- Monero is a CryptoNote-based cryptocurrency blockchain ecosystem that uses its own developed RandomX-styled Proof-of-Work consensus protocol.
- The currency is among the first privacy coins introduced, aimed at resolving the traceability of transactions in Bitcoin and Ethereum.
- It has highly advanced privacy features such as RingCTs, Stealth Addresses, Zero Knowledge proofs, etc. that facilitate almost complete anonymity.
Monero is a cryptocurrency that has its own blockchain and was one of the earliest coins built for privacy advancements against the traceability loopholes of existing cryptos like Bitcoin. The company touted the digital currency as ‘You are your own bank.’
It offers complete anonymity for transactions as opposed to Bitcoin and Ethereum, which are transparent blockchains. They are cryptocurrencies with block-secured databases that are more privacy-enabled compared to traditional online payment mechanisms and hard cash but are still traceable channels for the source of transactions. And that’s what Monero tries to overcome.
What is Monero and How was it Started?
Monero was launched in 2014 as an open-source blockchain focusing on decentralized, secure and permissionless cryptocurrencies for confidential finances. The consensus mechanism used by the network is based on Bitcoin’s Proof-of-Work but in a completely innovative, modified version. It uses a mining algorithm called RandomX, which was first developed by the company’s programmers.
RandomX is a proof-of-work algorithm for mining cryptocurrency that uses several Memory-hard Functions to rewrite the codes preserved in memory. It was devised to eliminate the use of ASICs and other heavy-computational devices for mining.
With Bitcoin’s PoW algorithm, an ASIC would give an advantage to a miner because it makes the rewriting of a hash function very fast. But that’s not the case with general CPUs. They can read a code many times but they cannot reproduce it multiple times. A Memory-hard function makes a general CPU capable of writing and reading code many times. This is called read-many, write-many technology, as opposed to the normal CPU’s write-once, read-many (WORM) storage.
It does so by storing the code in its memory, thereby requiring a specific (large) amount of memory, which is easily attained by any CPU. Any further addition to the memory for the writing of the code is useless, as it can be it multiple times by tracing it back to its storage itself. Since a regular CPU is now able to produce the hashes multiple times, there is no great advantage in using heavily expensive ASICs to do the same.
Hence, Monero makes mining more decentralized than in the previous state, where only those who could afford electricity-intensive, cost-exorbitant hardware for mining could win the race to add new blocks. Hence, it is an ASIC-resistant blockchain, which is a crucial aspect of its security and decentralization.
The network is based on the CryptoNote protocol, which helps hide the traceability of transactions in a blockchain.
The company’s foundation goes back to the founding of another cryptocurrency, ByteCoin, which was based on the CryptoNote protocol and was the first cryptocurrency to adopt the protocol. It was founded by the developer of CryptoNote itself, Nicolas van Saberhagen, a pseudonym assumed by a developer who has been anonymous to date.
Two years later, a user of Bitcointalk (a Bitcoin forum) by the username Thankful_for_today, along with six other American developers, hard-forked ByteCoin consensus protocol and developed many other features to launch BitMonera. Thankful_for_today and five of the six other developers are all anonymous to date. Of those six developers, only one, Riccardo Spagni, decided to disclose his identity and be known as the founder and CEO of the company.
Eventually, there were major disagreements between thankful_for_day and other developers. So they further hard-forked the project and, thus, Monero was born.
‘Hyper-Privacy’ Enabling Features
The prime focus of the network is user privacy. In fact, the company’s blog post reads that it aims to focus on privacy and security rather than user convenience and efficiency. The primary tools that enable this are Ring Signatures, Ring CTs and Stealth Addresses.
Ring Signatures conceal the identity of a sender while making the transaction by producing several decoys of the sender’s actual keys. The decoys are selected at random, hence, there is no traceability.
Ring CTs or Ring Confidential Transactions, hide the transaction amount by forming layers of digital signatures on top of the transaction details. The verifier can only verify that the amounts of input and output are the same, not the actual quantity.
Stealth Addresses generate one-time keys to hide transactions end-to-end so that only the sender and the receiver can see the transaction details. The payments are received at unique addresses each time, which cannot be traced back to the original address of deposition or linked to one another.
The transaction processing is further secured by Dandelion++ technology, in which special nodes are used to propagate the transactions. Additionally, a feature called Transactions on Tor/I2P enables users to conduct transactions using the Tor and I2P networks.
The Monero Coin: XMR
XMR is the native cryptocurrency coin utilized on the network. It enables highly confidential transactions. It can be used for trading as well as to make anonymous payments that are untraceable by authoritarian regimes.
At the time of writing the article, the current price of XMR was $137.93, which is a decrease of 1.11% over the past 24 hours. The current 24-hour trading volume is $59,704,371. The current market cap of the coin is $2,523,219,493 at a circulating supply of 18,294,097 XMR, with no limit to the maximum supply.
