A crypto enthusiast identified on Twitter as Cenan K. has in a thread of tweets explained how the built-in privacy features of Monero (XMR) works between senders and recipients.
In the tweets, Cenan stated that Monero uses stealth addresses to ensure that only the sender and recipient determine where payment is heading.
Using Alice as sender and Bob as the recipient, Cenan wrote, “A Monero wallet address consists of a public view key and a public spend key. When Alice wants to send Monero to Bob, her wallet automatically uses Bob‘s view key and public spend key to generate a stealth address, also known as a one-time public key.”
“The encrypted output amounts include an output for Bob and a change output for Alice. Only Bob is able to locate his output and to spend it by scanning the blockchain with his private view key and calculating a one-time private key that corresponds to the one-time public key.
“Ring signatures are used to protect the sender‘s privacy by hiding the origin of a transaction. The digital signature is made up of the actual signer combined with non-signers to form a ring.
“The actual signer is a one-time spend key that corresponds to an output of Alice‘s wallet. The non-signers are arbitrarily picked past transaction outputs from the blockchain. All these outputs make up the input of the transaction and are equally likely to be Alice‘s output.”
He further explained that the key image derived from an output is meant to prevent double-spending. The fact that only one image is for each output will enable miners to verify that no output has been spent twice. Monero XMR. Monero network
Explaining the role of Ring Confidential Transactions in hiding transaction amounts for Monero (XMR) senders and recipients, Cenan stated:
“Ring confidential transactions (or Ring CT) were implemented to hide transaction amounts. When Alice wants to send Monero to Bob, the output amounts include an output for Bob and a change output back to Alice.
“Alice is required to commit to the amount of an output without revealing it such that miners are able to confirm that the output sent to Bob is the same as the amount of funds available.
“Pedersen commitments allow Alice to send Monero without revealing or changing the Monero value of the inputs and outputs.
“This is done by verifying that the encrypted output amounts which include an output for Bob, a change output for Alice and the unencrypted transaction fee are equal to the sum of the inputs that are being spent.”
Conclusively, he pointed out that the Monero network allows the digital transfer of funds to anyone without leaking the details of the sender and recipient to third parties.