Monero's (XMR) is 'Auditable', Community Has No Control Over Regulations, Spagni Explains

Riccardo Spagni, the lead maintainer of monero (XMR), a privacy-oriented cryptocurrency, recently clarified that he does not think of XMR as a form of investment.

Spagni, who’s also known as “Fluffy Pony” on Twitter, explained that monero is “designed to be a currency, and in particular it’s [supposed] to be a privacy-preserving currency.” His comments came during an interview with Forbes (published on February 7th) during which the monero project lead revealed that he used to experiment with bitcoin’s (BTC) codebase while working as a developer in a corporate office.

After CryptoNote, the first trustless, default privacy protocol was launched, Spagni began taking more interest in cryptocurrencies. He learned that privacy-focused cryptos such as monero had a unique codebase, which was different from other crypto projects that were basically copies, or clones, of the bitcoin protocol. When monero was introduced, Spagni began mining the platform’s native cryptocurrency, XMR.

The South African resident also started to actively participate in monero’s community and has taken on the responsibility of lead maintainer of the cryptocurrency’s codebase and project development. Commenting on how monero reflects his own personal beliefs, Spagni remarked:

I'm a big advocate for personal privacy. I think that it should be a basic human right. The way all our data has just sort of been splurged online through hacks and compromises and malware and sometimes our own stupidity, we're in a situation where privacy-preserving projects are a necessity.

Using Ring Signatures To Maintain Financial Privacy

Launched in April 2014, monero (XMR) is an open-source cryptocurrency that focuses on “fungibility, privacy, and decentralization.” Transactions conducted on the monero platform are very difficult to trace and it’s not easy to determine the amount of funds transferred. This type of financial privacy is achieved by using an “obfuscated” public ledger for sending and receiving XMR coins.

Similar to bitcoin’s consensus mechanism, the monero blockchain network uses the proof-of-work (PoW) protocol to validate blocks of transactions and issue new XMR coins.

At present, many crypto projects including Ethereum are considering incorporating Zcash’s zk-SNARKS (zero-knowledge proofs) to their protocol. However, monero’s development team uses ring signatures, one-time stealth addresses, and ring confidential transactions - in order to maintain privacy.

XMR Transactions Can Be Audited

Notably, privacy-focused coins including monero’s XMR can be used to carry out illicit activities as it’s not easy to determine the identity of the sender and recipient of transactions. However, transfers made using XMR can be audited if the wallet owner, or the individual sending the funds, decides to voluntarily hand over transaction details.

Explaining how monero transactions may be audited, Spagni noted:

Monero is auditable. You can take the view key and ... give it to a third-party auditor or the IRS. Since the view key feature is cryptographically linked to your wallet, there’s a guarantee no one can manipulate or hide certain transactions associated with the wallet address.

Having access to a view key allows others (not just the wallet owner) to view the transaction history associated with an XMR address. Acknowledging that monero’s developers have no control over how XMR is regulated, Spagni said: 

In terms of regulation in general, the community doesn't have control over anything like that and can't really influence it. We largely take a hands-off approach; we work on an open-source project for the benefit of everyone around the world that can use it and that should use it and how regulators treat that is largely out of our control.

Spagni: ICOs Are Not Properly Regulated

Currently, Spagni is focused on developing a blockchain-based event ticketing platform called Tari. As the chief technical officer at Tari, Spagni aims to remove intermediaries from various services so that artists can receive most (or a larger cut) of the income generated from ticket sales. Spagni also revealed that he intends to create Tari’s platform on top of monero’s codebase.

When questioned about whether he would consider raising funds through an initial coin offering (ICO) for Tari, Spagni stated:

I’ll slay you where you stand. My problem with ICOs is not the act of selling targets, it's that it's being done in an environment where there is a lot of murkiness both from a regulatory and an ethical perspective. Right now, we have no regulatory clarity on whether ICOs are legal or not.

Although ICOs might be open to everyone (not just accredited investors), Spagni mentioned:

ICOs get snapped up in like 12 seconds by a bunch of engineers who are able to pay more gas than the little guy in the street.