Monero is one of the most popular privacy coins in the cryptocurrency world. While other crypto coins that also prioritize privacy exist such as Dash or ZCash, Monero has the biggest market cap among them all. Monero’s concepts of stealth addresses and ring signatures have helped this coin to be the 10th largest cryptocurrency at the time of this post writing. So, what exactly is Monero? Let’s take a look at the history of this coin and how it differentiates from other cryptocurrencies.
History of Monero
It all started in July 2012 when the first implementation of Cryptonote was launched. The project was called Bytecoin. The project Bytecoin attracted a lot of attention, but there were controversies around the coin as well. At the time 80% of the Bytecoins were already pre-mined before the coin’s initial launch to the public. Due to this fact, some developers decided to fork the Bytecoin blockchain, and the forked version was then called Bitmonero. Eventually, the coin was renamed from Bitmonero to Monero to make it more simple and unique. The name Monero itself literally means ‘coin’ in the Esperanto auxiliary language.
There were seven developers who started the Monero project. Two of them have decided to show their face to the public while the other five developers chose to remain anonymous. They are Riccardo “fluffypony” Spagni, David Latapie, smooth, TacoTime, othe, eizh, and NoodleDoodle. Beside Spagni and Latapie, the identities of these other developers remain unknown. At the present time, there are 30 core developers in the Monero project. If you count everybody who has contributed to Monero, there are more than 500 developers in total. However, most of these 500 developers only contributed part-time, and many of them have been inactive recently.
Until today, Monero has been continuously developed. Monero team has been (mostly) focusing on the privacy features of the coin such as the concepts of stealth address, ring signatures, and RingCT (Ring Confidential Transactions). Currently, they are also researching what they call as The Kovri Project. The goal of Kovri Project is to protect all your traffic within your internet applications and to make everybody remain as anonymous as possible within the Kovri network itself. Basically, Monero developers have been doing mostly privacy-focused developments.
Many of Monero supporters believe a cryptocurrency must focus on three different aspects. Decentralization, Security, And Privacy. They believe more mainstream cryptocurrencies often ignore the privacy part, which explains why these privacy supporters support Monero in the first place.
Purpose of Monero
Image source: https://www.getmonero.org/
As we have mentioned earlier, the idea of Monero is to be untraceable and to remain anonymous. Monero community believe a cryptocurrency should focus on several different aspects at the same time. Focusing on decentralization and scalability alone are not enough. Privacy must also be prioritized because the coin owner has the right to privacy.
Different from Bitcoin and other more mainstream cryptocurrencies, the transactions in Monero blockchain cannot be traced like how people normally trace transactions in public blockchains. For example, if you send bitcoins to your friend, I can easily check your bitcoin wallet address as long as I know your transaction ID - Vice versa if I know your bitcoin wallet address. I can check your recent transaction history.
With Monero, this is not the case. Monero has the concepts of ‘ring signatures’, stealth addresses, and ringCT to conceal transaction sender, receiver, and even the amount of coins in each transaction.
How Does Monero Work? Why Is It A Privacy Coin?
Monero transactions are untraceable because they introduced the concepts of stealth addresses, ‘ring signatures’, and RingCT (ring confidential transactions). Together, all of these features make Monero transactions untraceable. Let’s talk about them one by one.
Ring Signature: A ring signature is an anonymous digital signature where a transaction signer is merged with the non-signers inside the same group, so together they form a ring and create a distinctive signature to authorize a transaction.
So, the signer spends key that interacts with an output that’s being transferred from the sender’s Monero wallet. The non-signers are basically other transaction outputs that are gathered from the Monero blockchain. The idea is that the non-signers act as decoys to make the transaction untraceable. With Monero’s ring signature technology, the transaction sender can ‘guard’ his transaction origin by making sure that all inputs inside the ring cannot be differentiated from each other.
Image source: https://blockgeeks.com/guides/monero/#Monero_Cryptography_1_Ring_Signatures
Because of the use of this technology, there was a potential issue of ‘double spend’ by a user inside the ring signature. However, Monero has built a special feature to prevent this issue. Inside a Monero blockchain, each transaction has its own unique key image. Due to the fact that each transaction has unique key image, the miners inside the blockchain (who also act as ‘verifiers’) can easily verify if a Monero coin is being double spent.
Stealth Addresses: Every person has the right to privacy. Let’s use Anthony and Billy as our examples. Anthony is the sender, and Billy is the recipient. If Anthony wants to send money to Billy, Anthony doesn’t want everybody to know about his money transfer to Billy. Monero makes this scenario possible by utilizing stealth addresses. The idea is that every person in the Monero blockchain has 2 different public keys. Public view key and public send key. So, if Anthony sends a transaction to Billy, Anthony has to utilize Billy’s public view key and public send key to get a one-time public key. This one-time public key then creates a one-time public address. This one-time public address of Billy is what they call as ‘stealth address’.
Image source: https://hackernoon.com/blockchain-privacy-enhancing-technology-series-stealth-address-i-c8a3eb4e4e43
In order to verify the transaction, Billy has to use his private spend key to ‘communicate’ with the one-time public key we mentioned earlier. This interaction will allow Billy to get his Monero coins from Anthony. With all these processes, nobody (except Billy and Anthony) knows about the money transfer between the two.
RingCT (Ring Confidential Transactions): In short, RingCT hides the transaction amount from the public eyes. Monero developers believe the features of stealth address and ring signature are not enough, and they believe the transaction amount has to be obfuscated as well. With RingCT feature, a monero wallet can pick up ring members from any output of RingCT. The idea of RingCT is that everything needs to be ‘anonymous’. A transaction sender (with ring signature), a transaction recipient (with stealth address), and the transaction amount (with RingCT).
Monero becomes one of the best privacy coins by implementing all these features into one transaction (RingCT, ring signature, and stealth addresses). It does not want to stop there. At the present time, Monero developers are researching the Kovri project. With Kovri, your internet traffic will be protected, and nobody will know you are doing a transaction with Monero. With Kovri project, the expectation is that I2P (invisible internet project) and Monero will integrate with one another seamlessly.
Controversies
Image source: https://hackernoon.com/understanding-the-deep-dark-web-8e4cad356587
Despite all of these great privacy features, Monero project itself is not far away from multiple controversies. The most significant controversy and negative publicity about Monero is the fact that the transactions are anonymous. Many Monero skeptics believe there’s no future for a coin like Monero because it will be mainly used for ‘shady’ transactions such as illegal activities in the dark web.
It is believed there’s no need of anonymous transaction within the public blockchain because privacy coins help criminals to open the door to different types of illegal and criminal activities. But of course, Monero developers defended their cryptocurrency against these accusations.
Another past controversy that caught the attention of Monero supporters was the claim about Monero’s untraceability. In 2018, some researchers made a claim that 80% of Monero transactions are actually traceable. These researchers believed there were some privacy algorithm flaws in the Monero blockchain and these flaws made them able to trace Monero transactions. Obviously, the strongest use case of Monero is to be anonymous with your crypto transactions. If people can trace 80% of your Monero transactions, that means the whole point of Monero becomes useless.
Of course, Monero developers have frequently been updating the codes to fix these algorithm flaws. After the story blew up in the media, it has become a ‘cat and mouse’ game between Monero developers and people who keep trying to ‘find’ new Monero privacy algorithm flaws.
Monero Competitors
Talking about competitors, Monero is competing against other privacy coins. The biggest names in privacy coin market (beside Monero) are ZCash and Dash. Both ZCash (ZEC) and Dash (DASH) also have their own algorithm to honour their users’ privacy. Despite the efforts made by ZEC, DASH, and some other privacy coins, Monero remains the most popular name in the privacy coin market.
Monero’s Position In The Crypto Market
Image source: https://live.globalxchange.com/monero-market-potential-for-price-growth/
Monero has a strong position in the crypto market. At the time of this post writing, Monero is one of the top 10 cryptocurrencies by market cap. Monero has more than $1.2 billion market cap and more than $71 million daily trading volume. You can easily trade Monero with the biggest crypto exchanges such as Binance, Huobi, Bitfinex, CoinEX, Kraken, or Coinbene. Despite that, Monero is still not available on Coinbase. Many crypto traders believe Coinbase will never support Monero.
Conclusion
Monero is one of the best privacy coins, and it surpasses its competitors when it comes to fame. The future of Monero remains unknown as both of its supporters and haters have good points in their arguments. That being said, many cryptocurrency believers often say there’s always a future for privacy coins because anonymity is one of the strongest use cases of a ‘currency’. If the developers can keep improving Monero privacy features, obviously there will be a place for Monero in the future of cryptocurrencies and mainstream adoption.