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What is Monero (XMR)?
Luis Clark
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Luis Clark
What is Monero (XMR)?
Monero is an open-source cryptocurrency that focuses on censorship-resistant and private transactions. This means that all Monero transactions are untraceable and confidential. So unlike the majority of cryptocurrencies like Ethereum and Bitcoin that have transparent blockchains, Monero utilizes several privacy-enhancing technologies including Ring Signatures, Stealth Addresses, and RingCT to ensure user anonymity. And this isn’t selective anonymity as is the case with Zcash. Monero is one of the only cryptocurrencies that ensures every user is anonymous by default.
Who is the Founder?
Monero launched in 2014, and was founded by 7 people, 6 of these individuals were anonymous, but 1 of them is Riccardo Spagni. That said, the Monero network is based on the CryptoNote protocol, of which its whitepaper was originally written by pseudonymous author Nicolas van Saberhagen in 2012 with an update in 2013. This author has also been rumored to be Satoshi Nakamoto, the anonymous creator of Bitcoin.
How does Monero (XMR) Work?
Unlike a lot of other cryptocurrencies available in the market, Monero is built on the CryptoNote protocol.
This protocol only permits an approximate amount of any transaction to be known while ensuring that the actual amount, origin, and destination remain hidden. Now, while Monero enables a hidden trace of all transactions made on the blockchain, users are still able to share particular information selectively. Every Monero account has its distinctive private view key that enables users to analyze a specific account’s transactions.
That said, there are 2 primary aspects of how Monero works: ring signatures and stealth addresses.
Ring Signatures
Monero utilizes a very complex type of digital signature called ring signature. This is opposed to the EDSA signatures used by a lot of other blockchains. These signatures, for example, can contain the public keys of numerous individuals, several other signatures called mix-ins, and the real signature. Transactions or statements that are signed with a ring signature imply that a particular member of the group provided the private key for the digital signature but there are no details on the particular person that provided the digital signature. Accessing this information from ring confidential transactions remains impossible.
In its early days, Monero users could trace the amount of a transaction while ensuring that both the sender and receiver remain hidden. But since the Ring Confidential Transactions update, both the identity of senders and recipients, as well as, the value of individual transactions are obscured.
Stealth Addresses
Stealth addresses are also known as untraceable addresses. Thanks to the CryptoNote protocol all payment addresses are one-time usage. The outcome is that tracing the movement of funds via addresses is a lot harder. The secrecy embedded into the ring signatures implies that any member of the ring signature group may be a facilitator of the transaction and the one-time use transaction address creates a structure with numerous incalculable paths that the transfer of value may have taken.
Key Features
Monero Workgroups
Monero workgroups are formed by Monero community members who wish to join forces to achieve a common goal. There are many workgroups in the Monero ecosystem with different objectives, community members are free to join any workgroup.
Below are some of the workgroups in the Monero ecosystem:
- Core Team
The Core Team is committed to managing and maintaining infrastructure where centralization is unavoidable. This is a closed workgroup as membership is strictly by invitation. - Community Workgroup
Monero uses this working group to organize and coordinate activities in Monero. You can join this workgroup by joining its chat room, where you will introduce yourself and state your skills and interests. - Website Workgroup
This group was created to have all the discussions about the website in one place. It is a development-focused workgroup that coordinates the development of the website. - Development Workgroup
This workgroup is made up of the GUI team and the CLI team. It is made up of Monero developers who are working on the wallets and daemon that are maintained by the Core Team. - Research Lab
This workgroup was formed by scientists who are interested in improving Monero’s features and protocol. It focuses on Monero-related research. - Localization Workgroup
This workgroup was formed by contributors who translate Monero-related documentation and software. - Malware Response Workgroup
This group provides the needed resources and live support for different types of Monero-related malware. - Monero Space
This workgroup hosts popular resources and organizes Monero events. - Monero Outreach
This is the workgroup responsible for making Monero known to the world and gathering writers and artists that are committed to the publicity of Monero.
Weblate
Weblate is Monero’s localization platform. It is a web-based translation tool that features a simple user interface, quality checks, and propagation of translation across different components.
With Weblate Monero, community members can translate all things Monero. It was created by volunteers and accepts donations.
Translations in Weblate are grouped into projects and components. A project can contain multiple components and these components contain translations into individual languages. The components often correspond with one translatable file.
Each project by default also has translations to common strings propagated across different components. The aim of this is to reduce the stress associated with repetitive and multi-version translation.
Users can disable the translation propagation for each component configuration in case the translations diverge.
RandomX
This is a Proof-of-work algorithm developed by Monero contributors and adopted by Monero. The aim of creating RandomX is to create an egalitarian distribution of block rewards and to ensure that mining is decentralized.
RandomX is based on the execution of random code and optimized for CPUs. This is aimed at eliminating the need for the use of specialized hardware for the mining of Monero.
Weaknesses of Monero
While Monero’s focus on privacy was a major catalyst behind its adoption, it has also exposed Monero to some challenges.
The privacy and non-traceability features have made Monero to be used for illicit activities and questionable purposes on the dark web. Hackers have even infected computers through malicious software and mined Monero which they allegedly sent to North Korea. People who engage in these illegal transactions using Monero can easily escape law enforcement because it is nearly impossible to trace Monero. This has increased the regulatory scrutiny on Monero.
Another major weakness of Monero is that it is dominated by 2 mining pools. These 2 mining pools account for more than 50% of the hashing power. Almost 70% of code contributions since 2017 have come from one individual. This is against the principle of decentralization that guides all cryptocurrencies. If only a few individuals control the majority of the mining pools, these individuals will have more control and influence over the network.
Finally, Monero has fewer wallet options and a more complex user interface. This is because of the privacy technology that each transaction requires.
How is Monero (XMR) Created?
Monero is created via CPU and GPU mining.
Mining Monero (XMR)
Monero uses RandomX, a proof of work algorithm to validate transactions. But it wasn’t always so, the method was introduced in 2019 as a replacement for the previous algorithm CryptoNightR.
The RandomX algorithm was built to resist ASIC mining, which is used in mining a lot of other cryptocurrencies like Bitcoin. Monero mining is strictly done on consumer-grade hardware like GPUs, x86, ARM, and x86-64. This design decision is based on the project’s resistance to mining centralization which ASIC mining facilitates.
That said, Monero miners can choose if they want to mine Monero in a pool or solo. Both approaches offer pros and cons, but Monero recommends that miners either mine using the P2Pool or solo mine using their software (CLI and GUI) as independent mining is an effective method of boosting Monero’s robustness.
Here are some factors to consider for each Monero mining approach:
Pool
- Consistent Payouts: You’ll get XMR depending on the level of your participation in the pool you choose.
- Third-Party Fee: You can only pool mine using third-party software which will charge a percentage of your shares.
- Greater than 50 Hashrate: Too many miners in a pool can result in the pool having a greater than 50% of the total hash rate which is dangerous.
- Pool Operator Charge: You just pay a fee to the pool operator.
Solo Miner
- Secure Network: Solo mining makes the network more secure than a pool.
- Monero Wallet: You can mine Monero using the Monero wallet, no need for third-party software.
- Hashrate Timeline: It can take months before you locate a block depending on your hash rate.
Which Blockchain does Monero (XMR) Use?
XMR uses the Monero blockhain, which is an opaque blockchain meaning that all users and transactions on it are anonymous.
How To Use Monero (XMR)?
Monero (XMR) is the utility coin of the Monero platform. It is also a currency that can be used to exchange or pay for goods, services, and other currencies. Many merchants, especially those who want to transact discreetly, accept payments in XMR.
Transactions done using Monero are very fast with no multi-day holding periods, check clearing fees and legal jurisdiction.
How to Buy Monero (XMR)?
Due to the privacy of Monero and the fact that it cannot be easily regulated, Monero is not available to be traded on many exchanges. In recent times it has also been delisted from exchanges that once supported it because of the lack of regulatory clarity.
You can, however, find a list of exchanges where you can buy and sell Monero on Coinmarketcap. Some popular exchanges that still offer the buying and selling of XMR are Kraken, Hotbit, Bitrue, OKX and Binance.
After choosing your preferred exchange, you can then buy Monero. The process for buying XMR may vary on different platforms but they are usually easy.
You can buy XMR with fiat currency like the US dollar or using another cryptocurrency. You should use fiat currency because buying XMR with another cryptocurrency is a bit complex and time-consuming.
How to Store Monero (XMR)?
Monero can be stored in a wallet on the exchange where you bought the token or it can be stored in a software or hardware wallet. Monero is supported by Ledger Nano S, Ledger Nano X, and Trezor Model T hardware wallets.
Some wallets are specially designed for the storage of Monero. Below are some of these wallets:
Monero GUI Wallet
The Monero Graphical User Interface (GUI) wallet was developed by the Monero team and is free to use.
This wallet has 2 modes and is suitable for both beginners and advanced users. The simple mode is for users who have little or no technical knowledge, while the advanced mode is for users who want to have full control of their wallet and node.
The Monero GUI wallet is compatible with both Ledger and Trezor hardware wallets. It supports over 30 languages.
Monero CLI Wallet
The Monero Command Line Interface (CLI) wallet is an open-source wallet that was developed by the Monero community. It is designed for developers and advanced users. It gives the user total control over their Monero funds and node.
The Wallet has various analysis tools and can be customized to suit each user’s preference.
Cake Wallet
This is the first open-source Monero wallet on IOS. Cake wallet is a non-custodial wallet that supports the storage and trading of Monero, Haven, Bitcoin, and Litecoin.
Its intuitive user interface makes it suitable for both beginners and advanced users. Users can create multiple wallets and accounts with Cake wallet. They can also connect to any remote node of their choice and back up their wallets locally or on the cloud.
Feather Wallet
This is a free, open-source Monero wallet that is compatible with Linux, Tails, Windows, and macOS.
The Feather wallet is designed to be user-friendly, making it simple for people of all skill levels to navigate. Whether you’re just starting out or have extensive experience, this wallet is a great fit. It can smoothly operate on up-to-date devices such as live operating systems and virtual machines, ensuring compatibility and flexibility.
Monerujo
This is an open-source Android wallet for Monero that allows users to easily move XMR between several wallets. It has a built-in QR code scanner that can be used to scan wallet addresses. You can pay any BTC address using this feature.
MyMonero
This was created in 2014 by Riccardo Spagni and was developed with the assistance of the Monero Core Team. MyMonero is a secure wallet that enables you to send and store XMR at your convenience. It supports the exchanging of XMR to BTC.
Edge
Edge Wallet supports cryptocurrencies like Bitcoin, Monero, Ethereum, Dogecoin, etc. It has an in-app buy-and-sell feature as well as the crypto-to-crypto exchange, mobile top-ups, and gift cards.
The cool thing about its client-side encryption feature is that it scrambles all the user’s data on their device before sending it to the web server. This means the user has complete power over their digital stuff.
Best Place to Stake Monero (XMR)?
Monero is a proof of work coin and as such, you cannot stake the cryptocurrency in the real sense of the word. However, you can lend your XMR coins on centralized exchanges for interest in the guise of a staking program.
What You Need to Know about the Future of Monero (XMR)
Monero is a privacy coin that has succeeded in ensuring that cryptocurrency transactions are truly anonymous. This means that if governments roll out financial restriction policies and people decide to migrate to cryptocurrencies, privacy coins should get huge appreciation and since Monero leads the pack it would surely benefit. However, it is extremely limited in its use case and can’t be used as a major payment solution for platforms that need to obtain blockchain information.
Conclusion: Should You Put Your Money in Monero (XMR)?
Monero’s success is largely dependent on the degree that the market values the privacy that the Monero project offers. That said, the major reason Monero can be an excellent investment opportunity is that it not only has a niche in the crypto space but it is the leader of the pack.
Any investor interested in privacy coins knows Monero. This popularity is great for any type of investment opportunity. That said, Monero has its pitfalls that can impact the value of an investment in the project. Several nations and exchanges have banned and delisted it due to its anonymous features. Its lack of presence on certain exchanges can negatively impact the price of the coin. So ensure that you do your research before putting money into Monero.
Risk in Investing in Monero (XMR)?
Cryptocurrencies are extremely volatile and XMR is no different. You can lose your entire investment in the worst-case scenario, so only invest money you’re willing to lose.
FAQ
Most frequent questions and answers
Yes, Monero and XMR are the same. XMR is the abbreviation of the coin.
You can mine 0.00722974 Monero per day with a mining hash rate of 42000.00 H/s, a Monero difficulty of 326,252,280,112.00, and a block reward of 0.65.
Monero has an unlimited supply limit with a circulating supply of 18.2 million XMR.
Monero helps keep both users and their transactions untraceable.
Monero is an improvement of Bitcoin’s core principle of decentralization and privacy. Bitcoin is pseudonymous but the Monero blockchain is truly private.
Yes, Monero is one of the only major cryptocurrencies where all users are anonymous by default.
Monero is a coin.
Monero is not illegal in the United States and you can purchase the coin on several exchanges like Coinbase.
Yes, Monero’s use of the dark web and cybercrime is on the rise. It is used in illicit activities like targeting darknet markets, money laundering, ransomware, etc.
Yes, Monero’s official website has been previously hacked.
The Monero Research Lab is made up of scientists, researchers, developers, and cryptographers who are responsible for the improvement of Monero’s protocol and features.
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