Monero transactions are validated using a consensus mechanism called Proof of Work (PoW). PoW is a method of verifying transactions and adding them to the blockchain, where they are recorded and publicly visible.
Proof of Work
In a PoW system, miners compete to solve a cryptographic puzzle. The first miner to solve the puzzle gets to add the next block to the blockchain and is rewarded with newly minted Monero.
The puzzle is designed to be computationally difficult to solve, but easy to verify. This ensures that only miners with a lot of computing power can solve the puzzle and add blocks to the blockchain.
The puzzle is also designed to be random, so that it is impossible to predict which miner will solve it next. This ensures that the blockchain is secure and tamper-proof.
Ring Signatures
In addition to PoW, Monero uses a system of ring signatures to enhance the privacy of its transactions. A ring signature is a type of digital signature that allows a group of users to sign a message in such a way that it’s not possible to determine which member of the group actually signed the message.
In addition to PoW, Monero uses a system of ring signatures to enhance the privacy of its transactions. A ring signature is a type of digital signature that allows a group of users to sign a message in such a way that it’s not possible to determine which member of the group actually signed the message.
When a Monero transaction is created, the sender’s address is hidden using a ring signature. The ring signature includes the public keys of several other Monero addresses, as well as the sender’s own public key. When the transaction is verified, the network only knows that one of the public keys in the ring signature was used to sign the transaction, but it cannot be determined which one.
Stealth Addresses
Monero also uses a system of stealth addresses to further protect the privacy of its transactions. A stealth address is a unique, one-time-use address generated for each transaction.
When a Monero transaction is created, the recipient’s address is hidden using a stealth address. The stealth address is generated using the recipient’s public key and a random number. The sender of the transaction does not know the recipient’s actual address, and the recipient does not know who sent the transaction.