Monero (XMR) is an open source decentralised cryptocurrency that relies on the protection of counterparty privacy and transactions being completed with anonymity. In this article, you will learn how Monero achieves anonymisation and how the token stands out.
The cryptocurrency was launched in 2014. In 2015, it hit exchanges and was sold for USD $0.49. The peak value – USD $484 was reached in January, 2018, when the entire market was at its maximum.
The cryptocurrency was launched on 18th April, 2014, based on the CryptoNote protocol (PoW modification). It is an open source technology designed to address some of the disadvantages of Bitcoin, namely, the ability to mine with ASICs and the lack of transactional privacy. CryptoNote solves these problems with ring signatures and stealth addresses.
For the first time, this protocol was used by the Bytecoin cryptocurrency in 2012 (not to be confused with Bitcoin). Due to the strange method of token distribution during the premine, its developers were accused of fraud. The criticism resulted in the network restarting through a hard fork. As a result, the Bitmonero cryptocurrency surfaced. Later the prefix “Bit” was removed from the name. This is how the most popular anonymous cryptocurrency in the world was born.
In December 2019, the CryptoNote protocol was replaced with RandomX to eliminate the need for a biennial update.
Complete anonymity. Monero is one of the few cryptocurrencies that truly ensures the privacy of users. Unlike Bitcoin and other coins, which store the history of transactions (timestamps, sender and recipient addresses, amounts etc.) in the public domain, the system hides counterparty addresses, transfer amounts, signatures and other details that can be used to identify an individual network participant.
True interchangeability. Fungibility is the ability to replace one coin with another without losing value. In this case, not only is the coin value on the exchange important, but also its “reputation”. The “reputation” arises when it is possible to identify each individual coin. BTC is identified by transaction history, USD by serial number. If the “reputation” is clean, the coin has not been involved in illegal transactions, and everything is fine. If coins have taken part in illegal or unethical transactions, then they can be banned.
It does not matter whether the holder of the “bad” coins violated the law or if they received them as payment for a cup of coffee or a phone repair. At best, “bad” money will no longer be able to be used. At worst, they will be accused of those violations where such coins were noticed.
Dynamic scalability. The Monero blockchain does not have a predefined block size like the Bitcoin network (up to 4 MB). This allows the system to fit more transactional data into the block if the need arises. This allows the network to adapt to the load – if the number of transactions grows, then the block size grows and vice versa, while the block verification time always remains the same.
The only drawback of the approach is that miners can spam the blockchain with transactions, creating huge blocks. They increase the blockchain distribution to terabytes hundreds instead of gigabytes hundreds. Although, Monero has managed to get around this problem. The network keeps track of the size of the last 100 blocks. If a new block exceeds their average size, then the reward for its extraction decreases.
If the new block size is larger than the average value of the previous 100 by 10, 50, 80 or 100%, then the reward decreases by 1.25, 64 or 100%, respectively.
Stealth-Addresses. In the Bitcoin network, as well as Ether and almost all other cryptocurrencies, there is only one public and one private key (login and password to access the wallet). If a hacker gets access to these keys, then all money from the user’s wallet will be available to the hacker. Monero has a built-in Stealth-Addresses technology that addresses this vulnerability.
Ring signatures. The technology was described by Yael Tauman, Adi Shamir and Ron Rivest in 2001. The document proposes a concept according to which a group of users create one signature for all to authorise transactions. A close analogy is a joint bank account, cheques which can be signed by all joint owners (family members or company directors), using one signature for all (password or QR code), and the signer in each case remains unknown.
Ring transactions. This technology was first proposed by Shen Noether in the document, MRL-5, and the first edition can be read in Ledger magazine. The document describes the possibility of adapting Gregory Maxwell’s research on confidential transactions for ring transactions in order to hide their amounts without having to split them according to the mixing principle. This protocol became mandatory on the Monero network in September 2017.
Kovri (not integrated!). It is also worth noting that since 2015, the Monero community has been considering the possibility of integrating the Kovri protocol, but this has not happened yet, and the company’s immediate plans in relation to this are currently unclear.
Kovri is a technology that implements a C ++ I2P router for cryptocurrencies, which allows you to hide the IP senders addresses (a close analogy is the Tor browser). The protocol works through a common API with other cryptocurrency systems, so that third parties will not be able to find out what cryptocurrency was used and whether it was used at all.
In 2019, the Monero network switched to the RandomX protocol – this is a modification of the Proof-of-Work (PoW) consensus algorithm, tailored specifically for central processors in the offices and homes of ordinary users. This is done due to the special requirements for the device’s RAM and by using a code that changes hash functions according to a pseudo-random algorithm. These measures make the Monero network ASIC and FPGA resilient.
RandomX can work in two modes: fast – you need 2181 MB of RAM, lightweight – only 268 MB of shared memory is required but it works much slower. The fast mode is intended for “clean” mining, and the light mode for validating new blocks on nodes (user devices) with little hardware capabilities.
At the same time, for “clean” mining it is now better to use central processors, since the developers have made it more difficult to extract cryptocurrency on graphics chips (video cards) in one of the updates. Most current CPUs for mining are AMD EPYC 7742 (USD $4,700), AMD Ryzen Threadripper 3970X (USD $2,000), and AMD Ryzen 5 3600 (USD $200).
Here are the programs that allow you to mine XMR after switching to RandomX:
Also, they plan to add support for mining on RandomX:
In addition, it will soon be possible to mine XMR using smartphones with powerful processors. Midas Labs developers have already started adapting their DeMiner mining apps for mobile devices. The first on the list are the HTC Exodus models.
A couple of years ago, Monero cryptocurrency could be bought on all major exchanges. However, after the decision of the Japanese Financial Services Agency to amend the rules for regulating cryptocurrencies and tightening regulation by the FATF, the situation changed for the worse. UpBit, Coincheck, OKEx and several other sites removed XMR from their listings. Dash (DASH), Zcash (ZEC), Haven (XHV), BitTube (TUBE) were delisted along with Monero (XMR).
Monero (XMR) is a cryptocurrency that allows you to maintain your anonymity from states, corporations and other people. This is its main advantage and at the same time, its main disadvantage, since it is likely that such forms of money will be banned in some countries. If that’s the case, the XMR rate will quickly drop. If anonymous currencies are allowed to operate, then Monero meets all the conditions to achieve long-term growth.