What Is Monero (XMR)?
Monero was launched in 2014, and its goal is simple: to allow transactions to take place privately and with anonymity. Even though it’s commonly thought that BTC can conceal a person’s identity, it’s often easy to trace payments back to their original source because blockchains are transparent. On the other hand, XMR is designed to obscure senders and recipients alike through the use of advanced cryptography.
The team behind Monero say privacy and security are their biggest priorities, with ease of use and efficiency coming second. It aims to provide protection to all users — irrespective of how technologically competent they are.
Overall, XMR aims to allow payments to be made quickly and inexpensively without fear of censorship.
Who Are the Founders of Monero?
Seven developers were initially involved in creating Monero - five of whom decided to remain anonymous. There have been rumors that XMR was also invented by Satoshi Nakamoto, the inventor of Bitcoin.
XMR’s origins can be traced back to Bytecoin, a privacy-focused and decentralized cryptocurrency that was launched in 2012. Two years later, a member of the Bitcointalk forum — only known as thankfulfortoday — forked BCN’s codebase, and Monero was born. They had suggested “controversial changes” to Bytecoin that others in the community disagreed with and decided to take matters into their own hands.
It’s believed that hundreds of developers have contributed to XMR over the years.
What Makes Monero Unique?
There are several things that make Monero unique. One of the project’s biggest aims is achieving the greatest level of decentralization possible, meaning that a user doesn’t need to trust anyone else on the network.
Privacy is achieved through a few distinctive features. Whereas each Bitcoin in circulation has its own serial number, meaning that cryptocurrency usage can be monitored, XMR is completely fungible. By default, details about senders, recipients and the amount of crypto being transferred are obscured — and Monero advocates says this offers an upper hand over rival privacy coins such as Zcash, which are “selectively transparent.”
Obfuscation is achieved through the use of ring signatures. Here, past transaction outputs are picked from the blockchain and act as decoys, meaning that outside observers can’t tell who signed it. If Ian was sending 200 XMR to Susan, this amount could also be split into random chunks to add a further level of difficulty.
To ensure that transactions cannot be linked to one another, stealth addresses are created for every single transaction that are only used once.
All of these distinctive features have led to XMR being increasingly used for illicit transactions instead of Bitcoin — especially on darknet markets. Governments around the world, especially the U.S., have also offered hundreds of thousands of dollars to anyone who can crack Monero’s code.
How Does Monero Work?
Aside from its privacy features, Monero works similarly to other major cryptocurrencies, using proof-of-work mining to control the issuance of XMR and to incentivize miners to add blocks to the blockchain. New blocks are added roughly every two minutes.
Notably, though, hobbyists may find that mining XMR is easier than on other cryptocurrencies, as the algorithm that governs this process is designed to prevent against specialized hardware.
This means users may be able to generate XMR when mining with a laptop (CPU) or graphics card (GPU), lower-cost forms of hardware that are more widely available.
What Makes Monero Private?
Not all privacy cryptocurrencies achieve privacy in the same way, and as a result, users should not consider them equal offerings or interchangeable.
XMR, for example, should be viewed as a tool that, when used correctly, obscures user data on the blockchain, making its users more difficult to trace.
Ring Signatures
The technology that makes this obfuscation possible, Monero uses Ring Signatures to mix the digital signature of the individual making an XMR transaction with the signatures of other users before recording it on the blockchain. This way, should you look at the data, it would appear as if the transaction was sent by any one of the signers.
Over the years, Monero has experimented with altering the number of signatures involved in this mixing process, at one time even allowing users to specify a desired number.
As of 2019, however, a default monero transaction is now set, adding 10 signatures to every transaction group and mixing 11 signatures in total.
Stealth Addresses
Yet another feature contributing to Monero’s privacy is Stealth Addresses, which enable users to publish one address that automatically creates many one-time accounts for every transaction.
Using a secret “view key,” the owner can then identify their incoming funds as their wallet can scan the blockchain to identify any transactions with that key.
RingCT
Introduced in 2017, Ring Confidential Transactions hide the amount users exchange in transactions recorded on the blockchain. In effect, RingCT makes it so transactions can have many inputs and outputs, while preserving anonymity and protecting against double spends.
Why Use XMR?
The big reason to learn how to use Monero may be for its privacy. As transactions can’t easily be traced on its blockchain, users may more freely exercise their ability to send and accept crypto in all types of transactions.
Besides being secure and untraceable, this makes XMR fungible. This means companies can’t reject XMR because they may have been involved in objectionable activity.
Likewise, investors who believe cryptocurrency users will eventually demand more privacy may find it to be a valuable addition to their portfolio.
Further, XMR may be appealing to any user who wants to push the boundaries of cryptography in cryptocurrencies, paving the way for money systems that allow individuals around the world to save and pay without oppression.
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Cryptocurrency