What is Monero (XMR)
Monero is an open-source blockchain-based cryptocurrency .Monero cryptocurrency launched in April 2014 as a Bytecoin’s fork. A hard fork happens when the original crypto is split into two to create a new version. Most cryptocurrencies’ open-source format allows their members to make changes to address any flaws of the original currency or to create a better alternative.If a group of members of specific crypto doesn’t agree with how things are run on the network, they can improve the code and create a better version, which is called a hard fork.
A similar incident happened to the Bytecoin network. Created in 2012, Bytecoin is the original private digital currency. However, a group of seven developers led by Ricardo Spagni and David Latapie had some issues concerning the cryptocurrency’s initial distribution, which led to the split of Bytecoin into two, Bytecoin and Bitmonero. Launched on April 18th, 2014, Monero was initially named Bitmonero. The new cryptocurrency updated to its current name within a week. Monero started with no pre-mine or coin offering. Furthermore, the developers didn't keep any stakes for themselves — all the contributions from the community help to further develop the digital currency.
Monero is a decentralized virtual currency that focuses on the privacy and anonymity of its users. The network is built on an obfuscated public ledger capable of masking the source, the destination, or the amount used in a transaction. It is the most popular privacy-focused altcoin in the world.
Other major cryptocurrencies like Bitcoin or Ethereum don’t offer that feature. Transactions on most cryptocurrencies’ blockchain are public and accessible to anyone. Sure, you can use a pseudonym, but your coins can be traced to your public address, and they can know the nature and purpose of your transaction. For instance, when you send BTC to your friend, your transaction can be viewed by anyone on the web looking for that information. They can know how much you sent him and have access to your account balance. Malicious people can use a few transactions from your public address to study your behaviors and trends, and thus you would become prey to scammers. But, if you want to reinforce your privacy on the Bitcoin network, you would have to resort to extra methods like proxies, VPNs, etc.
By being private, you don’t want anyone to know what you are doing.Being anonymous means that you don't mind people knowing what you are doing; you just don't want them to know it was you.
However, whenever we connect to the Internet on our devices, many companies out there can study and monitor our habits. They even sell our data or study our patterns for their benefits. If you want to avoid seeing ads all day long from something that you checked on Google in the morning, a private digital currency is your go-to. Some other people want to keep their purchase private for different reasons. You can avoid being tracked by using proxies, but you would have some experience in IT or hire an expert.
Monero’s founders aimed to create a private cryptocurrency that doesn’t expose who sends how much and to whom. The transactions on Monero blockchain are unlinkable and untraceable.
Unsurprisingly, many people have argued that this cryptocurrency will benefit criminals. However, many other people can use it to protect their financial data, medical records, etc. Nonetheless, the non-traceability advantage indeed allows people to use the crypto for questionable purposes on the dark web like trafficking, gambling, and more.
Monero cryptocurrency uses the ring signature mechanism to reduce the amount of info displayed in a transaction. The Ring signature protocol mixes the sender’s data with a group of other users, making it difficult to trace the origin and the destination of a transaction. They only need to check if the sender has enough coins in his wallet. The system is capable of masking the identity of the sender and the receiver, plus the amount sent. On the Monero blockchain, no one can trace where your coin comes from.
In other words, the Monero network disguises the participants’ addresses and hides the amounts being transacted.
Traded on exchange platforms under the symbol XMR, Monero is peer-to-peer digital cash like Bitcoin. You can use it to buy products or accept it as a payment method anonymously.
Like Bitcoin, XMR is mined by a network of computers competing to solve math problems. It uses the same mechanism as Bitcoin to create new coins and incentivize miners to validate transactions and secure the system. That mechanism is called Proof-of-Work.
However, Monero uses a different algorithm than Bitcoin. While Bitcoin uses SHA-256, Monero uses CryptoNight, which is ASIC (Application-Specific Integrated Circuit) resistant. ASIC mining method requires miners to have specific hardware to participate in the creation of the new coins. Monero network gives individuals the ability to mine individually on their PC or join a mining pool. Monero proof-of-work algorithm prevents people from buying a large amount of mining power and dominate the market; it offers equal opportunity to all miners on the network.
Every two minutes, a new block is created on Monero’s blockchainagainst Bitcoin’s ten minutes. Also, 1 XMR is mined every two seconds.
Monero provides its users with privacy-enhancing features. The privacy features have fueled the cryptocurrency’s rapid adoption. However, they also brought many challenges.
As of December 4th, 2019, Monero market capitalization stands at 949 million, putting in the top 15 cryptocurrencies in the world. One XMR has a value of $54.74. Currently, there is a total of 17,338,649 XMR in circulation, and there will only be a total of 18.4 million. Once they reach that number in May 2022, new coins will continuously be added to the network at a rate of 0.3 XMR per minute. The new coins will be used to encourage the miners to secure and verify transactions on the Monero network.
How Does It Work
As a user of giant cryptocurrencies like BTC or ETH , you are given a public and private key/address. You can share your public key to receive coins in your account, but you have to keep your private key to yourself as you will use it to access the money in the account. As a result, the persons who access your public key can see how much you own. Also, when the transaction between you and your partner is approved on the network, it will be added to the blockchain. Once on the blockchain, the operation will be made public (the public address of the sender, the recipient, how much money you spent, and when).
Bitcoin enables its users to hide their real identity by using pseudo names. The names are a random combination of letters and numbers. However, their method shows some limitations as all the addresses and transactions are registered on the blockchain and displayed to the public. By studying a specific user’s transactions patterns, tech-savvy can link back a few transactions to an individual's public address, and even their real-life identity.
With Monero, on the other hand, the sender cannot view the receiver’s holdings and vice versa, even though he will still have access to his public address.
Monero technology enables for transactions on the blockchain to mix in with each other, thus making it difficult to trace where they originated from. Multiple sets of transactions executed on the Monero blockchain are mixed with each other in a process called “ring mixing.” Monero’s ring signature system obfuscates or masks the sources of funds. For instance,the ring signature method groups the transactions between you and your friend with other transactions that occur on the Monero blockchain. Again, when you send a certain amount of XMR to a partner, the coins will be rerouted through a one-time address specifically created to be used for that transaction.
Furthermore, the receiver’s holdings are mixed in with other users’ transactions and moved randomly on the list of operations. The ring signature also decodes the amount involved in any transaction. Monero splits the amount transferred into various amounts and treats each split amount as a separate transaction. For example, if you send 100 XMR to your vendor, the network would randomly split the amount into 45 XMR, 10 XRM, 25 XMR, 20 XMR, totaling 100 XMR.A one-time address will be created for each of the split amounts. The split figures are then mixed in with other users' split transactions, making it extremely difficult to determine which amount belongs to whom. The network only needs to validate whether the sender has sufficient funds and make sure the right amount reaches the recipient’s account.
Ring signatures are created to protect the sender’s identity, while stealth addresses are one-time addresses generated to protect the identity of the receiver.A stealth address hides the identity of the receiver, thus ensuring stronger anonymity on the Monero network.
Ring Confidential Transactions “Ring CT” is used to hide the transaction amount. Ring CT feature is mandatory for all transactions made on the Monero network. Georges Maxwell implemented it in 2017.
Each Monero user has a view key that they can share with selected parties, but with limitations. For example, you can give your view key to a partner and only give him the ability to see your account balance, but restrain him from spending any funds. You can also allow them to view all your transactions (historical and current), or specific operation. For example, you can give your view key to your parents (if you are a miner), to a spouse, an auditor, etc.
On top of the view key, you can also share a spend key with a few people of your choice. They will be able to spend the funds in the account. The spend key has a 64 long password, which consists of letters and numbers.
New Monero coins are created through the mining process using the CryptoNight algorithm. To take part in the mining process on the Monero network, you will need to download software. Monero software is compatible will all operating systems, including Windows, macOS, Linux, etc.
Another good thing about Monero is that it allows anyone to mine new coins without the need to purchase energy-consuming and expensive hardware. As opposed to leading crypto like BTC and ETH, Monero will enable individuals to mine on their personal PC in exchange for a reward. However, you could also join a mining pool for better chances to actually win a prize. When you mine within a pool, you will be sharing your computing power with other miners, thus increasing the mining speed. When a miner successfully solves the mathematical puzzle, the rest of the nodes on the network will verify the solution. Once validated, new transactions will be approved, thus the creation of a new block. The current block reward is fixed at 2.22 XMR.
And since nobody has no clue about the previous transactions, all Monero coins are equal and exchangeable.
Where To Buy and Store Monero Coins
Since Monero is a digital currency like Bitcoin, you can acquire it by accepting the coins as a payment if you are a vendor or use it to purchase goods and services. Moreover, you can earn XMR by taking part in the mining process. You can also buy Monero coins from multiple exchanges such as Binance, Bitfinex, Bithumb, HitBTC, etc. Nevertheless, it is essential to compare the prices on various exchanges to determine which offers you the best deal.
What more, you can trade XMR on various trading platforms. XMR trades against BTC, ETH, LTC, BCH, etc. It can also be traded against traditional currencies like USD and EUR.
Monero has its own original wallet available for Windows, Linux, macOS, and Android. You can also opt for hardware wallets like Trezor, Ledger Nano S, etc. For instance, MyMonero is a web wallet that you can download from Monero’s website. Monerujo is a mobile wallet that can only be used on Android devices.
Benefits and Features
Monero is a decentralized user-to-user cryptocurrency that offers its owners complete anonymity. The crypto offers its customer various features, including:
The Monero blockchain doesn’t record the addresses of the sender and the receiver. When there is a transaction, the system randomly creates a one-time address that cannot be linked or traced back to the real address of either party. Monero opaque ledger makes it challenging to track down the addresses and the amount involved in any transaction.
Monero coins are fungible, meaning that they are interchangeable and don't carry any distinguishing features. For example, even though two bills of one dollar share the same value, each has a unique serial number. When someone uses stolen bills to purchase products from your store, the corresponding authority will be able to trace the bills back to you.
The same thing can happen on the Bitcoin blockchain. For example, someone can refuse your BTC coins if you obtained them from someone who stole them. Since each bitcoin’s transaction is recorded on the blockchain, it allows identifying coins that may have been linked to malicious activities like theft, gambling, fraud, etc. When such action is discovered, the BTC units used in them will be blocked, and the account closed. However, all units of the Monero’s cryptocurrency are equal and share the same value. Fungibility prevents units of Monero from being blacklisted to their previous transactions.
Monero decentralized cryptocurrency is run by a network of users spread across the world. Nodes verify transactions on the Monero blockchain via a distributed consensus and then recorded on the blockchain. All operations recorded on the blockchain are immutable.
Through their ASIC-resistant mechanism, Monero encourages average people to mine with their personal PC to prevent too much centralization while in Bitcoin, the mining market is in the hands of a few mining pools.
What Does the Future Hold ?
As mentioned above, Monero is a private digital currency that offers a high level of privacy for customers and their transactions. Sending and receiving addresses are obfuscated by default on the Monero network. What more, participants on the Monero platform can neither see the transacted amounts nor the account balances.
The cryptocurrency experienced tremendous growth in the market due to its privacy features. Monero’s growth was mainly driven by the dark web users who used it to purchase guns, drugs, or stolen credit/debit cards.
Monero has a promising future ahead of it; however, the controversy around it is that the cryptocurrency can be used to evade law enforcement or engage in other illicit activities. In fact, Monero has gained a wide acceptance from controversial websites on the dark web. It is only natural that its usage raises concerns on whether it'll face regulatory obstacles in the future. Nonetheless, with privacy becoming increasingly important with the rising number of cyber-attacks, more people want to keep their data private. Monero is the current best way to keep your transactions anonymous.
Monero boasts of enthusiast developers dedicated to improving the network. They are continually working to push their efforts to better the cryptocurrency's security and privacy. The network 's talented developers and researches are grouped in various communities, such as Monero’s Research Lab, Community Developers, and Core Development Team.
Lately, Monero developers have successfully upgraded the network to a new and more accessible Proof-of-Work algorithm called Random X.
XMR was traded for the first time on May 22nd, 2014, at $1.60. The currency maintained a low value varying between $0.5 and $2 until August 2016.
Since mid-August 2016, mining equipment stores and gaming portals developed an interest in the crypto, which drove its price to $4. Shortly after, the owners of businesses on the darknet drew attention to the crypto and drove the prices to rise to $15. When the South Korean exchange adopted XMR on its platform, the coin's value exceeded $100.
When the Monero coin reached an all-time high of over $400 in December 2017, it gave its original investors an incredible 50x returns.
Unfortunately, Monero experienced a tough period since January 2018, where it shows a gradual falling. One XMR is now worth $54.74.
Even if you don't see the need for privacy as of now, investing in Monero is still a wise decision as it is expected to rise in popularity, which will cause mass adoption, thus increase the token's value. With its growing adoption and new features, many analysts believe the cryptocurrency to reach $500 within five years.
However, like many financial assets, Monero cryptocurrency is highly volatile. The currency's price solely depends on demand and supply. It can also depend on the cryptocurrency market news or updates. Therefore, make sure you conduct your own research or hire a financial advisor before putting your earnings on the line. Also, make sure never to invest more than you can afford to lose.
You can join Monero’s active communities to get fresh news and updates on various platforms such as Reddit, Telegram Chat, BitcoinTalk Thread, Stack exchange, etc.