BTC -0.69%
ETH 0.39%
SOL 1.08%
PEPE -2.50%
SHIB -7.84%
BNB 0.16%
DOGE -2.83%
XRP -9.70%
Best Crypto Poker

Ring Signatures: What Are They & Do They Ensure Privacy in Monero

Alex Lielacher
Last updated: | 4 min read

The pseudonymity of Bitcoin made it appealing to many new users, especially in its early days. However, its pseudonymity has become strained over the years as it began being surveyed by blockchain analysis firms and government agencies. As a result, privacy coins like Monero emerged, with embedded privacy protection at the base layer through the use of ring signatures. 

Read on to find out what ring signatures are, how they work, and how they provide privacy for Monero users.

What Are Ring Signatures?

A ring signature is a privacy-enhancing, cryptographic digital signature used to protect any information on signatures made by Monero users when they want to make any transaction.

Ring signatures are one of the earliest cryptographic creations ever to be made, and they remain effective to date. A ring signature typically involves a group of users who all own keys. When using a ring signature, it’ll appear as though a group of users have merged together (forming a ring) and are executing a transaction as a group. However, no one will know the true signer out of the transaction.

Simply put, instead of one transaction being signed by one person, it will be signed by multiple users – just like you would need multiple signatures from various members if you were to open a joint account in a bank.

Ring signatures were introduced by Adi Shamir, Ron Rivest, and Yael Tauman Kalai at ASIACRYPT back in 2001. They have since become very popular and are used for multiple real-life applications, especially in enhancing privacy on public blockchains. 

How Do Ring Signatures Work? 

The ‘White House Dilemma’ is one of the earliest schemes used to explain how ring signatures work. In this scenario, let’s assume there has been a leak of some sensitive information from the White House. However, the leaked data does not have any source. So, what happens?

It is assumed that everyone working in the Oval Office is a suspect and that the information must have been divulged by a staff member even though no one has any idea who it is. The news is in the open, but no one can tell the source or how the leak occurred. This, therefore, means everyone working at the White House gets to enjoy plausible deniability due to a lack of evidence. Given there’s no source, no one can be held accountable, making the concept similar to how ring signatures work.

For a ring signature to work, it needs an already existing group of users on both sides of every transaction. For instance, in the above example, the anonymous sender is the person in the White House leaking out the information, while the receiver is the general public. On Monero, a single signature is sufficient to transmit a ring signature message even though all the other ring members operate as decoys. And since it’s not possible to establish who signed the transaction using their keys, the anonymity of the signer remains as such – anonymous.

While ring signatures may appear similar to group signatures, they have two key differences. For starters, the anonymity of the single key used in a ring signature is irreversible. Secondly, there is no additional setup that is required to establish a single signing set. This means that any irregular set of keys can be used with or without the prior knowledge of the key owners. 

Ring Signatures: The Keys to Monero’s Transactional Privacy

Monero (XMR) is a decentralized digital currency that utilizes a distributed ledger and incorporates privacy-enhancing technology to obscure transactions and provide anonymity for its users. The cryptocurrency was a fork of Bytecoin and was launched in 2014. 

Monero does not depend on Bitcoin’s code, nor does it have a limited supply. Its independence on the Bitcoin blockchain means that it integrates privacy on its own protocol instead of making it optional or having to rely on a second layer to develop the security or add it at a later stage.

One such privacy-enhanced technology that Monero uses is ring signatures. So effective is this form of protection that it has not only set Monero aside from its competitor but also sparked the interest of the Internal Revenue Service (IRS), which offered a $625,000 bounty for anyone who could crack Monero’s privacy features

So, how do Monero ring signatures work?

To ensure the privacy of its users when sending XMR, Monero uses ring signatures to make it appear as though several outputs have been used to transfer funds to an individual, even though only one of the outputs has actually been used. Keys are, therefore, used to sign any Monero transactions made. This way, outside receivers, and observers cannot tell what output has been used to complete the transaction. Additionally, the ring signature used can also not be revoked, which helps to ensure that the anonymity of the Monero user is protected both in the short and long term.

Ring signature technology has helped Monero establish itself as one of the most private digital currencies. Additionally, it has made it very attractive to advocates of privacy in the crypto space who believe that privacy is a fundamental right, and not just for people who are believed to have something to hide. And given that the IRS hasn’t been able to crack its privacy has given Monero more success as the market’s leading privacy coin.