Monero, the #1 privacy coin with a market cap of USD 1.7 billion, has implemented bulletproofs. Bulletproofs are a scalability solution which drastically reduce the size of Monero transactions. The transaction fee for Monero has dropped from an average range of USD 0.50-0.70 to USD 0.02, a more than 95% decrease. Further, block size has dropped from 100 kb to 15 kb.
Before bulletproofs, Monero used range proofs. The purpose of range proofs is to ensure that inputs and outputs are balanced in a way that can be verified by anyone, and also that they are positive numbers within a set range that do not cause an overflow. Range proofs allow users to verify that a value is within a set range without revealing its value, which is essential due to the privacy oriented nature of Monero. However, range proofs scale linearly with the number of outputs and number of bits in the range, and multiple outputs need multiple separate range proofs, which caused range proofs to take up most of the space in a Monero transaction.
Bulletproof size increases logarithmically with the size of the range and number of outputs, versus linearly with range proofs. This means bulletproofs take up much less space, which drastically reduces the overall size of a Monero transaction. For example, a transaction sent with range proofs is 13.2 KB, while the same transaction sent with bulletproofs is only 2.5 KB. This 80% reduction in space corresponds directly to an 80% reduction in transaction fees theoretically, although the data from Monero shows that the reduction is actually more than 95%.
There are two types of bulletproofs, single output and multiple output. For now, Monero is just using single output, since an attacker could pack a transaction with many outputs and still maintain a small overall transaction size, and therefore pay low fees. Despite the small size and low fees, this sort of transaction would be computationally expensive, and an attacker could spam Monero’s network and effectively launch a denial of service attack with this exploit. To counter this, Monero developers are going to change fee structure so that it takes into account more than just the transaction size, but the discussions and testing for this are not done yet. Once multiple output bulletproofs are properly implemented, Monero transaction size and fees will drop even more.
This step to adopt bulletproofs is actually essential, since Monero’s transaction fees during December 2017 spiked to USD 20, which inhibits the use of Monero as a currency. Bulletproofs will ensure that Monero will not see a fee crisis even if transaction volumes return to December 2017 levels. Further, even the USD 0.50-0.70 fee that Monero had stabilized at could still inhibit the use of Monero, and it is far more ideal for fees to be near zero like they are now after the implementation of bulletproofs.
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