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Network Scaling
Similar to Bitcoin and Ethereum, Monero faces scaling issues and is currently developing solutions to these problems. Aside from the aforementioned dynamic block size, Monero's implementation of Bulletproofs allows for significantly reduced transaction sizes, with the Monero website even quoting up to an 80% reduction in transaction size and fees as a result of Bulletproofs.
An obstacle unique to Monero and other privacy-oriented cryptocurrencies is the corresponding increase in transaction size necessitated by anonymity-protecting technologies. Since ring signatures are used for their transactions, the size of each transaction is substantially larger than other cryptocurrencies. This leads to blockchain bloating, which will eventually cause problems for users running full clients. Blockchain pruning technologies were attempted with smaller CryptoNote projects, such as the now-defunct Boolberry, but substantial progress needs to be made on this front for Monero to scale practically. Instituting Bulletproofs helps with this, but further adoption of technologies to reduce the blockchain and transaction size of private transactions is needed. Without improvements, the chain bloat, computing cost of running a node, and transaction costs will become cost-prohibitive to most looking to use Monero as a currency.
Outside of the storage size of the Monero blockchain, it faces scalability issues similar to other Proof-of-Work cryptocurrencies when it comes to on-chain transaction throughput. Theoretically, Monero can achieve a TPS of approximately 1,000; however, the storage size of the Ring CTs makes this essentially too large for nodes to process, so it is only a theoretical limit and is lower in reality. While the Monero block size is technically dynamic, it is capped such that it will never exceed the median of twice the size of the previous 100 blocks. The Monero block time is 1 minute, and you need to wait for 18 confirmations for the transaction amount to be shown in the recipient’s account.
Riccardo Spagni, aka "fluffypony" is one of the team leads for Monero and has publicly stated his support for layer two solutions similar to those Bitcoin is pursuing with the Lightning Network (LN). Not only do they improve network scalability substantially, but they also increase privacy by creating private bidirectional channels between users.
Privacy Features
The privacy components of Monero are its cardinal feature. From Ring CTs to Bulletproofs, Monero—particularly the Monero Research arm—are at the forefront of cryptographic implementations in publicly obfuscated blockchain networks.
Monero transactions are confidential and untraceable. Transactions using the Ring CT (Confidential Transactions) scheme were put forth by Bitcoin developer Gregory Maxwell as part of the Lightning Network (LN) side chain privacy feature and are one of the primary components that allow for transaction obfuscation in Monero. Ring CTs are a method for obfuscating the value of transactions being sent. It does so by implementing a new form of ring signature known as a "Multi-layered Linkable Spontaneous Anonymous Group Signature." Ring signatures hide the signer of transactions by mixing their signature with a randomly selected group of signatures from previous transactions in the network, creating a muddying effect whereby determining the actual sender and recipient of a transaction is infeasible. The worthless transactions used to obfuscate the real transactions are known as “mixins."
In combination with key images – a cryptographically secure key used to ensure no double-spending – and one-time stealth addresses for transactions, the amounts transacted, the sender and the recipient are all kept private. Recently, Monero instituted testing for Bulletproofs, which are optimized Pedersen Commitment (Ring CT), where transaction amounts are obfuscated using a short non-interactive zero-knowledge proof. This is a new level of anonymity for the network as Bulletproofs bring the benefits of implementing zero-knowledge proofs but are much more efficient and do not require a trusted setup. The Stanford Applied Cryptography group initially proposed the concept in an academic publication, which eventually led to its testing and eventual integration with Monero. Kudelski Security recently completed an audit of Monero’s Bulletproof implementation. Full implementation of Bulletproofs in Monero were rolled out in the “Beryllium Bullet” upgrade in October 2018.
