Bitcoin created a new electronic version of cash to make it easier to send and receive payments in a quick, safe, and “private” way, without the need for intermediaries.
But note that I wrote “private” in quotes because, in reality, Bitcoin is not 100% private; in fact, anyone can see the public records of their transactions on the blockchain and therefore track them.
This has led many people to look for alternatives to preserve their privacy, and that is where Monero (XMR) enters the scene.
Monero is a private cryptocurrency that surpasses Bitcoin in many aspects: privacy, security, and scalability. This cryptocurrency has special cryptography that guarantees that all transactions are untraceable.
Monero certainly doesn’t have the degree of popularity that Bitcoin has, but even so, it hasn’t stopped growing since its creation in 2014, and today, you’ll learn why Monero is better than Bitcoin at privacy.
What is Monero?
On the official Monero website, you can find an interesting definition of this cryptocurrency:
“Monero is the leading cryptocurrency focused on private and censorship-resistant transactions.”
This also means that Monero is a secure, private, and untraceable cryptocurrency.
And indeed, it is; this cryptocurrency has special cryptography that guarantees that all transactions remain unrelated to their authors, making it impossible to trace them.
The word Monero means “currency” in the Esperanto language, and it has its origins as the first practical implementation of the Cryptonote protocol. Cryptonote is the technology behind many decentralized cryptocurrencies and although it has many similarities with the Bitcoin protocol, it also has important differences.
One aspect to highlight is that since its creation, Monero has been a digital currency focused on constantly improving security and privacy aspects, leaving efficiency and ease of use in the background.
The origins of Monero
Monero was born from a Bytecoin hard fork, one of the first cryptocurrencies focused on privacy that made use of the Cryptonote protocol, but which had several important flaws.
This hard fork occurred in April 2014, after an announcement on the well-known Bitcointalk forum by the user “thankful_for_today,” which proposed a series of changes to Bytecoin that was initially called “BitMonero.”
After passing the first stage of the project, it changed its name to what is now popularly known as, Monero, and since then, it hasn’t stopped growing.
Monero is a cryptocurrency that practically lives in anonymity, as even most of its main development team are unknown people.
At present time, we know the identities of Francisco Cabañas – doctor in physics – and Riccardo Spagni – developer – while the rest still retain their anonymity under the pseudonyms of Smooth, Othe, binaryFate, luigi1111, and NoodleDoodle, among others.
The project has had the participation of a large number of developers, although, at present, its main team consists of approximately 30 people.
How is Monero different from Bitcoin?
As with Bitcoin, Monero is a cryptocurrency that serves to transfer value in a secure, private, and decentralized way.
However, early on and like most cryptocurrencies, Monero sought to improve some aspects of Bitcoin, especially the ability to conduct private and censorship-resistant transactions.
Another aspect in which Monero differs from Bitcoin is in the maximum number of coins to be issued; Bitcoin has a limit of 21 million units, while Monero has an infinite supply of coins, in addition to a shorter time for block generation, being just 2 minutes, compared to 10 for Bitcoin.
It’s also worth highlighting the block size, which in the case of Bitcoin is 1 MB – one of its main problems – while in Monero the block size is dynamic, changing according to the volume of transactions on the network.
But with no doubt, the aspect in which Monero stands out the most is in privacy, something that allows us to avoid the violations of this right that many governments and corporations are perpetrating today.
While with some cryptocurrencies like Dash and Zcash users have the option to choose anonymity when making transactions; Monero includes this feature by default, making each transaction private, hiding the sending and receiving addresses, as well as the amount of the transaction.
In the next section, we’ll see how this particular Monero feature works.
Monero privacy features
Before taking a full look at the privacy aspects of Monero, it’s important to also understand the core values on which this cryptocurrency is based. According to what we can find on their website, they are the following:
Safety
Since users should be able to trust Monero without fear of errors or attacks from third parties. To guarantee this, Monero delivers the entire block reward to miners, since they are responsible for providing this security. Transactions are cryptographically secured using the most modern and efficient encryption tools.
Privacy
Monero wants to offer a layer of protection to its users against possible legal issues that could land them in jail or even cost them their lives. This level of privacy must be available to any user quickly and easily.
Decentralization
Thanks to decentralization, Monero doesn’t need a trusted third party or anyone to control it in order to be used. This decentralization is guaranteed by an accessible consensus algorithm that makes mining easy on common computers, preventing a single person or organization from centralizing mining power.
Now let’s explore what are the most important privacy features of Monero.
RandomX – The new Monero mining algorithm
In the past, the mining algorithm used by Monero was known as CryptoNight. This algorithm offered a certain degree of resistance to mining with expensive ASIC (Application Specific Integrated Circuit) equipment, something necessary to prevent that only companies with sufficient economic power have access to Monero mining. However, CryptoNight had its flaws.
Recently, these flaws have been corrected thanks to the implementation of a new mining algorithm known as RandomX, which not only offers the highest possible level of resistance against ASIC equipment but also improves some security and privacy features as well.
The operation of RandomX is based on the use of a mining core that works within a virtual machine. This is a great defense against ASIC, as ASIC hardware is not designed to run virtual machines, especially due to its low RAM.
RandomX also offers high-level cryptography by making heavy use of the Blake2b hash functions, the Argon2d password generator, and AES symmetric cryptography, resulting in truly exceptional cryptographic quality.
Ring Signatures
The Ring Signatures protocol is responsible for ensuring that the results of the transactions on the Monero network cannot be traced.
The algorithm achieves this by creating a signature for the sender’s address and sending it together with another group of user addresses with their own keys, that is, a packet or ring of signatures.
The main feature of this system is that it’s extremely difficult to determine which of the group member addresses was used to produce the signature for a particular transaction.
Stealth addresses
This protocol takes care of the privacy of the recipient of a specified transaction by hiding the public addresses in the blockchain registry at all times. It achieves this by making use of multiple keys and false public addresses that link to authentic public addresses to mask them so that the original addresses are never exposed.
For example, a public key is used to generate a unique public address where the funds will be sent, while a private key is given to the recipient so that he/she can unlock those funds. This allows real addresses to be hidden at all times so that only the users involved in the transaction have authentic, true, and accurate information about the transaction.
Fungibility
Fungibility is another cool feature of Monero. Basically, it means that each Monero unit can be freely exchanged for any other Monero unit. Since Monero allows you to hide the use you make of each unit, there is no way that a person can determine if a certain Monero unit was used in some type of illicit activity, for example.
This makes all Monero units equal and contributes to giving enormous flexibility and freedom to the use of Monero and is also one of the features of why Monero is often called – “the cryptocurrency of criminals” – but they say nothing about the US dollar?
Mining Monero
In the competitive cryptocurrency market, Monero has managed to create its own space and is currently one of the largest cryptocurrencies, with a market capitalization that exceeds US $4 billion.
In addition, due to the good performance that it began to have since 2017, delivering returns close to 4K%, it’s not surprising that more and more people are interested in mining Monero.
Fortunately, and unlike Bitcoin, to mine Monero you don’t need to buy expensive ASIC equipment, which can cost more than $1,000 per unit. Instead, you can mine Monero using your own computer’s CPU or GPU, the more powerful it is, the better.
Also take into account that for mining to be profitable, you should keep your equipment – if you have several, much better – running 24 hours a day, so one key question must be answered:
Is the cost of electricity consumption for mining a unit of Monero, less than the current price of this coin in the market?
The profitability of Monero mining will depend on this factor. Take into account that in some countries, electricity is almost free, while in others it is very expensive, so you’ll have to calculate this cost in order to see if mining Monero is worthwhile for you.
Before you start mining, you’ll also need to decide if you want to mine Monero on your own or with the help of a mining pool. This last option would give you some advantage over solo mining – not recommended for beginners.
Once you have everything ready, starting to mine is just a matter of clicking a button and waiting for the profits insha’Allah.
Benefits of Monero
Although Monero has received many negative commentaries from the media, it is undeniable that this cryptocurrency has many possibilities and brings interesting benefits to its users. Those benefits are the following:
- Monero is one of the most private cryptocurrencies in the industry, and few can compare to it.
- Monero transactions cannot be tracked
- The dynamic block size gives Monero greater scalability compare to many other cryptocurrencies
- Monero will have a fixed infinite continuous emission of 0.3 XMR per minute so that miners will always have incentives to work
- It has had constant growth since its inception in 2014, which gives investors great confidence
- It can be totally transparent since if you wish, you can share your viewing keys and make your account auditable
- The fact that Monero can be auditable, gives it some legal guarantees, so it turns out that it should not be labeled as “illegal” currency after all
Disadvantages of Monero
Since nothing is 100% perfect, now it’s time to see the disadvantages of this cryptocurrency.
- Today, more than 40% of mining is carried out by 3 mining groups, so the decentralization factor is in doubt
- The size of Monero transactions is very large due to the amount of encryption in them to ensure privacy
- The compatibility of wallets for Monero is very limited and there are very few supported hardware wallets
- It’s not the most user-friendly cryptocurrency, as its main focus is on security and privacy – although the developers are improving this step by step
Is Monero halal?
Is Monero halal? Yes. Monero is halal. There is a growing number of scholars who rule cryptocurrency as halal and classify cryptocurrency tokens as either a currency or an asset. Scholars would most likely classify Monero as a currency since its primary function is to serve as an anonymous and fungible medium of exchange similar to anonymous and fungible cash and if Monero is classified as a currency, then the rules of riba al buyu would apply.
However, even though Monero is halal, it may still be ruled illegal to use by some governments as there are a number of governments that are against the proliferation of truly anonymous cryptocurrencies, so please be mindful of the laws of where you live if you chose to own, spend, or mine Monero.
Conclusion
Initially, Bitcoin promised privacy and anonymity, but sadly, this feature was relegated to the background when the cryptocurrency gained widespread popularity worldwide. This put it in the eye of the hurricane, for better and for worse.
Monero is an alternative cryptocurrency to Bitcoin with unique features in the aspect of privacy. It’s especially attractive to those who want to keep their cryptocurrency operations anonymous, and in this and other respects, it certainly outperforms Bitcoin.
It’s also true that these characteristics have earned it a bad reputation among some groups in the industry, especially in certain news media, but even so, the cryptocurrency has not stopped growing and gaining followers, remaining as an excellent and very profitable option to keep our eyes on in the competitive crypto ecosystem.