Monero is acknowledged as the most famous privacy-focused cryptocurrency globally. Most likely, you have heard about Ethereum and Bitcoin by now, but there are typically thousands of other coins, and each of them claims to provide various improvements on Bitcoin.
A number of them have cheaper transactions; others are faster. Nonetheless, Monero’s (almost) distinct selling point is anonymous.
That’s right! Credit to some reasonably high-tech cryptography, the receiver, sender, and the amount of Monero sent is challenging to be seen by anyone else.
Because of this reason, Monero has discovered a different use in circumventing international sanctions by the likes of North Korea or as a method of payment on the Dark Web. Nonetheless, there are also some excellent reasons for having a private form of cash that is legal. I will discuss more of these later.
Hopefully, this beginner’s guide on Monero will enhance your understanding of Monero in an easy-to-understand way. Sadly, the topic is confusing, and to grasp all features of Monero, you’d need a good understanding of cryptography. Because this article focuses on beginners, we will not dwell so much on these since I don’t want to make it any more complicated!
After reading through this guide, you should have a good understanding of the history of Monero. Also, you should know how its privacy features function, how it is different from Bitcoin, the current value of Monero, how to create a Monero wallet in the easiest way possible, and the merits and demerits of Monero. Before closing it up, I will also introduce some concepts about the future of Monero for you to chew over.
However, before all that, we need to journey back before Monero was created!
The History of Monero
To begin our journey of tracing the origins of Monero, we need to check a different cryptocurrency called Bytecoin.
Bytecoin was created in the summer of 2012. It was the pioneer digital currency to be written using a technology known as CryptoNote.
Currently, CryptoNote is the fulcrum of many privacy-based cryptocurrencies, including Monero. The privacy of CryptoNote coins is guaranteed by grouping public keys. By grouping several keys in a single transaction, it’s difficult to tell who sent it!
The utilization of these “ring signatures” to ratify transactions offer the anonymity of the CryptoNote technology.
Bytecoin was an excellent pioneer of anonymous cryptocurrency. Nonetheless, there are a few hitches with its initial distribution. When it was developed, it turned out that 80% of the coins that would ever be mined were already in existence. This caused a team of seven developers to fork the Bytecoin blockchain, and the new currency would be called Bitmonero. This was finally shortened to Monero, Esperanto for “coin.”
Five of the seven developers who originally developed Monero decided to keep their identities a secret. David Latapie and Riccardo Spagni (the leading developer today) are two of these developers. Riccardo Spagni is also known as “Fluffypony”.
What Sets It Apart?
Monero has a lot of similarities with other cryptocurrencies. It’s an open-source project that is permission-less. The latter feature has the potential to transform the world. No authority can bar you from using a cryptocurrency. This implies that those with no access to modern banking facilities can participate in a digital economy in a manner they never could before. An internet connection and a device to link to it are all they need. Typically, millions of people globally do not have access to banking facilities but have local Wi-Fi hotspots and smartphones.
India is a good country with most of these “unbanked” citizens.
One other very critical feature of the Monero cryptocurrency associated with its privacy is that it is fully fungible. Don’t sweat over this; I’ll break it down for you!
It’s possible to trace Bitcoin transactions from one point to another. Depending on how a person uses Bitcoin, you might not know their identity, but you can trace each Bitcoin from one address to another.
This implies that a user can know if a particular Bitcoin was used in a crime. This is not the perfect quality for the money!
Let’s have a look at a case to prove this. For instance, you sold a legal item on a platform such as Open Bazaar, and you get paid in Bitcoin. Nonetheless, it turns out that the Bitcoin you received was initially used in a drug deal. For you, that might not be a concern. Nonetheless, when you attempt to spend it somewhere else, the individual receiving it could decide that they do not want this “unclean” coin.
Credits to the advanced privacy features of Monero, no one can know which transactions each coin was involved in. It would be tough to associate a single Monero coin with a past crime. There is no history of transactions linked with any Monero coins. This implies that they are fungible!
Quote: I am inundated by people asking me for recommendations on cryptocurrencies. If you used your heads, you would determine that the privacy coins (anonymous transactions) will have the most significant future. Coins like Monero (XMR), verge (XVG), or ZCash (ZEC) cannot lose – John McAfee.
The outstanding feature that gives Monero value is its privacy features. Nobody can link you to a Monero cryptocurrency transaction. This positions it as a favourite currency to those who love privacy for some reason. Not all these reasons are illegal, but some are.
3. ASIC Resistance
Another perceived issue with Bitcoin is that mining is now only profitable using specialized mining equipment. These systems utilize components called Application Specific Integrated Circuit Chips. They are costly, implying that only the affluent can set up mining operations.
Monero is different. It utilizes a different hashing algorithm to Bitcoin known as CryptoNight. CryptoNight utilizes many advanced features to render the production of ASIC chips fit for mining Monero unprofitable.
The details in the introduction to Monero may seem complicated. But all you need to understand is that Monero can be profitably mined using both GPUs and CPUs. This should imply that the currency can be more decentralized than Bitcoin.
4. Dynamic Scalability
Another aspect that Monero tried to enhance on Bitcoin is its scalability. Simply put, scalability implies how well the network can expand with demand. By definition, blockchain-based cryptocurrencies are limited in size.
For a more significant part of its past, Bitcoin has had a block size limit of 1MB. This implies that only 1MB of transaction data can fit into each block mined every 10 minutes on the Bitcoin network.
Sadly, when many users make transactions simultaneously using Bitcoin, the network gets jammed with transaction data. Those transactions that can’t be contained in a block have to wait for a miner to include them.
Miners opt to include transactions with the most significant fees attached. When the network is very engaged, it urges individuals to increase the fees to get their transactions included. This is what happened to the Bitcoin network in the Spring of 2017. A few transactions were incurring a $30+ fee just to be verified.
Monero doesn’t have a “pre-set” limit of the block size. While this does give room for more transaction data in each block, there is a negative aspect to this – spammers can fill the blockchain with transactions. This would create huge blocks.
Nonetheless, the creators of Monero introduced a block reward-penalty system. The median size of the last 100 blocks is taken. If the new block that the miners are working on surpasses the median of the previous hundred blocks, the block reward is reduced. This frustrates spam transactions because miners won’t mine blocks that are likely to get such a massive penalty if it’s no longer profitable for them to do so.
5. Multiple Keys
Monero applies a different system of keys to Ethereum and Bitcoin. There is only one pair of keys in these currencies – a private key and a public key. Monero utilizes a private view key, a public view key, and both private and public spend key.
- Only undetected public addresses are utilized, and only public view keys are produced.
- To confirm the signature on a transaction requires a public spend key.
- To create an outgoing transaction requires private spend keys.
A private view key is required to check the network and confirm that money has been received.
Monero and its Eventual Supply
Contrary to Bitcoin, there isn’t a set number of Monero tokens that will ever be mined. The currency is consistently slightly inflationary. The initial supply of Monero was set at 18.5 million coins. This was followed by an increase of about 0.87% in the first year.
This percentage decreases each year. It’s approximated that it will take 117 years to double the initial distribution. For this number to double again, it will take 234 years.
Monero and the Wider Cryptocurrency Market
The current value of a single XMR coin is $262.88. It is the 12th most popular in terms
The current (12th November 2021) price for a single XMR coin is $101.25. The currency is the 12th most popular in total market capitalization ($4.759 billion).
The Merits and Demerits of Monero
Merits of Monero
- One of the most private cryptocurrencies.
- Transactions are impossible to connect to a person.
- Transactions are challenging to trace.
- The blockchain does not have a limit. Its dynamic scalability means that fees shouldn’t end up being huge even when most people are using it.
- It’s possible to decide who can view your transactions. For instance, if you want to validate ownership of a certain amount of Monero for tax reasons, you can share your private view key with your tax authority. This reduces the chances that regulators will try to block Monero.
- A big team of dedicated developers works on the project.
Demerits of Monero
- Despite being ASIC resistant, there still exists a considerable degree of centralization of miners in Monero. Only three pools control an average of 43% of the hash rate.
- Few wallets have been developed for Monero. There is no support for Monero on any multi-crypto solutions or hardware wallets.
- Keeping Monero appropriately secure is much more challenging than most other cryptocurrencies. This could be the reason why the broader community of cryptocurrency has not more widely adopted it.
- Since Monero is not based on Bitcoin, it isn’t easy to develop applications that interact with its blockchain.
Monero In The Future
Currently, finding something that offers authentic privacy has become scarce. In such a world, privacy-focused currencies like Monero will stand out.
Monero can allow individuals to transact nearly instantly across the globe without requiring permission from any authority. In countries with authoritarian regimes, this could be a potent tool in the quest for freedom.
Criminals also acknowledge the privacy features of Monero. Markets in the Dark Web can be accessed by anybody and sell an incredible range of weapons, drugs, and other criminal items. Monero has quickly earned a reputation as the currency of choice in communities in illicit websites.
In addition, Monero has also been utilized by governments like North Korea to bypass international sanctions. For these reasons, Monero could likely be hacked by governments who are less keen on the concept of a private payment method for use by anybody from human traffickers and international terrorist organizations to drug dealers and child pornographers.
How fruitful such a clampdown on Monero would be will be an exciting test of cryptocurrencies’ “anti-fragile” properties.
Well, that was our beginner’s guide on Monero. I hope you are now well informed about the most popular privacy-focused cryptocurrency. I attempted to keep the technical stuff to a minimum.
In this guide, we have learned the following:
- What is Monero?
- The history of Monero
- Uses of Monero
- How Monero achieves its anonymity and privacy
- How Monero is different from Bitcoin
- The current and past value of Monero
- The merits and demerits of using Monero
- The future of Monero
I hope this guide has been educational and exciting! Monero can become a great tool of resistance and a convenient means of payment for various services and goods.