One of the issues that has set back cryptocurrency adoption is privacy. Bitcoin was originally intended as digital money that would be decentralized. Enter Monero.
Bitcoin transactions were designed to commence though an encrypted protocol. However, the wallets can be traced and it is possible to check the holdings and transactions of a wallet on the platform.
A number of crypto coins have come forward to address this issue. Monero is one such currency that has a relatively stable price and appears to be getting popular within crypto circles.
The Need for Monero
Monero was originally introduced as an alt coin that provided greater security and privacy for investors. While Bitcoin and other currencies also offer privacy for buyers and sellers, Monero took it one step further as privacy was built into its protocol.
It was based on the CryptoNote protocol that was first used in Bytecoin back in 2013. That project was overshadowed by scams and interest was lost within Crypto users.
Monero launched in 2014 as an honest version of the CryptoNote protocol by a different team of developers. It was one of the first coins that was not based on Bitcoin’s codebase.
Most of the developers work under pseudonyms and there is no known company behind the coin.
Monero is a coin where user privacy is built into the protocol. Privacy is achieved through a clever procedure called Ring Confidential Transaction (RingCT).
In traditional crypto currencies, ownership of coins is proved through cryptographic signatures. Monero uses decoys where multiple input signatures are used.
Only one of these is authentic while another 6 decoys are added to each Monero transaction. This makes it difficult to detect where the coins came from and where they went.
The protocol also allows users to hide the amount exchanged in a transaction. This is done through Pedersen commitment.
The system can perform transactions between parties without revealing how many coins were actually purchased and sold by each individual.
Lastly, the Monero protocol uses stealth addresses. These are special cryptographic addresses that are generated from thin air when a user tries to purchase or sell coins.
The owner of the stealth address can access it through a private key to transfer funds between the stealth address and their actual e-wallet.
Scaling in Monero is different than Bitcoin. The size of a Monero transaction is bigger than Bitcoin which is usually a few KB.
A Bitcoin transaction is usually less than 1 KB.
The maximum blocksize for Bitcoin is 1 MB while there is no limit to blocksize for Monero. Signatures are a large part of Monero transactions which increase the size of each block.
It is possible to reduce the size through a process of pruning.
Monero uses Cryptonight hash function which is heavy to verify unlike SHA-2. This will have heavier load on CPUs as the size and number of transactions increase.
This could lead to scaling issues according to some experts.
Can Monero Replace Bitcoin?
While Bitcoin is an improvement over fiat currency, it has one critical flaw. The currency lacks privacy.
If you give someone your Bitcoin wallet address to send you money, they can find out how many transactions you have conducted and how many coins you have in your wallet.
The same holds true even when you are sending money to someone. A recipient can check how much money you have in your wallet and the transaction history for a particular address.
Monero was created to fix this problem through encryption methods discussed above
Benefits of Monero
Monero can be useful in a number of circumstances.
Suppose you are a business that buys regularly from different suppliers and makes payment in crypto such as Bitcoin. When you make a partial payment for an order, the supplier might be able to see how much money is in your wallet based on transaction history.
They could demand that you should make the full payment since you already have the funds in your wallet.
Online shoppers, who use cypto as payment, will want information about their wallet or transaction history protected. Companies often use discriminatory pricing to get the highest price for their services from buyers.
In The End
Businesses and buyers who are looking for additional privacy and security for their online transactions will find Monero superior to most other cryptocurrencies.