Why the Monero IP Address Leak is Not an Exploit
Monero has been touted as one of the only truly private cryptocurrencies out there. Together with ZCash, the goal of Monero was to make sure that users could send privately and with complete anonymity. With this, the project has grown substantially over the past 3 years.
However, according to a disclosure by someone online, there are claims that some of the nodes can leak IP addresses. While this may sound slightly alarming at first, the claim that this is an "exploit" is quite overstretched.
Indeed, this is something that the Monero development team have known about for quite some time and are trying to remedy with other solutions. Moreover, other privacy conscious cryptocurrencies such as Zcash have their own drawbacks such as the reliance on master keys which are also being adapted.
More FUD than "Exploit"
The circumstances around the disclosure of the exploit are indeed quite suspicious. First of all, there is the obvious disclosure by the author that they have invested in a rival privacy conscious cryptocurrency. Similarly, there appears to have been a proliferation of this news on Reddit where people tend to overact to supposed rumours.
The reason this may only be FUD is because nearly everyone in the Monero community knows that some of the nodes will leak IP addresses on occasion and hence is not a vulnerability. If a node does expose an IP address, it has no impact on the true anonymity of the Monero network.
When an IP address is leaked from the nodes, it would be at random and cannot give any relevant information to someone about a specific transaction that took place on the network. It is true that an IP address can be used for physical node location, but without being able to link a transaction to it, having that IP address is useless.
The "exploit" author claims that the key to anonymity for cryptocurrency transactions is a hidden IP. This is not the case. The most important requirements for an anonymous cryptocurrency is being able to hide the transaction and sender / receiver addresses. This is something that Monero is able to do effectively through Ring CT technology.
Of course, there may be some users on the Monero network who are paranoid about their IP address ever being exposed. Even though a Monero transaction cannot be tied to this IP, they could always get a VPN to use proxy servers for running the nodes.
This is not to say that the development team at Monero are not trying to fix this quirk. They are currently working on solution called Kovri. This is a custom a C++ implementation which will allow for default IP concealment. Currently there is no definitive timeline on the rollout of the Kovri Solution.
The Monero team has being able to raise 7,000 XMR to work on this project and are likely making important strides near weekly. Given how much the Monero project has expanded over the past 3 years, many users have high hopes for this update.
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Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.