Monero (XMR -0.96%) is a privacy coin focused on providing complete anonymity to its users. All users of Monero are anonymous by default and all transactions are private. This also means that transactions cannot be traced.
As you might imagine, Monero's reputation for being untraceable makes it the perfect cryptocurrency for illegal activities. The IRS even offered a reward to anyone who could crack it. However, Monero is not just for criminals. It has a large developer community and is popular among privacy-minded cryptocurrency enthusiasts.
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What makes Monero unique?
What makes Monero unique?
Despite some people's misconceptions, most cryptocurrencies are not anonymous. They use blockchain to record transactions. These blockchains are public, so anyone can see the amount transferred from one cryptocurrency wallet address to another. Wallet addresses can be tied to real-world personal information.
That's where it differs from Monero. Monero uses privacy-enhancing technology to keep users and transactions anonymous, confidential, and untraceable. The sender, receiver, and amount of every transaction on the Monero blockchain are hidden.
The million dollar question is whether Monero is truly untraceable. To date, there is no evidence that Monero has been tracked. While there are companies that claim to have developed methods to track Monero, no one has provided evidence of tracking Monero transactions from point A to point B.
Meanwhile, Monero's own website states that nothing is 100% anonymous. It also leaves open the possibility that someone will figure out a way to infer information through the cryptocurrency's privacy layer. Monero seems to be the closest thing to being untraceable at the moment, but there is no guarantee of complete anonymity.
Origin of Monero
Origin of Monero
The idea behind Monero came from a 2013 white paper on a cryptocurrency protocol called CryptoNote. The author, who remained anonymous under the pen name Nicolas Van Saberhagen, wrote about the importance of privacy and anonymity in digital currencies. they again, Bitcoin (BTC 2.09%) was a serious flaw.
A user on the bitcointalk.org forum called “Thankful_for_today” decided to use these ideas to create the crypto coin BitMonero. When his users on other forums did not agree with his plans for BitMonero thanks_for_today, they forked it (separated from the original protocol and formed a new protocol). Fork became Monero, which means “coin” in Esperanto.
Monero was launched on April 18, 2014. The founders and many members of their core development team have chosen to remain anonymous.
How Monero works
How Monero works
Here are three technologies Monero uses to anonymize transactions.
- Stealth address: The sender must create a random one-time address for each transaction on behalf of the recipient. This prevents transactions from being linked to the recipient's public wallet address.
- Ring signature: Every transaction includes a ring signature by a group of users, including the actual sender and multiple decoys who signed the transaction. This prevents transactions from being linked to the sender.
- Ring CT: Ring Confidential Transactions is a technology that encrypts transaction amounts so that only the sender and receiver know the amount being sent.
These technologies, combined with the Invisible Internet Project (I2P) and Dandelion++, allow Monero to hide the sender, recipient, and amount of transactions on the blockchain.
To process transactions, Monero uses a proof-of-work consensus mechanism. Like Bitcoin, it relies on cryptocurrency mining. Participants use mining devices to solve complex equations, and winners earn the right to validate blocks of transactions and earn rewards.
There are important differences between Monero's Proof-of-Work algorithm and Bitcoin's algorithm. Monero's algorithms are resistant to ASICs, which are high-performance machines designed specifically to mine cryptocurrencies. Miners must use consumer-grade hardware: CPUs and GPUs. Due to its characteristics, mining Monero requires significantly less energy than mining Bitcoin.
Monero partnership
Monero partnership
Monero doesn't have many large partnerships. This is partly due to its reputation as it is known as a cryptocurrency used by criminals.
Monero’s most notable partnership initiative is Project Coral Reef. Monero's developers worked with dozens of musicians to make the cryptocurrency an accepted payment method in online stores and exchanges such as bisq, Local Monero, and Hodl Hodl.
Monero was briefly linked with the popular online battle game Fortnite in 2019. The game's official merchandise store has started accepting Monero payments through cryptocurrency payment providers. However, it turned out to be an accident and the Monero payments were quickly voided.
Can I earn passive income with Monero?
Can I earn passive income with Monero?
You can earn passive income by lending Monero. There are multiple cryptocurrency lending protocols that support Monero, including CoinLoan and KuCoin. A US resident is prohibited from using his KuCoin, but CoinLoan is an option.
specific risks
specific risks
Regulatory pressure is the biggest issue that could hinder Monero. Privacy coins are controversial, with Monero being the biggest one. While this shows how well it is working, it also means that Monero is the privacy coin that looms largest in regulators' crosshairs.
Several countries, including Australia, Japan, and South Korea, have completely banned or recommended banning privacy coins. Even in countries that are at least not considering a ban, many crypto exchanges do not offer privacy coins due to the risks.
These measures will not terminate Monero or prevent people from using it. However, it will be more difficult to purchase and will prevent widespread adoption. For example, most sellers are likely to avoid accepting Monero if there is a risk of legal issues.
Is Monero a good investment?
Is Monero a good investment?
Monero’s success as a cryptocurrency investment will depend on how well the market values the anonymity this coin provides.
The biggest reason why Monero can be a good investment is that it has a niche in the cryptocurrency ecosystem. It is the leader among privacy coins, and almost everyone interested in privacy coins knows about Monero.There are others, but the most notable are Zcash (ZEC 0.74%), but none have reached Monero's level of success.
There are many reasons why people seek out cryptocurrencies that keep their transactions private, so Monero has clear uses. Some users use his Monero for ransomware and other illegal activities, while others do not want public records of their cryptocurrency transactions.
Monero has potential problems. Countries have banned it and exchanges have delisted it. This could be constrained in terms of value, as availability on major crypto exchanges will affect the coin's price appreciation.
If you believe that privacy coins will play an important role in the future of cryptocurrencies, we recommend investing in Monero. Like other types of cryptocurrencies, Monero is volatile, so be prepared for price fluctuations and only invest money you can afford to lose.
How to buy Monero
How to buy Monero
Although many exchanges have chosen not to offer Monero, there are still places where you can buy Monero. If you live in the US, you can buy Monero on Kraken. People outside the country can also find Monero on KuCoin or Binance (not available on the US version of Binance.US).
Another way to obtain Monero is to buy it directly from others on a decentralized peer-to-peer Bisq exchange. There are also platforms where you can exchange one cryptocurrency for another and trade with Monero. Some of these platforms are:
Monero is controversial, but that comes with the territory. Digital currencies that promise privacy will attract criminals. This cryptocurrency also has a passionate community that supports it because its members believe in the importance of privacy.
Lyle Daly has a position in Bitcoin. The Motley Fool has a position in and recommends Bitcoin. The Motley Fool recommends his Monero. The Motley Fool has a disclosure policy.
