Monero (XMR) was one of the first cryptocurrencies to introduce cryptography that offered real advances in privacy and fungibility over available alternatives.
Its main differentiator was its ability to allow users to send and receive transactions without making that data available to anyone looking at their blockchain.
As such, Monero is often classified with other privacy cryptocurrencies such as Zcash (ZEC), which seek to address the privacy shortcomings of Bitcoin (BTC). (In Bitcoin, transactions reveal the amount exchanged as well as sender and recipient data by default.)
This, in turn, allows bitcoins to be tracked, making them less fungible, as companies can identify and blacklist coins involved in suspected criminal ventures, for example.
However, while projects like Zcash enjoyed media fanfare and the support of venture capitalists, Monero's origins are more comparable to Bitcoin's, involving a small online technology community that has grown silently over time as time goes by. the project gained credibility and market share.
But Monero also distinguished himself in areas other than privacy.
For example, Monero's software is scheduled to be updated every six months, a regular schedule that has helped him add new features more aggressively without much controversy.
This means that Monero has been able to continue to introduce cryptographic advances such as secret addresses (which allow users to create unique addresses) and confidential transactions (which hide transaction values).
Given his willingness to pioneer such advances, Monero continues to attract the interest of cryptographers and researchers looking to push the limits of what's possible in cryptocurrency.
Monero's origins are among the most unusual among major cryptocurrencies, involving unknown developers, allegations of fraud and, ultimately, various rebrandings of the project.
The story begins in 2013 with the release of the white paper CryptoNote, authored by developer Nicolas van Saberhagen. The article would get the attention of the crypto community, with renowned Bitcoin developers Gregory Maxwell and Andrew Poelstra creating their own work on its implications for cryptocurrencies.
However, initially this did not translate into success for their pioneering ideas.
Soon after, CryptoNote was used to create a new cryptocurrency called "Bytecoin", although the project would collapse over allegations that its developers had tampered with its supply.
The code base that would form the basis of Monero was later released in April 2014 as “Bitmonero”. The developers, however, had to fork again amidst the controversy, shortening the name of the cryptocurrency to Monero, Esperanto for the word "currency".
How does Monero work?
In addition to its privacy features, Monero works similarly to other major cryptocurrencies, using proof-of-work mining to control XMR emission and to encourage miners to add blocks to the blockchain. New blocks are added approximately every two minutes.
Remarkably, however, enthusiasts may find that extracting XMR is easier than with other cryptocurrencies, as the algorithm that governs this process is designed to guard against specialized hardware.
This means that users can generate XMR when mining with a laptop (CPU) or graphics card (GPU), low-cost forms of hardware that are more widely available.
What makes Monero private?
Not all privacy cryptocurrencies achieve privacy in the same way and, as a result, users should not consider them equal or interchangeable offerings.
XMR, for example, should be seen as a tool that, when used correctly, obscures user data in the blockchain, making it difficult to track your users.
The technology that makes this obfuscation possible, Monero uses ring signatures to blend the digital signature of the individual who makes an XMR transaction with the signatures of other users before writing it to the blockchain. That way, if you look at the data, it looks like the transaction was submitted by any of the signatories.
Over the years, Monero has experimented with changing the number of signatures involved in this mixing process, simultaneously, allowing users to specify a desired number.
In 2019, however, a standard monoro transaction was defined, adding 10 signatures to each transaction group and combining 11 signatures in total.
Another feature that contributes to Monero's privacy is Stealth Addresses, which allows users to publish an address that automatically creates multiple unique accounts for each transaction.
Using a secret “view key”, the owner can then identify their received funds while their wallet can scan the blockchain to identify any transactions with that key.
Launched in 2017, Ring Confidential Transactions hides the amount users exchange in transactions recorded on the blockchain. In fact, RingCT makes transactions that can have many entries and exits, preserving anonymity and protecting against double spend.