Monero

Published on :

21 Aug, 2024

Blog Author :

Edited by :

Reviewed by :

Monero refers to a privacy-focused digital currency that keeps transactions and wallets completely anonymous. It allows for private and fast transactions between two parties anywhere in the world with the availability of its currency and wallet. This cryptocurrency solves privacy-related issues using ring signatures and stealth addresses.

This cryptocurrency’s philosophy, when launched in 2014, focused on privacy, decentralization, and security. Since Monero cryptocurrency is fungible, one cannot link transactions on its privacy-enhanced blockchain to any specific user. Simply put, individuals cannot find the receiver, amount, and sender of any transaction occurring on the blockchain. This makes it unpopular among financial regulators. The Monero symbol is ‘XMR’.

What Is Monero?

Monero refers to a cryptocurrency that uses a blockchain running on privacy-improving technologies to ensure the transactions remain anonymous. Its key features, like stealth addresses and ring signatures, ensure that the transactions on this network are untraceable.
Zcash has a faster transaction processing speed compared to Bitcoin and Monero. Also, Zcash offers anonymity concerning transactions, unlike Bitcoin.
There are various key advantages of Monero. For example, it allows more individuals to mine the cryptocurrency through CPUs rather than ASICs.
A key disadvantage of this digital currency is its slow transaction processing speed.

How Does Monero Work?

Monero definition refers to a digital currency offering a high degree of anonymity for its users and the transactions. It utilizes a blockchain that has privacy-obfuscating transactions to achieve fungibility and anonymity.

This open-source project has a wide-reaching community of contributors. That said, it keeps the transactions and wallets entirely anonymous, including to the miners, network members, and developers. Moreover, the network has no maximum block size, resulting in low costs and faster transactions. The creation of new blocks takes place once every two minutes on this network.

Monero cryptocurrency utilizes the following three technologies to anonymize every transaction:

Ring Signatures: These refer to digital signatures signed by a member of a certain group of individuals having private keys. Whenever one makes XMR transactions, the wallet establishes a ring using the users’ keys pulled from the blockchain. The observers cannot tell which user’s key was utilized to sign. This makes all transactions anonymous.
Stealth Addresses: These enable senders to generate one-time addresses on the recipient's behalf for each transaction. The receiver can still utilize a public address to receive all the payments. All XMR users generate private spend and view keys. While private view keys enable users to see every transaction connected to their account, private spend keys are similar to Bitcoin private keys, which authorize transactions.
RingCT: Also called Ring Confidential Transactions, the technology encrypts all transaction amounts to ensure only the receiver and sender know the amount.

This digital currency utilizes the proof-of-work or PoW consensus mechanism to process the transactions. Similar to Bitcoin, it relies on crypto mining. The participants utilize mining hardware to solve complicated equations, and the winner is entitled to validate transaction blocks and earn rewards.

Features

Some key features of this cryptocurrency are as follows:

Ring Signatures: Such signatures hide the identity of the sender.
Bulletproofs: They are a kind of zero-knowledge proof that XMR transactions use to decrease confidential transactions’ size. Moreover, they minimize transaction fees and enhance scalability.
Stealth Addresses: They ensure to safeguard both the recipients’ and senders’ privacy.
P2Pool: The decentralized mining pool enables the miners to pool the resources and mine the cryptocurrency together. It promotes decentralization while preventing mining power concentration.
Smart Mining: It is a way to mine cryptocurrency that is more energy-efficient and less intrusive.
Random X: This refers to a central processing unit or CPU-optimized PoW algorithm that prevents ASIC mining and enhances the security of the network. This makes mining the cryptocurrency within the reach of general processing units and CPUs.

How To Mine?

Mining this cryptocurrency involves using RandomX, which is a resource-efficient proof-of-work algorithm developed for general-purpose central processing units. GPUs, as well as CPUs, are compatible with this cryptocurrency. However, the latter is much more efficient. One can engage in solo mining using a CPU through the cryptocurrency’s command line interface/the graphical user interface or GUI wallets. For users preferring to mine the cryptocurrency through a solo or pool mine using dedicated software or GPU, software like CSMiner or IXMRi is necessary.

Individuals can initiate the mining procedure via the launch of the mining software. This software will utilize the processing power of the device to solve complicated mathematical puzzles, conduct validation of all transactions taking place on the network and reward the miners with XMR tokens.

Examples

Let us look at a few Monero examples to understand the concept better.

Example #1

Suppose John wants to send 20 XMR tokens to Jack. The former will follow these steps to send the cryptocurrency:

He will utilize the stealth address (X, Y) to generate a one-time address (P).
John will accumulate inputs from the other one-time addresses he owns.
For every transaction input collected, John will accumulate n public keys. The public keys will create the ring required for the ring signature. This will ensure the observers cannot understand which public address is used to transfer the tokens.
For each input John uses, he will produce a key image with the spend key. It will ensure that John does not double-spend.
Then, John must upload the transaction.

To receive and use the tokens, Jack has to scan the blockchain using the view key to determine that the transaction output is his.

Example #2

In August 2023, Bitmain, a crypto rig producer, announced that it would introduce its latest Monero mining rig called the Antminer X5. Per the announcement, sales will start on September 4. The machine will feature a 212 KH/s hash rate and consume 1,350 watts from its power source. Shipping will begin on September 10. The announcement of this rig has sparked discussions within this cryptocurrency community.

With the debates concerning ASIC continuing, the community is grappling with the potential effects of such specialized machines. It is exploring avenues to ensure that the principles of accessibility and decentralization remain intact in the face of technological evolution.

Advantages And Disadvantages

Let us look at the benefits and limitations of this digital currency.

Advantages

It offers privacy and security by ensuring anonymity.
One cannot trace this digital currency as the tokens are fungible.
The mining of this cryptocurrency does not involve the use of application-specific integrated circuits (ASICs). Instead, it involves using CPUs. This enables more users to become a part of the mining process. Moreover, they need not spend a substantial amount to acquire specific hardware and participate in the mining process.
It has a dedicated group responsible for researching and developing privacy features.
There is no pre-set block size. As a result, the block can increase on the basis of demand.

Disadvantages

The transaction processing speed on this network is slow.
Since the transactions are anonymous, one can use the cryptocurrency to conduct criminal activities.
There can be storage issues concerning this cryptocurrency.
Multiple wallets do not support this cryptocurrency.

Monero vs Bitcoin vs Zcash

The concepts of Bitcoin, Zcash, and Monero can be confusing for individuals new to the world of cryptocurrency. To be able to understand their meaning clearly, one must learn about their distinct features. So, let us check them out.

Monero	Bitcoin	Zcash
Transactions are anonymous.	The transactions on this network are pseudonymous rather than anonymous.	It offers anonymity by using shielded addresses.
Transaction processing is slower than Bitcoin.	In this case, the transaction processing speed is faster than Monero.	It has a faster transaction speed than Bitcoin.
‘XMR’ is the Monero symbol.	Bitcoin’s symbol is BTC.	The Zcash symbol is ZEC.

Frequently Asked Questions (FAQs)

1. Is Monero illegal?

One must note that this cryptocurrency is not illegal in most countries. That said, the governments of some countries, including Japan, Dubai, and South Korea, have banned privacy coins like Monero. These governments claim that such coins make it straightforward to conduct criminal activities, for example, money laundering.

2. How high can Monero go?

Considering the benefits, this cryptocurrency’s price can increase significantly as the acceptance of digital assets increases worldwide. That said, one must consider various factors like the dynamic economic environment, changing government rules and regulations, etc., before investing in this digital currency. Also, one must remember that the cryptocurrency market has a lot of speculators looking to make short-term gains. Hence, individuals must proceed with caution.

3. Can Monero be mined on Android?

Yes, it is possible to mine this cryptocurrency on an Android device.

4. How do I buy Monero?

The easiest way to purchase XMR is via a cryptocurrency exchange. Having said that, if individuals wish to be more involved, they can download a wallet that supports this cryptocurrency to their devices and interact directly.