In 2013, developer Nicolas van Saberhagen (probably a pseudonym) CryptoNote White Paper In it, he states that “privacy and anonymity are the most important aspects of electronic money.” This publication attracted the attention of Bitcoin developers Gregory Maxwell and Andrew Poelstra, who later papers We investigated the impact of features that enhance privacy and anonymity on existing cryptocurrencies. Other developers have used his CryptoNote ideas to Bytecoin, the first private cryptocurrency. That's when the first iteration took place. Monero Blockchain has arrived.
“Thankful_for_today”, an anonymous user on the Bitcointalk forum, coded in Bytecoin and created a fork named BitMonero. Some users did not agree with this direction and eventually created another fork of the blockchain known as Monero or blockchain “coin”. Esperanto.After almost a decade, Monero (XMR) is on top privacy coin Measured by market capitalization, it has sparked important discussions about the role of privacy and traceability in the blockchain ecosystem.
In this blog we will discuss:
- Monero privacy enhancements
- How Monero works
- Monero market growth
- Monero mining rewards
- Darknet market activity
- Monero ban and regulation
- The future of Monero
What is Monero (XMR)?
Monero, also known as XMR, is a cryptocurrency with privacy enhancements encoded into the protocol. The most popular cryptocurrencies, such as Bitcoin and Ethereum, operate on transparent and immutable ledgers, allowing anyone to view and track transactions. Monero is also an open source blockchain, but its features are designed to reduce traceability and protect user anonymity.
Monero privacy enhancements
Monero's main purpose is to provide a decentralized network with enhanced transaction privacy and anonymity. Justin Ehrenhofer as host monero space work group explained“We just want to provide privacy and close some of the fundamental holes that exist in most cryptocurrency protocols… That's why Monero is the only coin that hides the sender, recipient, and amount.'' .”
The Monero blockchain employs a variety of privacy-focused methods to hide users' transaction history.
- ring sign It combines multiple users into a “ring” to hide their individual identities, making it more difficult to determine which user generated a particular signature.
- ring confidential transactions, or ring CTadded to Monero in 2017, hides transaction amounts.
- through the use of stealth address, all Monero senders automatically generate a new address every time they initiate a new transaction, making it difficult to tell where the funds are coming from and where they are going. The stealth address is cryptographically linked to the public address that actually receives the payment, but only the sender and receiver know about the relationship between the two. Those involved are private view keythe received transactions will be displayed. private spending keyused to send payments.
- transaction can be started Tor/I2P, protects the privacy of transaction sources by using an anonymous network. This feature started recently and is still considered experimental.
- Dandelion++ Hide the IP addresses associated with your nodes to reduce the risk of sensitive information being used to reveal the address's identity.
How Monero works
Monero's anonymity-enhancing features contribute to the stereotype that Monero is often used for illegal purposes such as money laundering. While these activities are real, Monero is also used for many legitimate purposes. Monero market growth, mining rewards, and darknet market Activities help provide a complete picture of how it is being used, both in good and bad ways.
Monero market growth
In recent years, Monero has experienced significant growth and Market capitalization This is significantly higher than the market capitalization of other popular privacy coins and privacy-preserving cryptocurrencies Zcash and Dash (approximately $600 million and $550 million, respectively).
Since Monero's launch in 2014, approximately 32 million XMR transactions have taken place. The number of XMR transactions in 2022 was approximately 8.6 million, down slightly from the peak of 8.8 million in 2021. For comparison, during the same period, approximately 800 million Bitcoin transactions took place.
XMR activity doubled between 2019 and 2020, and increased similarly between 2020 and 2021. As you can see below, the past two years have both averaged around 24,000 transactions per day.
Monero mining rewards
Similar to the Bitcoin blockchain, Monero is Proof-of-Work consensus mechanism. Its PoW algorithm, Random Xwas designed to maintain decentralized mining and resist specialized hardware such as: ASIC. XMR emissions are unlimited to ensure continued mining incentives, and Monero generates a new block approximately every two minutes. Miners can decide to mine solo or in a pool, but the Monero project encourages solo mining to increase the security of the network.
Between March 2020 and January 2023, Chainaracy identified a representative sample of Monero mining reward recipients. More than 80% of the XMR in the sample was mined in three major pools.
- SupportXMR.com
- cryptopool.fr
- nanopool.org
Darknet market activity
Over the past few years, many darknet markets have adopted Monero to reduce traceability. For example, White House Market was one of the most active darknet markets before its closure. Encouraged users to migrate We moved from Bitcoin to Monero for transactions, and eventually moved to only accepting Monero. Other darknet markets such as AlphaBay and Archetyp followed a similar model. However, Bitcoin remains the most commonly used digital currency in darknet markets.
Monero ban and regulation
Given Monero's growth and popularity, conversations about banning and regulating privacy coins often focus on Monero.major world economies such as Japan and South Korea Monero has already been banned from exchanges to curb money laundering and reduce organized crime. According to the 2020 report: Australian regulators and banks Encouraged cryptocurrency exchanges to delist XMR. Otherwise, “Bank account abolished.” dubai is one of the latest countries to follow suit by banning the use of Monero under a new digital asset regulatory framework.
Many cryptocurrency exchanges have also taken steps to end support for Monero for similar reasons. bittrex, bit bayand Huobi Three of these exchanges. Similarly, the U.S.-based cryptocurrency exchange “Kraken” Monero delisted This is to help UK customers comply with the country's evolving regulations in 2021.
The future of Monero
Although many illegal actors use Monero to hide their transactions, they have not adopted it as much as expected. The main reason is that Monero has lower liquidity compared to other cryptocurrencies, making it more difficult to execute large trades. Regulatory uncertainty and bans on his XMR have made it difficult to access his XMR in certain countries.
These will be important considerations as Monero developers continue to innovate and ecosystem participants explore its use cases. In any case, all cryptocurrencies, including privacy coins, operate on an immutable ledger. This means that evidence of transactions, legal or illegal, remains forever.
This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. Chainarise assumes no liability for any decisions or other acts or omissions made in connection with the recipient's use of this material.
Chainalysis does not guarantee the accuracy, completeness, timeliness, suitability, or validity of the information in this report and is not responsible for any claims attributable to errors, omissions, or other inaccuracies in any such material. We will not be held responsible.
