Monero is a privacy coin launched in 2014 by a team with a simple goal in mind. The team behind Monero say privacy and security are their biggest priorities, with ease of use and efficiency a close second. XMR aims to protect all users, regardless of whether or not they’re technologically savvy. Monero does this by making transactions private and anonymous through various features.

You’ve probably heard the negative stigma about crypto being a place for thieves and criminals who launder money. The mainstream media gives the impression that bitcoin and crypto universally are untraceable and hidden. This is simply untrue, and it’s often easy to trace payments back to their source because blockchains are transparent. Every transaction that occurs shows the addresses involved, and this data is forever stored. 

Now, the addresses might look like a long code of numbers and letters that mean nothing. But if that address can be linked to an individual, all of that individual's history is known. Think of it as an email address. It doesn’t matter whether the name of the address used that of the sender, using IP tracking and other technological tools, an address can be linked to a sender, regardless of the pseudonym used. This is why countless scammers and hackers have been caught across all industries. So in crypto, users can research the activity of an address and all its activities and then attempt to link these actions to a person. This research into monitoring what’s going on on the blockchain is called on-chain forensics.

Privacy in a transparent world

XMR is designed to obscure senders and recipients alike through advanced cryptography. They are making it anonymous and private, placing it into a subgroup of coins called privacy coins. These privacy coins hold a very special place in the cryptocurrency community. Many crypto enthusiasts, especially from the early days, are anti-establishment. They don’t trust the government and would prefer complete control over their finances; it’s kind of how they got into the space so early.

As mass adoption occurs and crypto becomes more mainstream, governments and institutions are more active and engaged, slowly taking the decentralised world of crypto and making it more centralised.

A clear example-if you want to buy crypto on an exchange like Coinbase, you must fill in your details, including your passport information and home address. Coinbase then issues you an address. At this point, all activity on that address is tracked, and the exchange knows that activity is yours. If Wes and Max are both on Coinbase, Wes sends Max some Bitcoin. Coinbase, and in theory, the authorities can see this data if they request access.

Hardcore crypto heads from the early days, and private people alike need an avenue to keep their activity for their eyes and their eyes alone. That’s the gap XMR fills.

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How does Monero achieve its key features?

Bitcoin, like electronic devices, contains a serial number, meaning that its usage can be monitored. So the history of a  bitcoin, from when it was mined to every address it has ever been sent to is forever logged on the blockchain. Electronic companies use this to verify and track the history of a product. Every iPhone in circulation has a complete record that tracks where it was made, where it was sold, and who bought it. 

XMR is entirely the opposite of this. The coin has no key identifier. This means all details about senders and recipients and the amount of XMR transferred are hidden. Picture an electronic device with no history attacked. This gives it an advantage over other privacy coins like Zcash, which are selective with what they keep private.

Monero also used a system by which past transaction outputs are selected from the blockchain at certain intervals o act as decoys, meaning that outside observers can’t tell who signed it. If Karim wants to send Bill 300 XMR, this amount can be split into multiple amounts to add a further level of difficulty for someone trying to track who is sending how much and to who.

To ensure transactions cannot be linked to one another, stealth addresses are created for every transaction and are only used once. Think of these like a ‘burner’ phone number that you only use once. 

Summary

These powerful features mean XMR has been increasingly used for illicit transactions, especially on the black and grey markets. What does this mean for the future of the product? The American government has invested millions of dollars and offered hundreds of thousands more to people attempting to break the Monero code. Privacy is an aspect that every one of us values in life, and thanks to recent events, more focused attention has been placed on the matter. 

What do you think? Do you transact in Monero? Is it a project you intend to hold? Share your thoughts below.

Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make, and only you are accountable for the results.