Monero 101 : The Most Popular Untraceable Cryptocurrency
Monero is an open-source, decentralized cryptocurrency. It is a secure, private and untraceable currency but can be selectively transparent too. Monero is also dynamically scalable, which makes it different from Bitcoin. It was created in April 2014 by a team of more than thirty members. Their aim is to improve the current design of digital currencies as well as make mining more equal.
Monero believes that everyone must be their own bank, eliminating the need of a third-party. People should be able to control and be responsible for their funds. In the traditional banking system, both the government and banks fail to protect customer privacy. But in Monero, transactions can be done in private. This means that “businesses can keep their suppliers in secret, as well as citizens can escape repressing governments.” It is also very secure. Digital cash is securely operated by a network of users and transactions are confirmed by distributed consensus.
Private and Untraceable
Monero’s most noteworthy and most important feature is its provision of privacy. When Bitcoin was first launched, it was perceived as the fundamental platform to remain anonymous. But there are some flaws in it. Bitcoin addresses and transactions are recorded on the blockchain and they are publicly available. Despite using a pseudonym, the history of owner’s purchasing trends can be used to decode his identity. In fact, blockchain analytics can be used to find the identity of wallet owner. This makes privacy compromised on Bitcoin.
Many cryptocurrency projects have been launched since Bitcoin, to address these problems of privacy. For instance, Dash, Zcash, etc. But they somehow failed to completely protect privacy. Whereas, Monero is “Private by Default”. It has advanced features, such as ring signature that was first proposed by academics at MIT. These features are experimented with, upgraded and even new ones are added to resolve any privacy-related loopholes.
Monero has three steps to protect privacy: it uses ring signatures, ring CT, and stealth addresses. ‘Ring Signatures’ allows the sender to hide his origin. It mixes the sender’s address with other groups’ addresses, making it difficult to find the link. ‘Ring CT’ (or Ring Confidential Transactions) hides the transaction amount. And ‘stealth addresses’ hide the address of the receiver. Together, they conceal the origins, amounts, and destinations of all transactions, protecting the sender and receiver.
Thus, it presents an opaque blockchain, which contrasts Bitcoin’s transparent and traceable nature. Although, it is optionally transparent. The users can also choose to reveal their information. There are two keys on Monero: ‘view key’ and ‘spend key’. Users can use ‘view key’ for optional transparency. Therefore, Monero provides all the benefits of crypto decentralization, without any compromises with privacy.
Monero’s advanced level of privacy offers fungibility. It means that each unit of currency can be substituted for the other, i.e., every coin has equal value.
On other blockchains, the transaction history of coins is recorded. If the coin has been used for a certain purpose (such as theft), traders can refuse to accept it for its past. However, because of Monero’s untraceable feature, the past transactions of the coins are unavailable. So all the coins are equal and fungible.
This is one of the reasons for Monero’s increased adoptions. Dark web marketplaces such as AlphaBay and Oasis have used it extensively, because of its popular demand by buyers.
Equality in Mining
Unlike Bitcoin that works on ASIC (Application-Specific Integrated Circuit), Monero is resistant to ASIC mining. The problem with ASIC is that while it is fast, it is limited to a narrow set of functions and is very expensive. So, only rich miners can use it for specific functions. This creates centralization and monopoly on a blockchain, which is one of the problems on Bitcoin.
Whereas, Monero uses consumer grade hardware such as x86, x86-64, ARM and even GPUs. They are more efficient and less costly. This allows more people to participate in mining and make it egalitarian.
Working of Monero
Monero works on Windows, MacOS, Android, Linux, and FreeBSD. It can be bought in both fiat currencies and cryptocurrencies. The implementation of Monero project is divided into three parts: Monerod is the main software daemon which is responsible for managing blockchain and reading transactions. monero-wallet-cli is the wallet address that Monero uses, and it manages user’s account. Lastly, Monero GUI (Graphic User Interface) allows the user and mentioned components of Monero to interact.
According to its developers, Monero’s “block reward will never drop below 0.3 XMR and the nominal inflation will stay at 0.3XMR per minute.” Monero’s value has been increasing rapidly. In Jan 2015, it was $0.25 per XMR, which reached around $60 per XMR in May 2017 and $425 in Dec 2017.
Monero’s price is very volatile. In April 2017, its value fluctuated by 70%. However, while some traders see volatility as a sign of risk, others perceive it as an opportunity to make money.