Monero Explained: The Privacy-Focused Cryptocurrency
Monero has been soaring in value for the past few weeks and the world finally seems to be catching up with the privacy benefits that it offers.
Today we’ll be discussing what is Monero, how it works, why it matters, the team behind Monero, what the pros and cons, how it compares to Bitcoin and what are the best ways to buy and store Monero safely.
1. What it Monero?
Before we move on to the utility and understanding the applications, let’s talk about what is Monero?
Essentially, like Bitcoin, Monero is a store of value. It’s basically mineable digital cash but all transactions are confidential unless you want them to be known to someone. When you receive funds, you won’t be able to track who sent it to you, unless the sender wants you to know.
Monero’s privacy benefits keep anyone from knowing how much you hold and keeps anyone from spying on your transactions or keeps your business transactions confidential.
2. How does Monero work?
Monero works just like any other conventional cryptocurrency and uses Proof-of-work system to maintain a ledger of a who owns what.
Monero is mineable and miners are responsible for mining blocks that hold the proof of your transactions, for this miner get rewarded in Monero itself.
Hidden Addresses and Unlinkability: With Monero transaction is private and nobody can tell how many payments or of what value were sent from one specific address to another.
Untraceability: Even if someone knows how much Monero tokens you received, it is impossible for them to trace how or where you spent them. This is done using Ring Signatures, which basically states that anyone from a group of members can sign the transaction so one wouldn’t know exactly who signed it.
3. Token Utility and Transaction period.
Since it’s a cryptocurrency, the utility of the Monero token is basically a store of value. However, unlike bitcoin (which is also a store of value) it’s untraceable.
Unlike Bitcoin, with Monero a new block is created every two minutes which leads to faster confirmations from miners and ultimately faster transactions.
Here’s how a regular Monero transaction would look like:
1-5 seconds: The transaction gets signed and initiated
2-3 minutes: The transaction gets first confirmations
20-30 minutes: The transaction gets ten confirmations and the transfer of tokens has been finalized & unlocked for spending.
Here’s how every transaction works. Once your transaction has been announced, it has to be confirmed by miners in order to ensure that the initiator is not double spending the tokens. Since each block takes an average of 2 minutes to be mined, it can take anywhere from 2-3 minutes to get the first transaction.
Similarly, the transaction will have to be confirmed by multiple miners and once there have been a few blocks mined without any confliction transacitons or double spending announcements, the transaction is considered complete and final.
4. Who’s Behind Monero?
The core Monero team consists of seven members, only two of which are known to public namely Riccardo Spagni and Francisco Cabañas.
Due to obvious reasons, popular exchanges like Coinbase do not allow you to buy Monero with fiat currencies, yet. However, we do have an extensive list of the best Monero exchanges where you can buy Monero with other crypto-assets.
While there aren’t a lot of options available, you still can store your Monero tokens safely by wallets built by the core team. If you’re really paranoid about the safety of your tokens, you can even generate a cold-storage paper wallet which takes your tokens offline.
We have discussed about the best monero wallets in much more depth here.
8. Monero Vs Bitcoin
If you’re serious about your privacy and giving out the value of your holdings or your past transactions hold the potential to have a severe personal consequence to you, then it becomes a no-brainer to use a cryptocurrency like Monero instead of going with traditional options like Bitcoin or Litecoin where anyone can see how much value you hold.
While there are no direct downsides to using Monero other than the fact that there are just not an abundance of ways you can securely store your tokens (refer to our post mentioned below to find the options that you do have), this is a temporary issue that will soon be fixed as hardware wallets like Ledger and Trezor add Monero wallet support.
If you’re interested in digging deeper, do read our indepth debate on Monero vs Bitcoin.
9. How to Mine Monero on Windows and Linux?