Monero is widely recognized in the crypto world as the original privacy coin. Among the currencies that are defined by their privacy features, it is the most established and popular. In this guide, ChangeHero team will try to answer all your questions about Monero and explain how it deserved its reputation.
What is Monero?
Most cryptocurrencies use blockchain as a distributed ledger to keep track of transactions. The best example is Bitcoin, but other currencies like Ethereum or Litecoin work in the same way. All the records are done in the form of cryptographically derived strings of data, like addresses, outputs or hashes of individual transactions. Because of this, Bitcoin is considered pseudonymous. However, if someone can link a public address with a person, it can mean that all their history of transactions is there to be observed.
Monero (XMR) is a UTXO cryptocurrency that is defined by its inherent privacy features and therefore is often called a “privacy coin”. Unlike most other blockchains, Monero’s blockchain is by design opaque: no one else can see the account’s balance or history of transactions.
Transactions with Monero are noticeably faster than Bitcoin ones. With a target block time of 2 minutes and the safe number of confirmations around ten.
How did XMR begin?
XMR’s predecessor, Bitmonero was launched in 2014 as a fork of ByteCoin. Rather soon, a community formed around the project, and when the original developer made several controversial propositions (like halving the mining rewards both prospectively and retroactively, affecting the balances of users, after detecting a bug in mining reward distribution or merged mining), the community opposed them and forked the network. The resulting chain became Monero.
The documentation regarded as Monero’s whitepaper, called “CryptoNote 2.0” was written in late 2013 by a pseudonymous developer, Nicholas van Saberhagen. It was supposed to fill in the blanks that were left in Bitcoin’s design of digital cash — namely, privacy and anonymity. These two would not be achieved without innate untraceability and unlinkability, so the developer proposed their vision for CryptoNote technology, which would be later successfully implemented in Monero.
Why is Monero special?
Monero initially utilized a cryptographic principle called ring signature, particularly one-time ring signature. Ring signatures refer to an evolution of group signatures, when an outside viewer can be convinced that the transaction was made by a member of the group but cannot point out which one. Ring signatures took it further, eliminating the need for a Group manager, a trusted verifier, and in one-time ring signatures it is still possible to link a public and private keys in case of a double-spend, so the privacy features do not retract from the security of the chain.
Ring Confidential Transactions (RingCT)
Monero has come a long way from the CryptoNote protocol. Originally, ring signatures grouped transactions by similar amounts, so it was harder to determine the amount being transferred but totally possible. This is solved by RingCT (Ring Confidential Transactions). This protocol hides the on-chain information about the amount of funds transferred, as well as other inputs, from everyone but the participants of the transaction. The network cryptographically confirms the validity of inputs.
Instead of using the same address for all transactions, Monero users send and receive funds with one-time stealth addresses. The randomly generated stealth addresses cannot be publicly linked to your personal address, but they actually are. Basically, each Monero account has two sets of private keys: view key and spend key. With a view key you can see the incoming transactions, and if you choose to share it, so will the others who know it — it’s one of the ways to opt-in for transparency.
What are other features of XMR?
In addition, XMR uses a memory-bound PoW algorithm – RandomX — to make mining Monero more easy with CPUs, which helps to keep the network decentralized. The mining difficulty is adjusted every block, and the block sizes are adjustable with no hard cap.
Thanks to the untraceability and unlinkability introduced in Monero, it is not only more private but also fungible. Fungibility in currencies means that any and each unit in circulation can be replaced by one with the same value attributed to it. So in simple terms, any 1 XMR is equal to other, no matter its previous history of transactions, as it can’t possibly get “tainted”.
As for the off-chain data transfers like traffic, Monero is compatible with Tor and I2P. These two are P2P-networks that bounce traffic from place to place, thus obfuscating the whereabouts of the source of traffic. A similar technology but developed specifically for blockchains, Dandelion++ is used as a means of preventing on-chain deanonymization.
What is the value of XMR?
One of the aspects that will define the worth of XMR is emission. By the code, XMR emission is infinite. There will be two phases: first, the main curve will be mined. The block rewards decrease gradually instead of scheduled rewards decreases. This is necessary to eliminate a possibility of sudden potential drop in hashrate when some miners leave after reward slashing events. Then, tail emission will take precedence: 0.6 XMR per 2-minute block. It is expected to come into effect after 18.4 million blocks, projected to May 2022. At the moment of writing, the existing supply is 17,631,035 XMR. In such a model, the inflation is supposed to be controlled and come up to only 0.9%. It also means that there will always be enough XMR to account for the growing user base.
On the graph above we see the history of Monero price fluctuations. Despite seeing a rather warm welcome to the market in 2014, occasionally rising in value up to $3 and $5, for the most part of its early history until 2016 Monero was not worth more than a dollar. Then it all started to change in the middle of 2016, and in September XMR increased in price sevenfold over a month, from $2 to $14. From then on, it was uphill, and the bull market took Monero first to $140 and then, on January 7, 2018 to its current price record — $495.84. Just like with other cryptocurrencies, 2018 from then on has seen a change from bull to bear market, and the downtrend continued up until 2019. This time, the bull market in the first half of the year was nowhere as crazy as in 2017, and it, too, eventually gave way to “bears”.
In 2020, XMR may not be fluctuating as wildly as some other altcoins but it is performing steadily. The year opened with XMR costing about $45, and now at the time of writing one Monero is worth $67.56.
Any controversies around Monero?
One of the stereotypes about privacy coins links them with various sorts of criminal activity, and this is not a baseless claim at all. There have been a few cases when it was proven Monero was used by criminals such as hackers or darknet vendors. And for that, the coin itself has paid dearly time and time again: it will either not get listed by regulated exchanges in the first place or even get delisted.
What are the future plans of the Monero team?
The Monero core team works in several directions. The development team is working on the Kovri project — I2P on C++ developed specifically for Monero. Monero Research Lab is working on the currency along with the devs, providing them with theoretical findings in cryptography.
Are there any initiatives in the Monero community?
Monero outreach and marketing is done by independent workgroups of volunteers, Community Workgroup and Outreach team. Together, they create initiatives like the recent theatrical run of the documentary Monero Means Money. The seats of the empty theatres were paid for by the members of the community, and the money raised were donated to independent cinemas to help them survive the pandemic. Who knows what other initiatives these teams will come up with next?
Monero on social media
Just the other day the CEO of Coinbase, the largest America-based F2C exchange, Brian Armstrong published his comment on the recent news that the exchange is selling the on-chain data to government agencies. The bit that got the most attention from Crypto Twitter was his endorsement of privacy currencies. It did not take long before the entire Monero community stormed his replies.
Trader Qiao Wang defined Monero as a standard for grassroots development. While most cryptocurrencies do have significant followings, Monero also is not too far behind from Bitcoin and Ethereum.
Here is a use case for everyone who thinks only criminals use privacy coins: news outlet Bittrail reports that more users are joining the mining initiative that donates proceeds to bail funds. RandomX is not too demanding in terms of computing power, and the Monero blockchain hides the identities of miners as well. This way, people can engage in activism without compromising their privacy.
How to buy and exchange XMR?
Buying and exchanging Monero might not be as easy as some other currencies. After all, it is not listed on many exchanges because of its “privacy coin” status. However, it is supported on ChangeHero. On our website, you can exchange it with other coins or use them to buy some XMR. You can choose between Best and Fixed rate exchanging, but the experience will be top-notch regardless: we’ll find you the best rate on the market and swap your crypto in a jiffy.
Where to store Monero?
Monero is supported by enough cryptocurrency wallets to be available on any platform and device. And, of course, it can be stored safely in a hardware wallet.
- Mobile (iOS and Android): Cake Wallet
- Desktop (Windows): Exodus
- Desktop (Linux): official GUI Monero wallet
- Hardware: Trezor
Exodus and Trezor wallets have integrated the exchange function powered by ChangeHero, so with these wallets you will be able to swap Monero or other currencies as quickly and easily as on our website but without leaving the app.
Where to spend Monero?
Suppose now you have some XMR to spend. Probably the first place that comes to your mind when you think of regular cash is a shop. It’s the same with Monero, since it’s modeled as privacy-oriented digital cash after all.
Monero outreach teams keep a list of stores that accept XMR and promote the use of it to merchants. For example, you can buy designer apparel and accessories or wild game jerky from the indie shops from this list. There is also Project Coral Reef which was launched by entrepreneurs to bring awareness to Monero by making it an accepted means of purchase for some top recording musicians and labels.
As the CryptoNote whitepaper says, Monero was not meant to replace Bitcoin. Instead, originally, the focus was to provide an alternative to it, so the whole digital currency economy could benefit. Perhaps, though, Monero could partially replace fiat money in a cashless economy but keep it private.
We hope this article could answer the burning questions you have about Monero. If not, feel free to ask them in the blog comments or on social media!