DEFINITION of 'Ring Signature (Cryptocurrency)'

Ring signature is a mechanism used to protect the privacy of the sender of a message or a transaction on cryptocurrency networks.

BREAKING DOWN 'Ring Signature (Cryptocurrency)'

Ring signature involves fusing together inputs of multiple signers with that of the original sender. These signers are the various participants of a group on the blockchain, whose signatures are clubbed together to authorize the transaction. Such signatures are akin to multiple holders signing a check drawn on a joint account, though the identity of the signer(s) is not known.

For example, Bob wants to send a transaction to Ken on a blockchain network which has a ring signature size of five. One of the inputs will come from Bob, while the rest will come from other four members of the blockchain. This pooling of inputs from various members will result in five different signatures, of which four will be decoy signatures and only one will be genuine.

Ring signatures are generated using a combination of sender’s account keys with public keys on the blockchain. It makes it private as well as unique. It hides the identity of the sending participant as it is computationally impossible to assess which group members' keys were used to generate the complex signature.

To an outsider, all five will be equally-likely without the possibility of knowing which is the genuine one. The transaction’s key image on the network, which is used to authenticate and verify the transaction during the mining exercise, ensures that the transaction is confirmed only through a secure and standard manner without any possibility of duplicity or hacking.

This ensures a secure yet anonymous transaction, as well as its successful authorization. Popular cryptocurrency network Monero, which is known for its privacy and security features, has implemented ring signatures. (See also, What Is Monero (XMR) Cryptocurrency?)

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