Improving Obfuscation in the CryptoNote Protocol

We identify several blockchain analysis attacks available to degrade the untraceability of the CryptoNote 2.0 protocol. We analyze possible solutions,discuss the relative merits and drawbakcs to those solutions,and recommend improvements to the Monero protocol that will hopefully provide long-term resistance of the cryptocurrency against blockchain analysis. Our recommended improvements to Monero include a protocol-level network-wide minimum mix-in policy of n = 2 foreign outputs per ring signature,a protocol-level increase of this value to n = 4 after two years,and a wallet-level default value of n = 4 in the interim. We also recommend a torrent-style method of sending Monero output. We also discuss a non-uniform,age-dependent mix-in selection method to mitigate the other forms of blockchain analysis identified herein,but we make no formal recommendations on implementation for a variety of reasons. The ramifications following these improvements are also discussed in some detail. This research bulletin has not undergone peer review,and reflects only the results of internal investigation.