What is Monero？The First Privacy Coin

2022-02-23, 10:05

[TL;DR]

Monero is the very first cryptocurrency in the world with fully private transactions, making it the first and still top cryptocurrency under crypto’s “Privacy” category. Founded in 2013 and currently trading as XMR, transactions in Monero’s blockchain are not public nor transparent like Bitcoin’s or others. Because of its dynamic use of cryptographed keys for transactions instead of digital wallets like most cryptocurrencies, only the person who has executed the transfers is aware of the transaction details.

[Full Article]

The main investment thesis of cryptocurrencies, once they were created, was to provide decentralization, freedom and safe digital transactions to its users. Monero, however, takes the subject of freedom to a different level by being the first crypto of the “Private” category conceived, and even one of the first crypto projects besides Bitcoin that’s still around to this day.
This article centers exclusively around Monero, exploring what it is, its qualities and what makes it so special compared to other crypto assets.

What is Monero?

Monero, traded as XMR, is a cryptocurrency notoriously known for being the first digital asset where transactions can’t be tracked at all. It was first released in 2013, emerging from a new cryptography protocol at the time called CryptoNote. At first, the project was called Bytecoin but, after going through a hard fork due to different perspectives of where to take it, one end was then named Bitmonero. Afterwards, the community just changed it to Monero.

The focus was to create an even more private framework for peer-to-peer transactions based on the Bitcoin blockchain. While blockchain allows transactions to be anonymous since no one has to provide personal data to create digital wallets, they’re still public. All transactions through Bitcoin and Ethereum’s networks, for instance, are openly available for anyone to see and can be backtracked throughout several wallets in a users’ history. Therefore, it becomes relatively easy to track down someone if you’re aware of their whereabouts.

With Monero, on the other hand, transactions are completely private, which made it the very first cryptocurrency of the Private category - able to offer completely decentralized anonymity to its fullest extent.

How does Monero work?

Transactions using Monero rely on blockchain technology like all cryptos, which are basically operations that are registered and attached to subsequential blocks, as more and more transfers join the chain. It’s the main resource that makes cryptocurrencies trustless and without the need for a central overseer.

Transactions in Monero’s blockchain, however, are not public nor transparent like Bitcoin’s or others. Because of its dynamic use of cryptographed keys, as we explain more below, only the person who has executed the transfers is aware of the transaction details.

Regarding its processing, Monero utilizes Proof-of-Work (PoW). Like Bitcoin’s, miners are rewarded in Monero to solve computational problems that as a result verify transactions and upkeep the general integrity of the network.

This consistent process of proving work makes the blockchains more reliable while in return making sure new currencies are being mined. Unlike Bitcoin, Monero does not have a limited supply - it currently has 18 million XMR coins floating across crypto markets, but its total supply is infinite as long as miners continue to do their work.

Why is Monero untraceable?

The main advantage of Monero over Bitcoin is its protection of privacy for those who use it. While Bitcoin units are transferred through the peer-to-peer method - wallet 1 directly to wallet 2 - Monero creates a passkey that changes in every transaction. The value transferred is only visualized by those who hold key access, which is the account who transferred and the account who received it. Therefore, tracking transactions of those who use Monero is virtually impossible.

While it does use blockchain technology, Monero is able to block user identification by leaving only the transaction ID itself public but without attaching it to any wallet address. Even so, these transaction IDs can also be blocked whenever the user wishes, by simply using the exchange passkey to lock or unlock the information. Basically, Monero is the very first blockchain that keeps users completely in anonymity.

The Monero blockchain also possesses a cryptography structure that aggregates all the values being transferred across the network, mixes them together and then sends the right amounts to each receiver. The amount of Monero being transferred remains the same and no user is negatively impacted by the mixing method, while keeping the blockchain even more anonymous and secure from oversight. While Bitcoin allows for every single transactional detail to be readily available to the public, Monero leaves nothing out in the open - it’s all hidden unless the parties wish to show it.

What are the main differences between Monero and other cryptos?

The biggest technical highlight in Monero is the fact that its CryptoNote blockchain protocol was built from scratch, while most other digital currencies used Bitcoin’s blockchain code as a reference to create their networks.

This is why Monero managed to accomplish a completely private blockchain system, its main differentiator. It offers a much more intense cryptography level that doesn’t even use digital wallets, which are pretty much a norm in today’s cryptocurrency markets. The network simply utilizes generated key passes which change at every transaction, as mentioned previously. This was only made possible due to Monero building its blockchain from scratch, which is a remarkable achievement to this date.

What are the main advantages of Monero?

Privacy, of course, is the priority that makes Monero (XMR) so attractive and attending to those who wish to conduct completely anonymous transactions. As a consequence, it offers more without leaving security behind.

Besides its main selling point, Monero also has very fast and low-cost transactions. There are some exceptions; when the market is heated, it can get a bit congested. But most of the time, Monero provides great bang-for-buck transactions that are nearly instant.

It’s also in constant development. The decentralized community is always finding ways to improve the network and how the XMR crypto is utilized. It’s no wonder that Monero was one of the first crypto projects to be released, back in 2013, and is still very relevant to the market today as the main crypto of its Private category.
It also holds a lot of potential in the future, as privacy becomes an increasingly present concern all over the world. With more people looking into ways to protect their assets and private information, it’s likely that Monero will keep growing along with the crypto asset class.

Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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