What is Monero? How does this coin work
What is Monero? How does this coin work
What is Monero? Monero (XMR) cryptocurrency was created on the basis of the ByteCoin token blockchain, developed in 2014. Due to the peculiarities of the altcoin, some crypto exchanges have abandoned its listing. Does the XMR token have advantages, who uses it, and in what areas can it be used for good?
ByteCoin is the first cryptocurrency to use the CryptoNote protocol. This protocol includes mechanisms that make the blockchain completely anonymous. Until now, most Monero developers have not revealed their names. Notable developers include Ricardo “Fluffypony” Spagni and Francisco Cabanas.
CryptoNote provides complete anonymity to users thanks to technologies:
- ring signature, which allows you to find out the number of coins sent and received, but hides the addresses;
- ring transactions, in which the time of the transaction, the involved participants, as well as the payment amount are hidden and known only to the participants in this transaction.
Monero owners can create a special “one-time” wallet for making a payment in order to further protect themselves. Such addresses allow you to hide the connection between the wallets of the participants in the transaction. This technology is called stealth addresses.
Public blockchain vs anonymous
In early June, the US Federal Bureau of Investigation was able to recover approximately $ 2.3 million of the $ 4.4 million that Colonial Pipeline paid the hackers in the form of a ransom. The funds were transferred to the cybercriminals’ crypto wallets in bitcoins, thanks to which they were tracked down.
More knowledgeable criminals are now demanding a ransom not in bitcoins, but in Monero. Bitcoin operates on a public blockchain, transactions in which can be tracked in real-time using various services, blockchain observers, for example, Blockchair.com or Blockchain.com. This means that the movement of funds in bitcoin does not go unnoticed. In addition to the addresses used in the transaction, the payment amount remains public. Monero is different – it runs on an anonymous blockchain.
Regulators versus Monero
The creators of Monero have developed a dynamic block system that allows you to quickly confirm transactions and keep online fees low. The system works in such a way as not to create queues from transactions. If unconfirmed transactions begin to accumulate, then the block size may increase, but not more than twice the initial size.
The total supply of Monero tokens is limited (18.4 million digital coins). But the developers have provided a mechanism that will replenish the lost tokens and keep their number in circulation at approximately the same level. From May 2022, the blockchain will add 0.6 XMR every two minutes.
Typically, a seed phrase that is used to restore access to a cryptocurrency wallet is generated from a set of random English words. Monero has the ability to generate a seed phrase in different languages to mislead attackers when trying to access the wallet.
Due to the high anonymity of the coin, financial regulators in different countries impose bans on its circulation. Because of this, crypto exchanges in Japan and South Korea, in particular UpBit, Coincheck and OKEx, had to abandon the listing of Monero. This came after the Intergovernmental Organization Against Money Laundering (FATF) obliged all cryptocurrency exchange services to comply with the CFT (Anti-Terrorist Financing) and AML procedures. Due to the nature of Monero’s architecture, these requirements cannot be met.
The future of Monero and anonymous coins
Despite the struggle of regulators with Monero, anonymous coins have a future. Token developers can justify its use for the good in areas where anonymity is an advantage, not a disadvantage. As an example, the analyst cited the field of philanthropy, where people often prefer to donate anonymously so as not to publicize it.
It is completely impossible to ban Monero. The supranational nature of cryptocurrencies discourages censorship even at the global level, not to mention attempts to ban in certain jurisdictions.
Anonymous cryptocurrencies will remain the domain of tech savvy ones. Monero has no plans to become a cryptocurrency that will be used to pay in supermarkets at the checkout. Monero also has a very tight-knit community that believes in revolutionizing through decentralization.
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