Navigating the Choppy Waters: Monero’s Journey with Nonfungible Tokens


Integrating nonfungible tokens (NFTs) into the blockchain technology of Monero, the acclaimed privacy-focused cryptocurrency, has always been a technical possibility. However, this feature’s recent manifestation has stirred up a sea of contentious issues, igniting a vigorous debate within the Monero community.

The novel class of tokens known as Monero Ordinals, or Mordinals, enables users to inscribe arbitrary data with transactions registered on the Monero blockchain. This recent development has inadvertently opened the doors to a fresh set of challenges, including privacy concerns and potential decentralization impact, akin to a Pandora’s Box. 

Mordinals and Ordinals: An Unconventional Data Storage Method

The Bitcoin Ordinals platform allowed users to tether data to a single Bitcoin unit, a satoshi, effectively enabling the creation of NFTs on the network. In addition, the Ordinals protocol diligently manages these satoshis, the connected data, and their unique identifiers.

Mordinals are an innovative adaptation of the Ordinals protocol for the Monero blockchain. While the Ordinals protocol requires data to be retained in a Bitcoin transaction’s “witness” segment, Mordinals utilize the “tx_extra” field in each Monero transaction. Though this functionality has been theoretically feasible since 2014, it has lacked substantial support.

Concerns Mount Over Monero’s Privacy and Decentralization

Skepticism surrounding Mordinals is reminiscent of the concerns voiced against Bitcoin’s Ordinals, but with a heightened focus on potential risks to Monero’s cherished privacy. A community that places a premium on privacy, Monero’s venture into the NFT space, an area where the distinctive characteristics of tokens are celebrated, was bound to face resistance.

Monero employs “ring signatures” to uphold user privacy, intertwining genuine transactions with decoys. As a result, there’s an inherent risk that a well-funded attacker could inundate Monero’s blocks with Mordinals, rendering it simple to differentiate actual transactions from the sham NFTs. 

Considering the US Internal Revenue Service’s $625,000 bounty in 2020 for tracking Monero transactions, this apprehension holds considerable weight.

There’s a similar concern about Mordinals’ potential influence on decentralization. For example, the burgeoning size of the blocks could escalate storage requirements for nodes, potentially disincentivizing smaller nodes from remaining in operation.

A Compromise Between Decentralization and Censorship?

While there’s an option to upgrade the protocol to enable nodes to prune these transactions, this could inadvertently lead to allegations of censorship, given that a blockchain’s efficacy hinges on its nodes’ consensus on the network’s state.

Monero, equipped with a dynamic block size, could witness an unnatural growth of its blockchain due to Mordinals – a valid worry within the Monero community. Nevertheless, on-chain metrics reveal a lack of evidence for rampant block growth.

Addressing Privacy Concerns and Potential Solutions

The impact of Mordinals on privacy deserves serious attention, but many believe these risks can be mitigated through timely updates. In this regard, Justin Ehrenhofer, the Vice President of Cake Wallet, advocates for Monero to curtail certain behaviors, similar to how it has previously managed other privacy and fungibility risks.

Ehrenhofer proposes the confinement of the tx_extra field within Monero transactions to 256 bytes to considerably elevate the cost of flooding the network with bogus transactions while retaining adaptability for future applications.

The Risk of Illegal Content Storage on Monero

There is a looming risk of using Monero for storing and selling illegal content. Given its reputation as an uncensorable, privacy-focused blockchain, this could potentially lead to grave repercussions. Despite this, the possibility has always existed on Monero, but Mordinals have made it more accessible, bypassing the need for technical command-line interface knowledge.

The discourse around the future of the tx_extra field has been a long-standing debate. However, the community is converging towards Ehrenhofer’s view, as demonstrated by a recent patch that limits the size of the tx_extra field to 1,060 bytes. Although it’s still considerably larger than his proposal, it undoubtedly raises the bar for network attacks.

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