One of the basic precepts of blockchain technology is to provide users with complete privacy. Bitcoin as the first decentralized cryptocurrency was based on this premise to market itself to a wider audience that then needed a virtual currency without government intervention.
Unfortunately, along the way, Bitcoin proved to have several weaknesses, including a lack of scalability and a fickle blockchain. All transactions and addresses are recorded on the blockchain, making it easier for anyone to connect the dots and reveal private user details based on existing records. Some governmental and non-governmental agencies are already using blockchain analytics to read data from the Bitcoin platform.
Bugs like these make developers look for alternative blockchain technologies with better security and speed. One such project is Monero, commonly represented by the ticker XMR.
What is Monero?
Monero is a privacy-focused cryptocurrency project whose main goal is to provide better privacy than other blockchain ecosystems. This technology shields users’ information through hidden addresses and Ring signatures.
Address stealth refers to the creation of a single address for a single transaction. Cannot pin two addresses in a single transaction. The received coins are deposited into a completely different address, so that the whole process is not clear to the outside observer.
Ring signature, on the other hand, refers to mixing account keys with public keys, thus creating a “ring” of multiple signers. This means that a monitoring agent cannot associate a signature with a particular account. Unlike cryptography (the mathematical method of securing crypto projects), ring signature is not the new kid on the block. Its principles were studied and documented in a 2001 paper by the Weizmann Institute and MIT.
Cryptography has won the hearts of many developers and blockchain enthusiasts, but the truth is that it is still a nascent tool with little use. Since Monero uses the already proven Ring signature technology, it has distinguished itself as a legitimate project worth adopting.
Things to know before starting to trade Monero
The Monero Market
The market for Monero is similar to other cryptocurrencies. If you want to buy, Kraken, Poloniex and Bitfinex are some of the exchanges to visit. Poloniex took over first, followed by Bitfinex and finally Kraken.
This virtual currency is mostly shown pegged to the dollar or against other cryptos. Some of the available pairings include XMR/USD, XMR/BTC, XMR/EUR, XMR/XBT and many more. This currency records very good trading volume and liquidity statistics.
One of the good things about XMR is that anyone can participate in mining either individually or by joining a mining pool. Any computer with reasonably good processing power can mine Monero blocks with some bugs. Don’t worry about ASICS (Application Specific Integrated Circuits) which are now mandatory for Bitcoin mining.
Despite being an awesome cryptocurrency network, it is not that unique when it comes to volatility. Almost all altcoins are very volatile. This should not worry avid traders, this factor is what makes them profitable in the first place: you buy when prices are down and sell when they are up.
In January 2015, XMR was trading at $0.25 and in May 2017 it hit $60 and is currently hovering above the $300 mark. The Monero coin recorded an ATH (all-time high) of $475 on January 7th, before starting to fall along with other cryptocurrencies to $300. At the time of this writing, almost all decentralized currencies are in a price correction phase between $10-11k of Bitcoin from its glorious ATH of $19,000.
Fungibility and adoption
Thanks to its ability to provide reliable privacy, many people have adopted XMR to easily replace their coins with other currencies. In simple terms, Monero can easily be exchanged for something else.
All Bitcoins on the Bitcoin Blockchain are recorded down, so when an incident such as a theft occurs, all the coins involved are no longer functionally exchangeable. With Monero, you cannot tell one coin from another. Therefore, a seller cannot reject any of them because it has been associated with a bad incident.
The Monero blockchain is one of the most trending cryptocurrencies today with a huge number of followers. Like most other blockchain projects, its future looks bright, even in the face of government crackdowns. As an investor, you should do your due diligence and research before trading in any Cryptocurrency. Whenever possible, seek the help of financial experts to get you on the right track.