What is Monero XMR?
in Monero (XMR)
Measured by market cap, Monero is the most popular privacy orientated cryptocurrency. But what is Monero and what makes it so different than every other crypto out there?
In this article, we’ll look at exactly what is the XMR coin, why Monero is valuable, why it’s widely misunderstood, and what challenges Monero might face in the future.
What is XMR and why Monero is Valuable
Although Bitcoin is the world’s most popular cryptocurrency, it has a feature that some may not value — the network is completely transparent. Given the analytical tools that have been developed over the years, it’s relatively easy to associate a person with a Bitcoin address. Once that association has been made, it’s possible to track past purchases and how much BTC someone has.
This creates all kinds of security concerns, especially for someone holding a lot of Bitcoin. Then there is the fact that Bitcoin is not fungible. In this context, “fungible” means that one Bitcoin does not necessarily equal another Bitcoin. Here’s an example.
Hackers have been taking over computer networks and demanding a Bitcoin payment to return control of the network. Out of desperation, it’s not uncommon for the hijacked entity (be it a hospital, city, company, etc.) to pay this ransom. So one potential scenario is,
- The city pays the hacker in Bitcoin
- The hacker receives the Bitcoin and then sends some of it to someone else who has absolutely zero knowledge of the crime
- The authorities trace the Bitcoin transaction and an entirely innocent person is now under suspicion because they have received Bitcoin from a “tainted” source
Although this scenario does not play out often now, it will become increasingly common, especially as you consider that authorities may trace the same “tainted” Bitcoin through dozens of transactions. Entire services have been set up to identify tainted Bitcoin. This is not optimal, especially if some percentage of all Bitcoin in existence is deemed tainted and is not suitable for spending.
Monero solves all of this because Monero is digital cash.
- Cash doesn’t have a history. If you’re given a $20 bill, it doesn’t matter what it was used for in the past. It’s just as good as any other $20 bill
- When you hold cash, nobody can see how much you have. Although your bank can track ATM withdrawals, no random person can know your wealth just by looking at the wallet in your pocket
- Cash is untraceable
For thousands of years, human beings have valued these properties in money. Seashells, gold, and paper bills, they all have similar characteristics. It’s only in the digital age of credit cards and Bitcoin that we can begin to trace transactions on a mass scale.
What makes Monero valuable is the fact that it cannot be traced. No government, company, charity, religious organization, or nosy neighbor can see what you spend your money on. And nobody can see how much Monero you’re holding since wallet balances are hidden. Furthermore, since Monero is untraceable, it’s impossible for there to be “tainted” Monero. 1 XMR is equal to any other XMR. It’s that simple—digital cash for the digital age.
While these properties admittedly do make Monero attractive to criminals, hopefully, they should also be properties that are widely desired by the law observing public.
We should have the right to spend money without others knowing what we’ve bought. We should have the right to store our wealth without others knowing how much we have. Businesses should be able to accept a payment without worrying that the FBI will be at their door the next day, asking where the money came from.
Monero Coin: XMR
XMR is the ticker symbol for Monero. The coin itself is very similar to Bitcoin since XMR is designed to be used for payments and storing wealth, nothing else. There are no fancy properties, no smart contracts, no bells, and whistles. XMR has traditionally been a top 20 crypto by market cap.
Monero uses a Proof of Work consensus mechanism and a new block is created roughly every two minutes. Monero developers recommend waiting for 10 confirmations, which gives Monero a confirm time of 26 minutes (generally, Bitcoin’s confirm time is 30 to 60 minutes).
While Monero’s supply issuance decreases over time like Bitcoin’s, Monero is different from Bitcoin in that there is an infinite tail emission. In other words, a small amount of Monero will continue to be paid out to miners for as long as the network exists.
One of Monero’s forward-thinking features is that every six months they institute a hard fork to discourage ASIC mining. The reason Monero is so anti-ASIC is that the Monero developers believe ASIC mining centralizes the network.
While it’s possible to mine Monero on your laptop or PC using the Monero GUI wallet, this is generally not recommended. If you mine for long enough, it tends to burn out your computer, and it’s unlikely that you’ll ever earn enough XMR to cover the cost of a new laptop. As with other popular networks, mining is only profitable on a large scale or under exceptionally favorable circumstances, i.e., access to very cheap electricity.
One of the unintended consequences of having a network secured by GPU & CPU miners is that the combination of GPU/CPU mining and anti-ASIC technology has encouraged botnets. Hackers have created viruses that can infect thousands or tens of thousands of computers, causing them to mine Monero without the owner’s knowledge.
Threats to Monero
As a privacy coin, Monero faces an undue number of threats. The following three challenges are a few of the big ones.
1. Somebody cracks the network
Monero uses complex math to enable private transactions. However, that’s not to say that the network can’t be cracked. If an agency or company figured out how to track Monero, it would end the cryptocurrency.
Unfortunately, there are incentives for someone to crack the network. Recently the IRS announced that they would pay a bounty to any company that could find a way to trace Monero transactions. However, that bounty is insignificant compared to the real reward.
The big money would be in a private firm developing a way to track Monero transactions and then not telling anyone about it. They could consult with agencies like the FBI and NSA to trace transactions that people thought were private and charge hefty fees for the tracking service.
Given the network’s complexity, it’s unlikely that Monero will be cracked; however, nobody can say with 100% certainty that it will never be compromised.
2. Monero will be made illegal
At this point, it’s unlikely that Bitcoin will be made illegal in a major jurisdiction like the United States or Europe. There is too much infrastructure, too much public support, and too many wealthy investors who have a stake in Bitcoin’s success.
The same cannot be said of Monero. It has very little adoption compared to Bitcoin, and Monero could quickly be banned with only a small outcry. It would be akin to banning Bitcoin in 2012.
Already we’ve seen governments like South Korea force exchanges to delist Monero. The real test will come after the next bull market after XMR’s price skyrockets, and more attention is drawn to the project. How governments will respond at that time is anyone’s guess.
3. Bitcoin could implement strong privacy features
Although it’s fairly unlikely, at some point Bitcoin could implement strong privacy features which rival Monero’s. If people could hold Bitcoin and nobody could see their balance, and spend Bitcoin without anyone tracking the transaction, it would decrease the demand for Monero.
These threats aside, it’s important to consider the upside: nobody cracks the network, governments don’t ban it, and Monero usage explodes. As people become increasingly aware of how governments and private corporations track their every move, at least some percentage of the populace will be interested in a cryptocurrency that protects their privacy.
Monero is digital cash. People should be able to spend their money without recourse, and they should be able to hold money without the world knowing their account balance. As they say in the community, SHUM…
Should Have Used Monero
Now that you know what is Monero, are you ready to invest? One of the safest places you can keep your XMR is in the Exodus Monero wallet. You can download the Monero wallet for free, or check out the Monero Wallet for Android and iPhone Monero Wallet mobile app.
Exodus is a non-custodial wallet with 24/7 customer support and a built-in exchange so that you can buy or sell Monero XMR (using crypto) without registering on an exchange.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.