There is a vast variety of crypto tokens available today. The possibilities are endless, from tokens meant to speed up digital transactions to those that can be used on metaverse platforms. But one of the main offerings of crypto tokens is their privacy and anonymity. This is where Monero comes in. Monero is a privacy-first token that focuses on keeping you and your transactions anonymous.
Why is Monero Important?
The importance of Monero comes from the fact that they put ease of use and efficiency second. This is because the most essential factor for Monero is its privacy and security. Unlike other popular tokens like Bitcoin and Ethereum, Monero has created several features that make transactions opaque.
The Bitcoin blockchain is transparent and publicly available. Using the information provided, transactions in Bitcoin can be traced back to their source using the public keys and value of the transaction. This is not possible with Monero. Its features allow you to mask all relevant information about the transaction so that it cannot be traced back to you.
Principles of Monero
All users should be able to transact with Monero without the fear of errors. All transactions must also be cryptographically secure and protected. To bolster this security, all block rewards are given back to miners. Miners enable the chain to operate securely by verifying genuine transactions.
The level of privacy Monero provides is available to anyone, regardless of their comfort with technology. Monero believes it must be capable of protecting its users in a court of law. Therefore, no user should need to change their spending habits for the risk of being found out.
Monero research and development are carried out all over the world through collaboration. The process of updating the token and adding more features is done with full transparency. These updates are also open to discussion in the community. Finally, its proof of work algorithm tries to distribute rewards fairly, without requiring special mining equipment.
How Does Monero Work?
There are two main technologies used by Monero to fulfil its privacy-first transactions.
This stands for Ring Confidential Transactions. Added to Monero in 2017, it is an updated version of Ring signatures. This allows for transactions to be encrypted. Only the receiver and the sender have access to the value of the transaction. Ring signatures also create multiple decoy senders, preventing transactions from being linked back to them.
These are one-time addresses for every transaction. The sender is required to generate a random address for the recipient on each transaction. This enables the recipient to receive the tokens in any wallet while having all incoming transactions display a random address.
Apart from these two technologies, the project also uses “randomx”. This is a proof of work algorithm that resists mining-specific equipment like ASIC units. It instead favours the CPU of your computer to perform computation.
At the time of writing, Monero is trading at $146.53. This is 71.7% down from its all-time high of $517.62. It has a market capitalisation of $2.65 billion and a total supply of 18,167,238 tokens.
Advantages of Monero
Monero is the only widely used coin that is private by default. Unlike other options, such as Zcash, Monero’s privacy-protecting features are enabled automatically. They must be disabled manually to make transactions semi-transparent.
No other crypto token offers the same level of privacy features that Monero has. With its RingCT and stealth addresses, it is virtually impossible to trace transactions with Monero. However, someone who can break the layers of privacy will still be able to track your transactions.
From the future of the platform to its rewards, everything is highly decentralised. Rewards are distributed fairly by resisting specialised mining gear. Additionally, all development and voting happen with collaboration and input from the community.
Read about: The Decentralized Ecosystem
Disadvantages of Monero
Monero is currently the largest “privacy coin”. A problem that plagues all privacy coins is their use by criminals for illicit activities. While the target audience may be users who are concerned about their privacy, Monero’s features also make it an attractive option for payments in criminal activities.
This has led to a lot of regulatory hurdles for Monero, as some countries have imposed bans on privacy coins. Australia and South Korea do not allow crypto exchanges to list these coins, while Japan has banned their use entirely. The Federal Bureau of Investigation in the US also offers bounties for breaking Monero’s privacy features.
Lack of Acceptance
Owing to the possibility of legal troubles, many businesses that accept crypto tokens do not transact in Monero. Therefore, most Monero transactions are peer-to-peer.
Read about: P2P Stablecoin Pegged to Renewable Energy
Not 100% Secure
While there are a lot of privacy features built-in, Monero is not 100% untraceable and many businesses offer tracing services. This tracking usually occurs when converting Monero into other crypto tokens or back into cash. Therefore, privacy may not extend beyond the Monero ecosystem.
Monero is a divisive coin. It is at the forefront of user protection as the most used privacy coin. However, its extensive use in criminal activities makes many businesses unwilling to trade in it. It also attracts attention from law enforcement and government agencies. Its performance and longevity in the market depend on how much users value its unique offering and how much negative attention the coin can resist.