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Monero is a digital cryptocurrency that offers a high level of anonymity for users and their transactions. Like Bitcoin and many other cryptos, Monero is a decentralized peer-to-peer cryptocurrency, characterized as a more anonymous or privacy-oriented digital cash than Bitcoin.
Points to Remember
- Monero is an open-source, privacy-oriented cryptocurrency that was launched in 2014.
- It has numerous privacy-enhancing features that make it better than Bitcoin.
- It is open-source and created from decentralized, grass-roots development.
- This blockchain is opaque, which makes transaction details and the amount of every transaction anonymous by disguising the addresses used by participants.
- Investors can mine Monero using their own CPUs, which means they don’t need to pay for special hardware.
- Its privacy features make Monero easy to use for illicit activities as well as for use on the dark web.
Understanding Monero
Monero was created as a grassroots movement with no pre-mine and funding from venture capitalists, it was launched in April 2014 as a fork of Bytecoin.
Monero’s popularity in the crypto world has been rising mostly due to its anonymization characteristic. All cryptocurrency users are given a public address or key which is unique to each user. With most cryptocurrencies, the recipient of the coins has the coins transferred to their address which they have to tell to the sender. The sender can see how many bitcoins the recipient has once they have knowledge of the fund recipient’s public address. Also, all transactions are visible on a DLT.
However while transacting with Monero, the sender receives no such information of the receiver’s public address. These transactions are untraceable and coins are sent to addresses randomly generated for every unique transaction.
Furthermore, the monero ledger does not record the stealth addresses. Also, the random one-time addresses that are recorded cannot be traced back to the original parties. Therefore, anyone examining Monero’s opaque ledger can’t track down the addresses and individuals involved in any past or present transaction.
Monero Features
Monero also has a feature called the ring signature. It makes the sources of funds obscure making them virtually untraceable to the parties involved in the transfer. This ensures that every Monero transaction between two parties is grouped with other multiple transactions that occur among other unrelated parties.
Hence, the recipients funds are mixed in with that of other users as well and moved randomly in the ledger, making it way tougher to trace the recipient. The ring signature also decrypts the actual amount involved in any transaction.
Finally, Monero splits the amount transferred into multiple amounts and treats each split amount as a separate transaction. With a unique one-time address for each of the split figures. With the ring signature, each of these split amounts is mixed in with other transactions making tracking impossible.
The currency symbol for Monero is XMR and the plural of Monero is Moneroj.
Monero and Privacy
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Monero allows for transparency based on the users’ discretion. All users have a “view key” to access an account with the corresponding private key. It can be shared with selected parties with some limitations.
In addition to the view key, users also have a “spend key” which allows a selected entity that the user shares the key with to spend or transfer funds from the account. Both keys are 64 characters long and consist of alphabets and numbers.
The popularity of Monero has grown, not just for the intent of engaging in illegal activities, but also for individuals who simply want to be able to acquire goods and services online anonymously or discretely without leaving a digital “paper trail.”
Improving Privacy
Monero addresses privacy concerns using the concepts of stealth addresses and ring signatures. Ring signatures are like anonymous digital signatures from one member of the group, but they don’t reveal which member signs a transaction.
To generate a ring signature, the Monero platform uses a combination of a sender’s account keys and clubs it with public keys on the blockchain. This makes it unique as well as private.
Stealth addresses are randomly generated addresses for one-time use that are created for each transaction on behalf of the recipient. The use of these stealth addresses enables concealing the actual destination address of a transaction, and it hides the identity of the receiving participant.
Is Monero Illegal?
Monero is not an illegal cryptocurrency. It is slightly different from mainstream cryptocurrencies as it is privacy-oriented and provides users with anonymity. This means it is not traceable. This characteristic is actually what makes it very popular on the darknet and for use with certain activities such as gambling and the sale of drugs.
Monero vs Bitcoin
Every cryptocurrency today is judged against Bitcoin, probably because the latter is the most popular crypto right now. Bitcoin offers limited privacy because it is publicly accessible. Even pseudonymous addresses are not fully private.
A few transactions carried on by a participant over time can be linked to the same address, allowing the possibility of others to become aware of an address owner’s trends and their identity.
Another advantage of Monero over bitcoin is fungibility, which means that two units of a currency can be mutually exchanged with no difference between them. Thus while two $1 bills are equal in value, they are not fungible, as each carries a unique serial number. But, two 1Kg gold bars of the same quality are fungible, as both have the same value and don’t carry any distinguishing features. Using this analogy, a bitcoin is the $1 bill, while a Monero is that piece of gold.
The transaction history of each bitcoin is recorded on the blockchain. It helps to identify bitcoin units that may be linked to illegal events. Monero on the other hand, offers a non-traceable transaction history, which permits participants a much safer network without the risk of having their held units be refused or blacklisted by others.
Challenges
Privacy concerns are the fundamental reason for Monero’s popularity but that doesn’t mean that it comes without its challenges. The non-traceability and privacy features are used for illegal purposes and at questionable marketplaces, including those like drugs and gambling.
This is one of the reasons why markets that were popular on the dark web, showed increased use of Monero before they were shut down.
Mining Monero
Monero runs on all leading OS platforms, including Windows, macOS, Linux, Android, and FreeBSD. The currency supports a mining process where individuals get rewarded for their activities by joining mining pools, or they can mine coins individually.
Monero can be mined on a standard computer and does not demand any specific costly hardware or software. A full list of hardware that can be used is available on the Monero website as well. Interested people can also install certain software, by paying a developer fee.
According to the company’s website, Monero relies on a proof-of-work mining algorithm for security. This prevents double-spending, which can harm the supply, showing there’s much more than actually available.
Purchasing the currency is pretty easy and can be easily done by an exchange. You can also buy Monero through an ATM that is enabled for cryptocurrencies.
Investing in Monero
If you’re interested in cryptocurrencies, Monero may be a good investment. The price of the currency jumped more than 231% between Aug. 26, 2020, and Aug. 26, 2021. Additionally, it doesn’t cost much to start, as you don’t need any special hardware.
You can actually use the CPU of your own computer to mine it, and Monero works with all major operating systems. This will save you a lot of money in fees and charges.
Tracing Monero
As mentioned earlier, Monero, or XMR, is untraceable. Unlike other coins, such as Bitcoin, Monero has a non-traceable transaction history. This characteristic offers participants a much safer network where they don’t run the risk of having their held units be refused or blacklisted by others.
Conclusion
In this article we discussed the Monero cryptocurrency at length, we learnt about its features and how it promises to maintain privacy. We also compared Moreno with the most popular cryptocurrency, Bitcoin and discussed the challenges that it faces. Furthermore, we learnt about mining monero, if it’s a good investment and if it is legal or not.