Nowadays cryptographic (or digital) signatures are at the epicenter of the crypto economy – they help to confirm the legitimacy of ongoing transactions. The roots of this technology go back to 1976, this is when the idea of public-key cryptosystem RSA cryptographic algorithm appeared. This system was capable of protecting digital data in the chaos of the global network. It is still used today as the standard precaution for data encryption.
With the development of this sector of IT technologies, a dozen other digital schemes for signatures have been added to the RSA algorithm, including Lamport's signature, ECDSA (Elliptic Curve Digital Signature Algorithm), Schnorr's signatures, Ring signatures (underlying the functioning of the Monero cryptocurrency). In this article we’ll take a closer look at the last one.
Ring signature: FAQ
This is the type of digital signature that is most likely to confuse or even scare away a potential hacker. It is impossible to find out which user has actually signed the transaction, and which was just online at that moment. All data is combined by the system into a ring and mixed, creating an additional obstacle for hacking. The technology erases all boundaries between the person who actually signed the transaction and the ones who did not.
How do ring signatures work in the blockchain?
In a cryptocurrency transaction there are two main participants – the sender of funds and the recipient. They have a set of keys that provide encryption, the correct matching of which allows the operation to be done. In the ring signature system there is a person who actually signed the transaction. He or she gets a one-time key which is equal to the withdrawal funds from the sender's wallet. It does not go directly to the recipient, but falls into the general pool of keys along with the output of past transactions, which are extracted from the blockchain. These are the keys belonging to users who have not signed a particular transaction. They act as a decoy in a ring signature operation.
Since the transaction is carried out in an open digital space, in addition to the two participants in it, there are also other users who conduct the same transactions at the same time.
Origins of ring signatures
The technology of ring signatures is based on the concept of group signatures with a slight difference. Typically, a cryptographic signature verifies the authenticity and integrity of a document from a single person. Simply put, you can sign a check in the same way, verifying that you agree with the withdrawal.
Instead of showing that the document was "approved" by one signer, a group signature proves that one person from a fixed group approved the document. It is important to remember that this concept does not disclose which of the members of the group signed it up. Rather than requiring multiple participants to sign parts of a transaction that can then be combined, ring signatures allow only one member of some group to sign a transaction. And no one will know who signed the deal.
Pros and cons of the ring signature concept
Key benefits of ring signature technology are:
- Anonymity and confidentiality. Now it is possible to hide information about the sender, recipient, transfer amount and transaction history from everyone. The maximum that an outside researcher can find out after the transaction is the fact that the signature was put by one of the members of a group.
- Safety. The principle of mixing data allows you to protect not only the crypto assets, but also increase the security of the entire system.
- Untraceability. It is impossible to keep track of who and how they spend their crypto. Usage history is erased. Cryptocurrency based on ring signatures tends to the principle of fungibility – it allows one crypto to perform the functions of another similar currency.
It would seem that the concept of ring signatures is ideal and its wide application is only a matter of time. But it’s not that simple. Users complain of one significant disadvantage - high fees that the system takes for mixing data. There is also an increase in transaction volume. The developers of Monero (XMR), the only cryptocurrency that works entirely on ring signature anonymity, are already trying to solve this problem. In 2018, the Bulletproofs protocol was created, which is designed to increase the scalability of the confidential features of the blockchain and reduce the weight of confidential transactions. This protocol helped to reduce fees by 80%.
Who uses ring signatures?
Crypto community becomes more and more in the concept of Ring Confidential Transactions (Ring CTs). At the moment, ring signature technology has no analogues. The Monero is based on it and this token is known as the most anonymous and secure cryptocurrency.
The ring signature is used by cryptocurrency developers as a privacy concept. The CryptoNote protocol was created based on the ring signature scheme. It allows us to hide the true addresses of wallets, replacing them with a random one-time address of the network participants. CryptoNote makes blockchain analysis difficult.
Within CryptoNote, a ring signature verifies that a transaction was initiated by one of the addresses from a certain group. Transactions signed with a ring signature link to several other transactions on the blockchain. The CryptoNote protocol is used by Bytecoin, as well as by its forks Monero and DarkNote.
So if the total anonymity of crypto transactions is really important for you, then now you know all about technology that can make it happen.