Bitcoin has been leading the cryptocurrency industry for years now. With a 55% market dominance (at the time of publishing this) and a $317 billion market cap, it has definitely proven it’s grounds and still has a lot of room for growth given that real market adoption has just started.
In comparison, Monero is a pretty new player with a comparitively miniscule market cap of $4 billion and essentially serves the same purpose that of bitcoin i.e. a digital store of value.
So what makes Monero valuable or even a viable cryptocurrency when you can just use Bitcoin as a store of value.
Before we get to that, let’s discuss why we really need cryptocurrencies when we’ve been using fiat currency since forever.
Cryptocurrencies have changed the way ownership and transfer of value can happen. Instead of relying on a central institution like a government or a bank for ensuring that value is being delivered rightfully, cryptocurrencies rely on pre-written code and permanent network consent to decide who owns how much value.
Using cryptocurrencies is fast, inexpensive and you can send payments to anyone, anywhere in the world with just a simple internet connection and their wallet address.
Since cryptocurrencies are decentralised, they cannot be “shut down” or “demonetised” by a single country or institution. Sure, countries can buy exchanges where you can buy and exchange tokens, but you can still send and receive tokens through private wallets without anyone’s consent or knowledge.
You own your value and you’re responsible for how it’s used.
The primary benefit of using cryptocurrencies is that they’re safe from “capital control”.
For example, in 2016, the Indian govt decided to demontise 70% of the major currency notes on a very short notice and followed by a very feeble plan of execution to replace the demonitised currency notes. This led to a lot of people losing value that they held in the form on fiat currency i.e. Indian rupee.
In 2015, IMF released a list of 100 countries that practied Capital control in one form or another. Another example, would be countries like Denmark and Sweden implementing negative interest rates, where if you hold your cash in a bank account then you might have to pay the bank interest rather than the bank paying you interests on your deposits.
The holders of cryptocurrencies do not have to face such restrictions just because an insitution decides to stop accepting a certain currency as legal tender or if they start printing paper money just to increase circulation.
The Misconception about Bitcoin.
A major misconception about bitcoin is that all transactions are 100% private. This is not true as anyone can see how much value you (your bitcoin wallet address) holds and how much value you have transfered or received from various sources.
While I personally like the feature about bitcoin, it does really open up someone to hacking attempts or even more serious physical attempts if the attacker knows the person who owns that address.
This is What Monero Fixes
Monero is the truly private cryptocurrency.
Nobody can know how much value you hold, who you’ve transacted with in the past or even how much value you’re sending in a particular transaction or how many transactions you’ve actually done with a particular address.
Moreover, you’ll only know who has sent you Monero tokens, if the sender wants you to know the source.
But that’s not all, apart from being a truly private cryptocurrency, Monero does feature some upgrades when compared to bitcoin.
Monero’s ‘Adaptive block size limit’
Bitcoin blocks are mined every 10 minutes while Monero’s blocks are mined every 2 minutes. While this does lead to faster transactions, the major difference here is that Bitcoin blocks have a pre-specified size, so if your transaciton doesn’t fit the block, you’ll have to wait for the next block to be mined to have your transaction confirmed and finalised.
On the flipside, Monero has an adaptive block size limit, which means it can increase the size of its blocks as per the increase in future volumes thus maintaining a faster transaction time.
Monero’s Mining Algorithm
Bitcoin’s mining algorithm gives a clear and unfair advantage to computers using ASICs or specialised mining processor chips, this is not the case with Monero. Monero can be mined by any computer and using an ASIC will not give one much of an advantage.
This helps increase decentralisation and build a bigger community of miners. This also increases the incentive for everyone to get involved in mining and earn their first Monero through mining.
Bitcoin’s Network Effect
What makes cryptocurrencies really powerful is the network effect and bitcoin has a very strong network effect. However, I believe that while the network effect is prevelant, it’s still too young of an industry to really have that established.
Bitcoin is still being held for speculative and investment reasons than actual transactions and when you compare the real world benefits of using Monero (more privacy, safer an faster transactions), it’s hard to say which currency would really end up being the one actually used for doing real life transactions.
Both Bitcoin and Monero have their fair share of pros and cons. Which currency would ultimate dominate the finance world, only time will tell. But till then, keep an eye out on developments on both fronts.