Understanding Monero: The Privacy-Centric Cryptocurrency
Monero is a peer-to-peer decentralized entirely anonymous payment system built on Blockchain. It has all the characteristic features of Bitcoin (BTC) an additional guarantee of privacy and fungibility. Monero’s protocol mixes the transactions in such a manner that the wealth and history of people conducting it are always private.
In 2014, five years after the advent of Bitcoin (BTC), cyber crimes and Ponzi schemes had found a new avenue. If Bitcoin was ever going to be a global currency, it warranted KYC (Know Your Customer) approval and regulation of Exchanges. Hence, the anonymity of Bitcoin (BTC) addresses was lost; this was a small price the community paid for global acceptance.
However, some argued that to be indeed categorized as ‘money’, a cryptocurrency must be fungible. Fungibility involves the principle of making money indiscriminable, it cannot be tracked, or money bills cannot be market. The bearer of the coins holds its value irrespective of his identity.
Monero aimed to develop such a system virtually.
Monero’ conviction towards anonymity extends to the identity of the developing team as well. Riccardo Spagni is the only member out of the seven-member team who has revealed his true identity; other members of the group remain anonymous having shared only their Github and Reddit accounts.
Monero uses ‘ring-CT algorithm’ for encryption. Monero hides the public address of the sender and receiver behind a ‘stealth addresses’.
There is an additional functionality of ‘secret view key’ which can be shared to verify the transactions on the blockchain. Hence, it can be shared with trusted sources to see or analyze the transactions. However, they ‘view key’ cannot authenticate new transactions.
In January 2017, it underwent an upgrade called CT – Confidential Transaction where the amount sent was also hidden from the network along with the address.
Finally, it implements ‘ring signatures’ to enable transaction mixing. Transaction mixing refers to the process by which funds are not transferred directly from one address to the other. The funds of several different transactions and addresses are mixed to ensure fungibility of the Tokens.
It uses cryptographic techniques which securely uses the funds from several wallets to complete a transaction. Therefore, this makes it challenging to identify the source of the transaction.
Earlier, Monero gained traction mostly because it was primarily used on the dark web and sending unethical anonymous payments.
The All-Time Price High price of Monero is $470. Furthermore, Monero is ranked in the top ten cryptocurrencies by market capitalization. Monero had gained through vastly through adoption and investment before getting caught in the whirlpool of 2017- 2018.
Competition and Future Prospects
Bitcoin became the premier medium of exchange due to its encryption and security. Eventually, Bitcoin (BTC) started losing its initial customers; once who wanted privacy to Monero (XMR) and Zcash (ZEC) post KYC impositions.
Moreover, Zcash, with its advanced Z-snarks protocol and dual address system, poses a direct threat to Monero. Monero has already gained recognition in the dark web (e.g., Alphabay); making it number one privacy-focused coin.
An anonymous cryptocurrency is not necessarily used for an immoral purpose only. It is also beneficial for the privacy-centric people. The Bitcoin Ledger due to its transparency can reveal the funds of any user and make him vulnerable to theft.
The transaction speed and limited supply with decentralized anonymity can be visualized as a ‘new economic system‘ rather than a simple payment structure.