Monero Explained: The Ultimate Cryptocurrency for Privacy Enthusiasts!

Monero, also known by the market ticker XMR, is a cryptocurrency that focuses on privacy and anonymity. Unlike most other cryptocurrencies, Monero aims to provide untraceable and unlinkable transactions.

Generally speaking, Monero operates similarly to other cryptocurrencies.
It utilizes a decentralized network of computers, known as nodes, to maintain the blockchain and validate transactions.
Though, unlike Bitcoin or Ethereum, Monero does everything possible to keep user data secret.

But how does it do this, and is that all that makes it unique?

Today we find out!

Monero was launched in April 2014 by a group of individuals who were working off an earlier 2013 whitepaper for a crypto application known as CryptoNote. Perhaps unsurprisingly, given Monero is a crypto project built around privacy, who exactly created the project remains a mystery, at least outside their online forum names.

Those online handles are Nicolas van Saberhagen for the 2013 whitepaper and thankful_for_today, who created the code of Bitmonero, the precursor to Monero.

Monero itself would be forked from Bitmonero after a disagreement regarding the future direction of the Bitmonero project.

Forking is where a project splits into two or more different projects, the most famous example being Ethereum which forked from what we now know as Ethereum Classic.

Monero aims to provide privacy by obscuring transaction details and making it challenging to trace and analyze the flow of funds.

In case you didn’t know, most blockchains operate an open ledger, which means all transactions can be viewed, by everyone.

The CryptoNote v. 2.0 author, Nicolas van Saberhagen, not his real name, noted that the traceability of transactions on the Bitcoin network was a “critical flaw,” given that a lot of the appeal to early crypto adopters was the appeal of being anonymous.

Now, while you may initially think crime, there are many valid reasons why you might not want someone to know what you’re doing with your money. A good example would be donating to people in a country where there is political instability.

You may not want to be seen as taking sides in a conflict, but you may still want to help. Well, that is the kind of thing a blockchain like Monero could assist with.

Monero is a Proof-of-Work blockchain, although we’ve covered Proof-of-Work before on the channel, I’ll give us a quick rundown so we’re all on the same page.

Proof-of-Work is a consensus algorithm used in blockchain networks to validate and secure transactions. It serves as a mechanism to ensure that the participants in the network agree on the order and integrity of the transactions recorded in the blockchain.

In a Proof-of-Work network, nodes, also known as miners, compete to solve complex mathematical puzzles. These puzzles are computationally intensive and require a significant amount of computational power to find a solution.

The first miner to solve the puzzle broadcasts the solution to the network, providing proof that they have performed the required work. This process is known as “mining.”

Miners in the network continuously compete to find the solution, and the puzzle difficulty is adjusted periodically to maintain a consistent block creation rate. This difficulty adjustment ensures that the average time to solve a puzzle remains constant.

Once a miner finds a valid solution, the block is considered mined, and the miner broadcasts it to the network. Other nodes verify the solution, and if the solution is valid, the block is added to the blockchain, and the miner is rewarded with newly minted cryptocurrency or transaction fees.

So, what makes Monero unique from other Proof-of-Work blockchains?

Naturally, privacy comes to mind, but it’s more how Monero becomes private that makes it unique.

For example, Monero uses a technique known as Ring Confident Transactions, or Ring CTs for short.

Ring CTs are a privacy-enhancing feature that allows for secure and confidential transactions by obfuscating the sender, receiver, and transaction amount. Ring CTs utilize cryptographic techniques to combine multiple transactions into a single transaction, making it challenging to identify the actual transaction participants.

As if not challenging enough, Ring CTs on Monero allow for “decoy” coins to be added to transactions meaning not even the amounts can be traced, making it even harder to find the true amount or origin.

Additionally, Monero also uses stealth addresses, which are essentially one-time wallet addresses that change after each transaction. As such, only the parties involved in the transaction know the corresponding Monero address to the stealth address, and as this changes each transaction it cannot be easily linked back to your real Monero address.

A further technique used by Monero is what they call bulletproofs. This was essentially a protocol update that made transactions more scalable and faster to finalize, managing to cut down on network bloat by up to 80%.

Lastly, there is Monero’s use of Dandelion ++, a feature that hides the IP addresses of nodes in the network. This further reduces the possibility of being detected as it hides you even from your ISP and VPN providers.

When you add all of these features together, it is no wonder that the US government is offering various bounties to anyone who can deanonymize, track, or trace Monero transactions.

But how about the Tokenomics?

Monero was created with no pre-mining or VC funding. That means the creators didn’t donate large amounts of XMR to themselves, and no large company is funding the project behind the scenes making Monero one of the few true remaining cryptocurrencies that put privacy above commerce.

Unlike most crypto projects, Monero doesn’t have a fixed limit. While there are only 18.3 million XMR tokens that can be mined, all of which now have been, there is still the tail emission rate, which is an amount released with every newly created Monero block, which is designed to incentive the nodes in the network to continuing hosting now that mining has finished.

Currently, this is set to 0.6XMR per block, with a new block being created approximately every 2 minutes.

Monero is not for everyone, as the company does not attempt to bother with Anti-Money Laundering or Know Your Customer legislation.

It is perhaps the last true cryptocurrency project as they continue to push for privacy even at the cost of being delisted from many major exchanges.

Though, if we think about the fundamentals that founded cryptocurrency, Monero is the last one out there still pushing the boundaries when it comes to user privacy.

So, if that is something that is important to you, Monero might be for you.