one being spent right and so once we have selected the other inputs we need to finish creating the ring CT ring signature so the ring CT ring signature is used to hide the amount that is spent the ring signature hides that the sender the stealth address hides the receiver and the ring CTS ring signature hides the amount that is being sent so you sign it in such a way that all these inputs appear to be the real one used and this signature includes several other important elements so this is a more detailed view of what a transaction looks like in the Monaro network right so when I make a transaction there are up to six other transactions that are added to their to the Ring right all these rings rings are signed using a ring signature right and importantly very critically a key image is created from all of these transactions that key image is one hash and it’s given to the network as proof that the signature was created appropriately the network verifies that this image has not been used before to prevent double spending so it’s got a list in the blockchain of all of these key images and they look for a match has this key image been sent before yes okay it’s double spending you can’t do it no this is a valid transaction go ahead and so that’s how spending is prevented using the key image next is the Petersons commitment so this is used to prevent other people from knowing how much is actually being spent so it’s a formula right so you have the actual amount that is spent a it’s multiplied by a random number and this constant value here and the result is this number that is a result of the formula and that that is a commitment right you can use this commitment to commit to spending a certain value that only you have the authority to spend but other people don’t know what that value is because it’s it’s the result of this formula right it’s not that it’s not the original amount it’s a result of this formula and that’s what’s public right so so the Petersons commitment is a critical component of the ring confidential transaction or ring CT it hides the actual value by adding a random number X the commitment value is calculated for the set of inputs and outputs in the transaction and it is broadcast to the network so that’s what the network sees as the result of that work of that Peterson commitment formula and it and so that all comes together to form the ring CT ring signature and the result is an unknown amount of monaro being spent the commitment public key is what’s used by the network to verify that commitment that I talked about before right so how do the outputs get used over time so we can compare Bitcoin and Manero to find out right so in this theoretical history of the outputs we control all the blocks highlighted reds are the ones where the output appears and if this was for Bitcoin we would eat really easily be able to tell that this output was transferred from user a to B to C but with Manero it’s not so simple there are three reasons for an output to show up in a block either it’s new money and a coin based transaction it was actually spent or it was added as a decoy in a ring signature I also want to talk about Cove rewrite so we talked about how the sender is hidden using ring signature as we talked about how the amount is hidden using ring C T we talked about how the receiver is hidden using stealth addresses but how about the location right like where you are your IP address and that’s obfuscated using this I 2p routing service called Calvary it’s kind of like tor but basically your transaction is routed through all these different nodes these internet what do they call these internet invisible Internet project nodes right III two P nodes and these nodes pass your messages along and have no visibility over what is in them and that’s under construction right now it’s getting better and better over time and you can view its progress on github it’s all public and open source but it’s double spending proof right because we talked about that that key image that the whole blockchain has a copy of and it’s blockchain analysis resistant not completely nothing is but it’s the most block chain analysis resistant cryptocurrency that exists currently and yeah so this is a huge high-level level overview of everything I’ve talked about if you want to go into more details really look into this but yeah those four components are really the the key features of of Manero lastly adaptive parameters like we said before a monaro transaction has an ambiguous output origin an unknown amount in a commitment in an known receiver so for every transaction on the network all of the information stored on the blockchain is obfuscated right so let’s talk about how to lastly I want to talk about how to by Mineiro and then how to mine Manero okay in terms of how to by mineiro I’ve got this great link here it’s in the Jupiter notebook in the github description so check it out but change lis is the best site I’ve found to buy Manero you can by using Visa or MasterCard there’s you can buy it with Bitcoin and you can buy it with even US dollar if you so please or Doge or all these currencies so definitely check out this website change Lea and to mine Manero I found this really great Python repository that you can clone in docker it’s about the all the docker dependencies ready for Mac and Linux you can run it and you can start mining it as well and yeah it’s gonna be awesome but yeah it wraps this javascript mining library for coin hive that’s kind of like this generic mining library for a bunch of cryptocurrencies but it works with any Manero pool so these are pools of miners based on the strata mining protocol you can set up your own pool there’s no dead feed there’s no adblock and you can use any pool you’d like but you clone this repository repository you CD into it you build it with docker and then you run it with docker please subscribe for more programming videos and for now I’ve got to plan my scaling strategy for the new year so thanks for watching

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