Since the birth of Bitcoin, many altcoins have emerged in recent years. While their success varied, most cryptocurrencies focused on improving usability and enhancing privacy and anonymity. One security-focused altcoin is Monero, which was acknowledged for its privacy-oriented features.
What is Monero?
Monero (XMR) was launched in 2014 and is an open-source, privacy-focused cryptocurrency that was built and operates on the blockchain concept. Monero’s blockchain is intentionally designed to be incomprehensible, which allows for transaction details, like the identity of senders and recipients, and the amount of every transaction – anonymous by disguising the addresses used by participants.
Monero uses an obfuscated public ledger, which means that anyone can transmit or send transactions, but outsiders cannot determine the source, amount, or destination. Similar to Bitcoin, Monero uses a proof of work mechanism to create new coins and to encourage miners to secure its network and authenticate transactions. Due to the anonymity it offers, Monero is commonly linked to the dark web, where it can be used to buy illegal items and substances. However, despite this, Monero is popular amongst those seeking financial privacy. All of the transactions and balances are completely hidden, which is highly uncommon for most cryptocurrencies.
Monero can be mined either through mining pools or by individual miners as it does not require any specific hardware such as the application-specific integrated circuits (ASICs) and can be mined on an ordinary computer. Monero is available on iOS, macOS, Windows, Linux, Android, and FreeBSD.
What’s so special about Monero?
Monero’s main advantage is that it creates anonymity and reduces users’ privacy concerns by utilizing the concepts of ring signatures and stealth addresses. Ring signatures are entirely anonymous digital signatures that allow the ‘sender’ to hide their identity from other participants. In order to generate a ring signature, the Monero platform uses a mixture of the sender’s account keys as well as public keys on the blockchain that make it entirely unique. This facilitates the sender the ability to hide their identity as it is virtually impossible to determine which of the group members’ keys were used to create the complex signature and execute untraceable payments.
Stealth addresses add more privacy to Monero’s transactions; stealth addresses are randomly generated addresses for one-time use, which are produced for each transaction on behalf of the recipient. Using them allows users to conceal where their transaction is actually going as well as the identity of the receiver.
Furthermore, Ring Confidential Transactions, or RingCT, enable users to hide the transactional amount that they’re executing. Due to Monero’s untraceable nature, no two coins are different from one another and are equal.
Trading and Mining Monero
Just like other altcoins, Monero can be traded on popular crypto exchanges like Poloniex, Bitfinex, and Kraken. The Monero XMR token has experienced a lot of volatility since it was first released. Since its inception, Monero’s price has grown to an all-time high of almost $500 in December 2017 and gave its investors a return of 4800% but then dropped almost 90%. Currently, Monero is trading at $62.16 and has a market capitalization of $1,092,416,192.
Monero does not require an ASIC (Application Specific Integrated Circuit), which is a special type of hardware used for Bitcoin mining and can cost anywhere between $600 to $1000, which is quite pricey. Instead. Monero mining can be done using a normal computer’s CPU/GPU, which is a great option for beginners as well as people who cannot afford to invest in hardware.
At the time of writing, there is a total of 17,575,165 XMR in circulation, and this number will continue to grow until it reaches 18.4 million. Once the limit reaches 18.4 million XMR coins, new coins get added to the network at a flat rate of 0.3 XMR/minute. New coins will be an incentive for miners to encourage them to keep mining. Currently, the reward for verifying/ mining 1 transaction block is around 4.99 XMR, plus a transaction fee of 0.06573 XMR.
To start mining, you can join a mining pool and combine your hash power with other miners, which will give you a better chance when verifying transactions since there is a lot of competition. However, the rewards you receive will be split between you and other miners. Also, most mining pools charge a fee, which is generally in the range of 0-2%.
The bottom line
Monero’s privacy attributes have helped it become the 16th largest cryptocurrency by market capitalization but have also shadowed the cryptocurrency’s reputation for being deceptive.
Regardless of that, the crypto coin has grown dramatically in the last few months and could be heading back to its high price mark, which for investors and traders could be a great win.