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Coin Study

What Is Monero (XMR)? A Crypto Coin Study

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Image Credit: Descryptive/Flickr

Privacy-focused Monero is an increasingly popular alternative to Bitcoin. But who’s behind it? How does it work? And how expensive is it to buy? We’ll answer all these questions and more in this coin study.

What Is Monero?

The unique selling point of Monero is its dedication to privacy. Every transaction on the Monero blockchain is unlinkable and untraceable. Anyone can use the network to send and receive assets, but the source, recipient, and amount are hidden.

This differs from Bitcoin. Nakamoto’s creation is pseudonymous; BTC transactions are traceable thanks to blockchain analytics.

The History of Monero

Monero has its roots in Bytecoin. Bytecoin was the first real-life implementation of CryptoNote, an application layer that powers many of the sector’s most well-known privacy coins.

Bytecoin went live in 2012 but was beset with suspicious behavior by the development team. Most worryingly, it was discovered that more than 80 percent of the total number of coins had already been published.

In 2014, therefore, a group of Bytecoin users took the decision to fork the coin. The new coins and new blockchain took the name of BitMonero.

Many aspects of the fork were poorly received by the community. It caused the lead developer, only known as thankful_for_today, to walk away from the project.

Five days after the BitMonero fork, the coin was renamed to Monero (meaning “coin” in the Esperanto language), and the community took over the project.

The original Bytecoin still exists. It is the 31st largest cryptocurrency in the world by market cap ($174 million). One Bytecoin has a value of $0.000946.

Who’s Developing Monero?

Today, Monero has a seven-person core development team. Only two of the team have gone public with their real-life identities: Riccardo Spagni and Francisco Cabañas.

In addition to the core team, there have been more than 400 contributors to Monero since the currency first launched in April 2014. Some have revealed their names, others have chosen to remain anonymous. You can see the full list of developers (along with their contact details) on Monero’s official website.

How Does Monero Work?

As previously mentioned, Monero is based on CryptoNight. It uses a proof-of-work hash algorithm.

The big difference between the Monero blockchain and most cryptocurrencies’ blockchains is the way public and private keys are used. It is these differences which give Monero its privacy properties.

Everyone has a public address. However, the Monero funds you own are not associated with it. Therefore, if someone knows your public address, they cannot see how much Monero you own (this differs to Bitcoin).

Instead, when you send money to a public address, it is directed to a new destination address. As a result, there is no record of funds being received on the public record.

Indeed, your public address will never appear on the public record in any form. A “stealth address” is used in its place. A recipient can scan the Monero blockchain for transactions addressed to them using their secret view key.

The other key component of Monero transactions are the “ring signatures”. They prevent a sender from knowing when Monero coins are re-spent by the original recipient.

Best described as transaction mixing, ring signatures make other random users’ funds appear in the transaction. The cryptographic technology means it’s impossible to tell which user was the true source.

The Monero Whitepaper

There are three Monero-themed whitepapers for you to check out.

The first is the original CryptoNote whitepaper. It was written in 2012 by an unknown author under the pseudonym Nicolas Van Saberhagen and first appeared on Tor.

The second is Monero’s annotated version of the CryptoNote document. It acts as an informal review of the original, breaking down its claims on a line-by-line basis.

Finally, you can read Brandon Goodell’s review. Goodell is an MRL researcher. His document offers a formal analysis of the claims and mathematics in the CryptoNote paper.

It’s also worth checking out the Monero Research Lab Papers. Six have been published so far. They are:

How Much Does Monero Cost?

monero one-year price history

At the time of writing, Monero is the 10th largest cryptocurrency in the world. It has a total market cap of $1.1 billion—just $60 million less than ninth-placed Cardano. There are 16.5 million Monero coins in circulation.

Monero’s all-time high is $542.33, a price it reached on January 9, 2018. After the crypto crash in late-January, Monero lost much of its value. However, it continued to trade above $100 throughout most of 2018, only dipping briefly below the support level in late-August.

Sadly, the recent Bitcoin Cash hash wars have placed negative pressure on the entire crypto sector, and Monero has suffered. Today, one Monero coin is worth $69.01. It is the coin’s lowest valuation since August 2017.

However, don’t let the recent downward trend put you off. Monero still boasts a cumulative return of 2,674.20 percent since it started trading. The coin’s best month was November 2017; it grew 110.38 percent.

Where to Buy Monero

monero markets top 10

The largest Monero market in the world is found on Bithumb. The Monero/South Korean won pairing sees $145.2 million of volume every 24 hours. It accounts for 89 percent of Monero’s total trading volume.

The largest Monero/Bitcoin market is on Binance. It has a daily volume of $3.6 million. Finally, the largest USD market is Bitfinex. There’s a 24-hour volume of $1.2 million.

Monero is not available on Coinbase. You’ll have to transfer assets to a full-featured crypto trading exchange if you want to invest.

What’s Monero’s Future Potential?

Perhaps Monero’s biggest issue is its connection to illicit activities. Cybercriminals on the dark web have used it for illegal gambling, buying drugs, purchasing guns, and other nefarious purposes.

These shady connections sprung into the public eye during May 2017’s WannaCry ransomware attack. The attack targeted organizations around the world, including Boeing, FedEx, the NHS, Honda, and Hitachi.

After demanding payment in Bitcoin, the hackers converted the assets into Monero, at which time it became entirely untraceable.

The other pressing issue Monero faces is competition. Monero is far from being the only cryptocurrency with a focus on privacy; Zcash, Verge, Zcoin, NavCoin, PIVX, and more all offer a variation on the same theme.

On the positive side, the Monero blockchain doesn’t have a block limit and is dynamically scalable, meaning it should be future-proof.

The developers have also taken care to ensure miners remain incentivized. Although the number of Monero is capped at 18.3 million, an extra 0.3 Monero will be created every minute, forever.

Join the Monero Community

If you want to learn more, check out some of the various Monero communities on the web:

Let us know your favorite Monero communities in the comments.

If you enjoyed this study, head over to our Ethereum study to brush up on your knowledge even further.

Dan Price
Dan has a background in both finance and technology. Previously, he worked for more than five years as a private financial consultant, advising clients on single investments, fund portfolios, long-term savings, and more. Dan holds professional qualifications from the UK's Chartered Insurance Institute, including a Certificate in Discretionary Investment Management and a Diploma in Financial Planning. Dan also writes for Blocks Decoded's sister publication, MakeUseOf. He started at the company in 2014 and has gone on to hold several key positions in the organization. In mid-2017, Dan finally started to invest in crypto. He is a firm advocate of index tracking funds and automated portfolio balancing. He's currently using the Crypto20 token and Hodlbot for exposure to the top 50 coins.
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