CryptoNote currencies are quickly gaining speed and have established themselves as a niche in this ever-evolving universe of cryptocurrency technology. Like Bitcoin, CryptoNote currency is an open source technology moving the world forward in the development of decentralized currency. However, there are some differences that make CryptoNote currencies different than Bitcoin.
Regulatory detractors claim that Bitcoin is anonymous, but a closer look reveals that Bitcoin is only psuedonymous. Transactions are still traceable through the transaction public key of any sender or recipient by those parties determined enough to track for any reason.
Ring Signature Technology
CryptoNote currencies are immune to tracking through the use of ring signature technology, through ring signatures a sender’s public key is randomly shuffled with other user public keys as part of a group creating a multiple unique one-time public key for each peer-to-peer payment to a recipient. The recipient then performs a formula check to confirm the transaction, eliminating any third party from discovering the link between sender and receiver, this is known as the Diffie-Hellman exchange protocol. The multiple unique one-time public key also prevents certain block chain analysis of transaction. CryptoNote uses an algorithm that prevents double-spending by entering a one way key image, this function makes it impossible to recover a ring signature public key to use for a second time.
CryptoNote has the following parameters which adjust automatically for each new block:
1) Difficulty. The general idea of our algorithm is to sum all the work that nodes have performed during the last 720 blocks and divide it by the time they have spent to accomplish it. A measure of the work is the corresponding difficulty value for each of the blocks. The time is calculated as follows: sort all the 720 timestamps and cut-off 20% of the outliers. The range of the rest 600 values is the time which was spent for 80% of the corresponding blocks.
2) Max block size. Let MN be the median value of the last N blocks sizes. Then the “hard-limit” for the size of accepting blocks is 2*MN. It averts blockchain bloating but still allows the limit to slowly grow with the time if necessary. Transaction size does not need to be limited explicitly. It is bounded by the size of the block.
3) CryptoNote currencies also have a “smooth” emission, described as:
The upper bound for the overall amount of all digital coins is also digital:
MSupply = 264 − 1 atomic units
This is a natural restriction based only on the implementation limits, not on intuition like “N coins ought to be enough for everybody”. To make the emission process smoother CryptoNote uses the following formula for block rewards:
BaseReward = (MSupply − A) >> 18, where A is amount of previously generated coins. It gives a predictable growth of the money supply without any breakpoints.
CryptoNote currencies are based on the Egalitarian Proof of Work (PoW) mechanism which is a voting system where users vote for priority of transactions, supply distribution and new features added to the protocol. For example, ByteCoin created the CryptoNight algorithm designed to be suitable for CPU mining only, restricting GPU and ASIC mining.
Various CryptoNote Currencies
Today, there are a handful of successful CryptoNote currencies available with a variety of features and benefits starting with ByteCoin [BCN] the original CryptoNote currency, followed by Quazarcoin [QCN], Monero [XMR], BoolBerry [BBR], Aeon [Aeon], FantomCoin [FCN], DuckNote [XDN] and MonetaVerde [MCN]. These currencies have had an impact on the cryptocurrency market and vary in degrees of success. It remains to be seen whether CryptoNote technologies will emerge in the future or if Bitcoin will overcome vulnerabilities that CryptoNote has solved by finding solutions to these issues.
In conclusion, CryptoNote digital currencies appear to be here to stay. How they will change the landscape of cryptocurrency in general is still up in the air; however, these types of currencies should not be overlooked, or discounted and now is the time for the cryptocurrency world to participate and take part in its further development.
CryptoNote Technology. (n.d.). Retrieved from https://www.cryptonote.org/inside.php
Disclosure: I do not currently own or hold any currencies listed in this article; however, Quazarcoin is a client of CryptoCat Concepts LLC a digital marketing agency of which I am an owner and currently compensated in Bitcoin.