What is Monero (XMR) and how does it work?
Monero was launched in April 2014. It was a fair, pre-announced launch of the CryptoNote reference code. There was no premine or instamine, and no portion of the block reward goes to development. See the original Bitcointalk thread here. The founder, thankful_for_today, proposed some controversial changes that the community disagreed with. A fallout ensued, and the Monero Core Team forked the project with the community following this new Core Team. This Core Team has provided oversight since.
Monero has made several large improvements since launch. The blockchain was migrated to a different database structure to provide greater efficiency and flexibility, minimum ring signature sizes were set so that all transactions were private by mandate, and RingCT was implemented to hide the transaction amounts. Nearly all improvements have provided improvements to security or privacy, or they have facilitated use. Monero continues to develop with goals of privacy and security first, ease of use and efficiency second.
Who Are the Founders of Monero?
The origins of Monero start with the release in 2012 of the CryptoNote whitepaper – a cryptocurrency research paper by developer Nicolas van Saberhagen, whose true identity is unknown. It introduced the cryptographic methods described above and proposed a new form of electronic cash, called “CryptoNote”.
In July 2012, Bytecoin became the first cryptocurrency to launch based on the CryptoNote protocol, then in 2014, Bytecoin’s codebase was forked to create a new currency – Bitmonero, which we know today as Monero.
Monero has no single founder or CEO. There is a core team of developers working on it, most of whom choose to remain anonymous. One of the few developers who is known by name is Riccardo Spagni (aka FluffyPony) who was Monero’s lead maintainer until stepping down in December 2019. Spagni originally got involved in cryptocurrencies in 2011 by mining Bitcoin and went on to co-found Tari, a merge-mined sidechain of Monero focused on enabling and empowering non-fungible tokens (NFTs).
As an open-source project, Monero relies primarily on donations from the community to fund its development. Hundreds of people around the world have supported the project with proposals and funding through Monero’s Community Crowdfunding System (CCS).
What Is Monero?
The Monero platform and its XMR token were designed with one mission statement in mind: making it possible for each user to control the level of visibility of their personal data online. It came into existence in 2012 with the launch of Bytecoin, an anonymity-focused cryptocurrency from which Monero was launched as a fork back in July 2014. The idea for the project was born out of the perception that the Bytecoin’s reputation took a hit after the public learned that the majority of its supposedly mineable coins were already in existence. Despite the fact that the parent Bytecoin network has been built from scratch using CryptoNote, a powerful privacy-oriented open-source application layer protocol, the future designers of Monero went on to do their own thing.
Two among these, David Latapie and Riccardo Spagni, named their pet crypto after the Esperanto word for “coin”. The Monero team kept the Cryptonote protocol from the Bytecoin, pairing it with ring signatures, ring confidential transactions (RCT) and stealth address technologies. The goal was to create the first fully untraceable and secure cryptocurrency which puts forward the protection of privacy as its main selling point.
How Does Monero Work?
To achieve the desired effects on the transaction process, Monero’s workflow follows a specific path based on its implementation of the CryptoNote technology:
Upon creation of a Monero account, a user will be given a private view key and a private spend keys, alongside a public address. The spend key can be used to spend payments, while the view key gives insight into incoming transactions. Finally, the public address is used to receive funds. These are used to create the user’s Monero address.
Next, let us imagine that there is an output which a user wants to spend after it was sent to the one-time public key.
With the help of an Extra, a TxOutNumber and the private account key, the user can recover their one-time private key.
The Extra value for sending a transaction to another user is generated randomly.
The Extra, the TxOutNumber and a recipient’s account public key are used to create the recipient’s output public key.
The sender can hide the link to his/her output among the foreign keys in the input.
Double-spending is prevented by including the key image, a special marker which is created from the sender’s one-time private key. There is only a single key image for each expenditure on the blockchain.
The senders signs transactions with his/her one-time private key, all public keys and key image and adds the ring signature (see below) to the end of the transaction in question.
How To Use Monero?
The increasing supply of XMR makes it less suitable as a hedge against inflation than other cryptocurrencies, and its main use case remains to be as a means of transacting anonymously. This could be useful in a variety of situations, including businesses wanting to keep their suppliers hidden, citizens trying to escape government oppression, and the average person who just wants to be free of any kind of scrutiny due to their personal purchases.
How To Choose a Monero Wallet?
The type of Monero (XMR) wallet you choose will likely depend on what you want to use it for and how much you need to store.
Hardware wallets or cold wallets provide the most secure cryptocurrency storage option with offline storage and backup. Ledger, Trezor and the Monero community-funded Kastelo offer XMR storage solutions. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of XMR for more experienced users.
Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. Software wallets deemed safe by Monero include MyMonero, Edge and Cake Wallet. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of XMR or more novice users.
Monero also supplies a GUI (graphical user interface) wallet which can be downloaded to your desktop and is recommended for less technically savvy people who want to quickly send and receive XMR.
Online wallets or web wallets are also free and easy to use. They are accessible from multiple devices using a web browser but are considered hot wallets and can be less secure than hardware or software alternatives. As you are trusting the platform to manage your XMR, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.
Kriptomat offers a secure storage solution, allowing you to both store and trade your XMR tokens without hassle. Storing your Monero (XMR) with Kriptomat provides you with enterprise-grade security and user-friendly functionality.
Buy and sell XMR, or exchange them for any other cryptocurrency – it can be done in mere moments when you choose our secure platform as your storage solution.
The Monero network is based on a proof-of-work (PoW) consensus mechanism, like Bitcoin and many other cryptocurrencies, which incentivizes miners to add blocks to the blockchain. The algorithm that manages this system is designed to be resistant to application-specific integrated circuits (ASICs) – specialized mining equipment that gives companies and wealthy individuals a significant advantage over other miners.
Over 65% of the hashing power for Bitcoin comes from ASIC mining farms in China, so clearly they risk the network becoming centralized. In 2019, Monero upgraded to the RandomX algorithm which is optimized for CPU miners (e.g. a laptop) and GPU miners (using standalone graphics cards), which should, in theory, keep the network more decentralized.
While Bitcoin may have taken the initial steps towards a more private digital cash over a decade ago, Monero has made significant advances towards true financial anonymity. Although it’s one of many privacy coins available on the market, between its advanced cryptography and features such as stealth addresses and ring signatures, coupled with ASIC resistance, Monero has secured its place as the biggest privacy coin by market cap.
Moreover, Monero is governed by a community that is driven more by ideals than profit and believes privacy is a fundamental right. As privacy rights become ever more eroded in the modern world, the value of cryptocurrencies like Monero becomes more apparent, and with a dedicated community and regular updates planned for the future, Monero looks to have carved out a spot for itself in the greater crypto markets – and it isn’t leaving.
Is Monero a good investment?
The success of Monero as a crypto investment will depend on how much the market values the anonymity this coin provides.
The No. 1 reason why Monero could be a good investment is that it has its niche in the crypto ecosystem. It’s the leader among privacy coins, and just about everyone who’s interested in privacy coins knows about Monero. There are others out there, most notably Zcash (CRYPTO:ZEC), but none that has reached Monero’s level of success.
Monero has a clear use since there are plenty of reasons why people would want a cryptocurrency that keeps their transactions private. Although some use Monero for ransomware and other illegal activities, other users just don’t want a public record of their cryptocurrency transactions.
Monero does have its potential issues. Countries have banned it and exchanges have delisted it. That could hold it back in terms of value because availability on major crypto exchanges influences how high a coin’s price goes.
If you think privacy coins play an important role in the future of cryptocurrency, you may want to invest in Monero. Like other types of cryptocurrency, Monero is volatile, so be prepared for price changes and only invest money you could afford to lose.
How to buy Monero?
Although many exchanges have opted not to offer Monero, there are still places to purchase it. If you’re in the United States, you can buy Monero on Kraken. People outside the country can also find Monero on KuCoin and Binance (it’s not available on the U.S. version, Binance.US).
Another way to get Monero is to purchase it directly from another person on the decentralized, peer-to-peer Bisq exchange. There are also platforms that let you swap one cryptocurrency for another, which you can use to trade for Monero. Here are a few of these platforms:
Monero is controversial, but that comes with the territory. Any digital currency that promises privacy is going to attract criminals. This cryptocurrency also has a devoted community that supports it because the members believe in the importance of privacy.
How many Monero coins are in circulation?
At the time of writing, Monero has a circulating supply of 18,189,118.23 XMR. This number can fluctuate depending on mining and minting activities, as well as any potential token burning (which removes coins). As Monero approaches the 18.4 million XMR mark, the rate of new coins added will decrease.
Is Monero a good Investment?
It is solely up to you, and potentially your financial advisor, to determine whether a crypto investment will be ‘good’. You can only ascertain whether Monero (or any crypto) will be a valuable investment by conducting your own, thorough, research. Always keep in mind the volatility of the market when making any investment.
Where can you buy Monero (XMR) in Australia?
Monero (XMR) can be bought from most Australian decentralised exchanges, such as eToro or CoinBase. It is important that you do your research on any exchange you engage with. Once you decide on an exchange, there are plenty of useful guides online regarding how to buy cryptocurrency in Australia.
How is the Monero network secured?
Monero transactions are cryptographically secured. This means that its network uses a combination of the most resilient encryption tools, and vigilant crypto miners to disguise an investors transactions and wallet address.