What is Monero?

December 05, 2019 15:00 UTC
Reading time: 11 minutes

A new cryptocurrency is created every day, or at least that's how it seems at this point. However, not all non-Bitcoin cryptocurrencies have their origins in 2017 and beyond. Take Monero (XMR), for instance, a cryptocurrency that started back in 2014, and has provided key advantages in the field of privacy.

This article will define what is Monero, it will explain how Monero differs from Bitcoin, how Monero defends its privacy, the pros and cons of privacy, how new Monero coins are created, how to trade CFDs on Monero, and more!

What is Monero?

Monero is a cryptocurrency which launched in 2014. It is privacy-oriented and operates as open-source on the blockchain concept. Open-source means that the technology and software is built, tested, and improved through user collaboration. According to Monero itself, over 240 developers have contributed to the project, with 30 of them marked as the 'core' group.

Blockchain has the same technology logic used for most digital currencies: it is the underlying logic behind cryptocurrencies and provides a public ledger for all the transactions in the network. Last but not least, Monero is known for its privacy, as it was built with a lack of transparency on purpose. It was configured to hide the identity of the senders and recipients, as well as the amount of every transaction.


How is Monero Different from Bitcoin?

Bitcoin is known for its anonymity, but there are limits to the privacy that it offers. Bitcoin records both Bitcoin addresses and transactions on the blockchain, which opens the data to the public. The key point is that the addresses are not fully private, even though Bitcoin uses fake names and addresses. Why? Simply because Bitcoin addresses and transactions are recorded in the blockchain, which makes them publicly available and traceable.

Basically, this means that there is a chance that transactions may potentially be linked to a real person's identity. Monero offers more privacy than Bitcoin, as its transactions are hidden behind cryptography, which protects addresses and transferred amounts. Basically, all Monero transactions are obscured, which enhances the privacy of all of its users.


How Does Monero Defend its Privacy?

Monero is based on the so-called ring signatures and stealth addresses, which helps to conceal the sender's and recipient's identities. Ring signatures make a mixture of the user's account key with public keys from the Monero blockchain. Third parties are not able to identify which key is from the public, and which one is from the user, which removes the possibility of linking a user and a signature together.

Monero mixes all of its coins with every transaction, which is something that other privacy cryptocurrencies (e.g.Dash (DSH) and Zcash (ZEC) ) do not have. However, Dash does combine transactions to reduce the chance that any one user's identity will be identified. Zcash also offers users a choice to withhold their identities, and does not mention the transaction value.

The main difference is that Zcash's privacy settings are optional, whereas Monero is private by default. Other cryptocurrencies do not mix by default, which creates suspicion when coins are mixed, due to the perception that something is hidden. Monero removes the suspicion, as all coins are mixed and the information is concealed automatically. Users aiming to remain anonymous appear to be better off with Monero.


What Are the Pros and Cons of Privacy?

High levels of privacy offer multiple benefits. Each Monero coin or unit is interchangeable, like the currency used at your local store. You simply do not care if you receive coin X or coin Y, they are the same. You might be wondering: is this not valid for all cryptocurrencies?

You might be surprised to find out that the answer is no. Bitcoins are recorded on a blockchain which displays the transaction history. This means that coins can be associated with certain events, as well as negative ones, such as theft. In these instances, these coins could become less desirable.

This is where Monero makes a key difference due to its emphasis on privacy. This means that two XMR coins cannot be distinguished from each other based on their transaction history. That is at the same time also a challenge for Monero as its strength in the field of privacy has made it a popular coin for questionable marketplaces potentially connected to drugs and gambling.


How Are New Monero Coins Created?

The creation of new Monero coins is completed via the "mining" process, which is a usual way for cryptocurrencies to reward participants in recording blockchain transactions. The time needed for Monero to mine (complete) one block is approximately two minutes. Monero offers the opportunity to mine coins as well, but with a few key differences.

Monero mining does not require specific hardware and can be applied on all leading platforms including Windows, Android, Linux, and MacOS.3 It uses a proof-of-work (PoW) algorithm that was designed to make sure that it was accessible to a wider range of processors. This means that mining is open to different parties, not only large mining pools that solely focus on mining coins. This is one of the main advantages of mining

When compared to other altcoins: the process can be completed on a standard computer, rather than on one that requires dazzling speeds. You might be wondering what the reward for mining is. Miners are offered a 'permanent block reward', which means that there will always be a minimum reward of 0.3 XMR.

The main advantage of mining new coins is simple: it offers miners an incentive which ensures that enough participants are participating in the blockchain process. Relatively speaking, 0.3 XMR will constitute a smaller part of the total XMR in circulation, which means that it is a disinflationary cryptocurrency. By 2022, the inflation will be approximately 1%, and it will likely keep decreasing from then onwards.


What is XMR Price Movement Like?

The price movement in the Monero (XMR) cryptocurrency has been hugely volatile, especially in recent years. In early 2017, Monero traded around the $12 price level. By August 2017, the cryptocurrency was traded at a high of $160. It then spent the rest of the year surging higher to an all-time high of $469.

Unfortunately, the cryptocurrency unravelled in 2018, as did many other cryptocurrencies. Monero (XMR) spent the year trending lower closing the year out at just $49.71, only a few dollars above $37.06 - Monero's low of 2018.

The volatile price swings are evident in the price chart of Monero (XMR), as shown below:

Source: Admiral Markets MT5 Supreme Edition, XMRUSD, Weekly - Data range: from January 01, 2017, to November 21, 2019, accessed on November 21, 2019, at 13:00 pm BST. - Please note: Past performance is not a reliable indicator of future results.


Is it Possible to Trade Monero?

Yes, absolutely! It's not just about long-term investing in cryptocurrencies. You can also trade cryptocurrency CFDs – short-term. Admiral Markets offers the ability to trade CFDs in Monero, where you can trade the derivative of this highly popular cryptocurrency on the world's leading trading platforms – MetaTrader 4 or MetaTrader 5. You can also trade direct in your web browser – with no downloads necessary – via MetaTrader WebTrader!


What's Next For Monero in 2020?

Due to its emphasis on privacy, Monero seems to have found a solid niche in the world of cryptocurrencies. But how and when that will impact the price remains to be seen. Analysing the charts is just one method of how traders can forecast future price movements.

Source: Admiral Markets MT5 Supreme Edition, XMRUSD, Daily - Data range: from November 19, 2018, to November 21, 2019, accessed on November 21, 2019, at 1:05 pm BST. - Please note: Past performance is not a reliable indicator of future results.

The first half of 2019 has started off favourably for Monero investors with prices pushing back above the psychologically relevant barrier at 100 USD. But over the second half of the year, the cryptocurrency gave back most of those gains, but still holding more than 20 % above its yearly opening price as of November 2019.

Nevertheless, the sequence of falling highs and lows is clearly visible on a daily chart and would continue with a sustainable break below 51.00 USD, darkening the technical outlook for the cryptocurrency further.

A sustainable break lower continues the sequence of falling highs and lows, leaving Dash vulnerable to a drop significantly below 50.00 USD, activating 37.00 USD as a next target on the downside in 2020.

In fact, this bearish outlook is probably even more true with Monero's status as being one of the most anonymous digital asset in the marketplace and continuing to suffer at the hands of US regulators.

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