What is Monero: Definition, Features & Working

Monero is a digital currency that provides users and their transactions with a high level of privacy. Monero, like Bitcoin, is a decentralized peer-to-peer cryptocurrency, however unlike Bitcoin, Monero is considered a more anonymous or privacy-oriented digital cash.

 

In this article, we will look at the mechanics of Monero and what makes it so unique.

 

Understanding Monero

 

Monero is a decentralized cryptocurrency that is safe, secretive, and untraceable. Monero employs a unique type of encryption to ensure that all of its transactions are completely unlinkable and untraceable. 

 

It's easy to understand how something like Monero might become so appealing in a more transparent society.

 

Bytecoin, the first real-world implementation of CryptoNote, was introduced in July of 2012. The application layer technology that powers several decentralized currencies is known as CryptoNote. While it is comparable to the application layer that runs bitcoin in many ways, there are numerous areas where the two diverge.

 

Monero was founded as a grassroots initiative in April 2014 as a fork of Bytecoin, with no pre-mine and no VC funding . A fork happens when an original cryptocurrency is divided into two to generate a new version, which is made feasible by the open source formats used in the majority of cryptocurrency designs. The majority of forks are created to correct faults in the parent currency and to establish superior alternatives.

 

Monero's prominence in the crypto industry has grown mostly as a result of its anonymization feature. Each bitcoin user is assigned a public address or key that is unique to them. With Bitcoin, the coins are transmitted to the recipient's address, which they must reveal to the sender. 

 

Once the sender has the fund recipient's public address, the sender may see how many bitcoins the receiver has. All coins moved from the sender to the receiver are recorded and made public through the Bitcoin network.

 

Even if the sender knows the recipient's public address, transacting with Monero does not provide the sender with a window view of the recipient's holdings. Transactions in Monero are unlinkable and untraceable. Coins given to a recipient are diverted through an address that is generated at random and is only used for that transaction.

 

Unlike blockchain, the Monero ledger does not store the sender's and recipient's actual stealth addresses, and the one-time constructed address that is recorded is not linked to either party's actual address. 

 

As a result, anybody inspecting Monero's opaque ledger would be unable to identify the addresses and persons involved in any previous or current transaction.

 

 

Features of Monero

 

So, what is it about Monero that makes it so popular? What are the distinguishing characteristics of CryptoNote’s algorithm? Let's have a look.

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Features of Monero

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1. Your Currency is Yours

 

Your transactions are completely under your control. You are in charge of your money. No one will be able to see what you are spending your money on because your identity is confidential.

 

This provides privacy and there are no restrictions. The transaction history is private and at the end of the day it is your decision where you wish to spend your money.  

 

2. It is Fungibile

 

Another intriguing attribute it obtains as a result of its privacy is that it is actually fungible. The interchangeability of an item or asset with other individual goods or assets of the same sort is referred to as fungibility. 

 

Let's take a look at bitcoin as an example. Bitcoin takes pleasure in being an open ledger and open book. But it also implies that everyone can see the transactions in it, and more more critically, everyone can trace the trail of those transactions. 

 

This simply implies that if you hold a bitcoin that was used in an unlawful transaction, like buying drugs, it will be permanently imprinted in the transaction data. What this really accomplishes is "taint" your bitcoin.

 

These "tainted" coins will never be valued as much as "clean" coins in some bitcoin service providers and exchanges. This eliminates fungibility and is one of the most common critiques leveled about bitcoin.

 

This is where Monero enters the picture. Because all of their data and transactions are secret, no one can see what transactions your Monero has been through in the past, nor can they see what was purchased with your Monero.

 

Because its transaction history is unknown, the "transaction" trace is likewise non-existent. As a result, the idea of "tainted" and "clean" Monero does not exist, and hence they are fungible. 

 

3. Dynamic Scalability

 

The problem of bitcoin scalability has been a major subject in crypto circles in recent months. So, to summarize the problem, bitcoin was designed with a self-imposed block size restriction of 1 Mb. Bitcoin did not have a block size restriction in its early stages; however, the size limit was imposed to prevent spam transactions.

 

Monero has a free block size method with no "hard restriction" on block size. This, however, implies that malevolent miners can jam the system with unreasonably large blocks.

 

4. ASIC Resistant

 

Monero isn't technically "ASIC resistant," but the expense of developing ASICs for Monero would be prohibitively expensive. 

 

Cryptonight was founded in order to establish a more equitable and decentralized money system. Cryptocurrencies that include Cryptonight cannot be mined. 

 

It was thought that by doing so, mining pools would be discouraged and the cash would be more equitably divided. So, below listed are some  characteristics of CryptoNight that make it ASIC resistant.

 

• To function, Cryptonight requires 2 MB of fast memory. This implies that parallelizing hashes is restricted by how much memory can be squeezed onto a processor while remaining affordable.

 

• Cryptonight is meant to be CPU and GPU friendly because it makes use of the AES-Ni instruction set. 

 

5. Multiple Keys

 

The fact that Monero has many keys is one of the most perplexing elements about it. In bitcoin, ethereum, and other cryptocurrencies, you only have one public key and one private key. 

 

However, with a system like Monero, things aren't quite that straightforward. The public view key is used to produce one-time stealth addresses to which cash will be delivered. The recipient uses the private view key to search the blockchain for monies delivered to them.

 

Privacy & Population of Monero

 

Monero provides for transparency at the option of the users. Every user has a "view key" that may be used to get access to an account that has the associated private key. 

 

A user can provide chosen parties access to their view key with restrictions such as permission to view the account holdings but not to spend any monies stored in the account; access to all past and current transactions; or access to only certain transactions in the account. 

 

Selected parties include parents who may require the view keys to monitor their children's transactions and auditors to whom the user wants to grant access in order to assess their account holdings and value.

 

Users have a "spend key" in addition to the view key, which permits a designated entity with whom the user shares the key to spend or transfer funds from the account. The spend key, like the view key, is 64 characters long and made up of alphabets and digits.

 

Monero has gained in popularity, not just for those looking to engage in illicit activities in the underground market, but also for those who simply wish to be able to obtain goods and services online anonymously or quietly without leaving a digital "paper trail."

 

Also Read | Public vs Private Blockchain

 

 

Why chose Monero over Bitcoin?

 

As previously said, Bitcoin is the most widely used cryptocurrency on the market. It is based on a technique that uses pseudo name addresses to conceal the identity of the participants. These aliases are made up of letter and number combinations that are produced at random.

 

However, this method provides minimal anonymity because both Bitcoin addresses and transactions are recorded on the blockchain, making them available to the public. Even pseudonymous email addresses are not completely private. A few transactions carried out by a participant over time can be connected to the same address, allowing others to learn about an address owner's patterns and identity.

 

Fungibility is another benefit of Monero over Bitcoin. This indicates that two units of a currency may be substituted for each other with no difference. While two $1 notes have the same face value, they are not fungible since each has a unique serial number. 

 

Two one-ounce gold bars of the same quality, on the other hand, are fungible since they have the same value and no distinguishing qualities.

 

Also Read | Non Fungible Token (NFT)

 

Many people are interested in investing in cryptocurrencies. However, the popularity – and price – of Bitcoin may be a deterrent. However, there are several other virtual currencies that you may buy and trade that may be simpler to invest in, most notably Monero.