A new cryptocurrency is created every day, or at least that's how it feels. However, not all non-Bitcoin cryptocurrencies have their origins in 2017 and beyond...
Take Monero (XMR), for instance, a cryptocurrency that, in fact, started back in 2014 and has provided key advantages in the field of privacy.
This article explains the key ideas, features, advantages, and challenges facing Monero in a competitive cryptocurrency world.
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. 1
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 and the amount of every transaction.
Many might now wonder: was Bitcoin not intended to be anonymous? Yes, but the reality is seemingly different...
Bitcoin is known for its anonymity, but there are limits to the privacy 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.
Monero is based on the so-called ring signatures and stealth addresses, which helps conceal the sender's and recipient's identity. 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 to link a user and a signature together.
Monero mixes all its coins with every transaction, which is something that other privacy cryptocurrencies, e.g., Dash (DSH) and Zcash (ZEC), do not have. 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 a perception that something is hidden.
Monero removes the suspicion as all coins are mixed and information is concealed automatically. Users looking to remain anonymous seem to be better off with Monero.
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 shows the transaction history. This means that coins can be associated with certain events, also negative ones, such as theft. These coins could become less desirable.2
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.
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 Monero 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 keep decreasing from then onwards.4
Monero (XMR) has seen its fair share of volatility, just like other cryptocurrencies. Obviously, its price was low when it started out at about a quarter of dollar ($0.25) in January 2015.
Monero also enjoyed a huge spike in 2017, similarly to Bitcoin and other cryptocurrencies. In May 2017, the price spiked up to about $65 before the next impulsive price action to above the $150 mark in August.
Just a few months later, the uptrend continued strongly, and the price managed to reach $475 in December 2017. This is currently the all-time high, and the price has been correcting lower ever since, building a retracement that took the price back to $200.
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 CFDs in Monero! 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 – no downloads necessary – with MetaTrader WebTrader!
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 way of how traders can forecast future price movements.
Make sure to check out our insightful educational articles on chart analysis, technical analysis, fundamental analysis, and risk management to be better prepared for making trading decisions.
We also most certainly recommend opening a Demo account first to test your trading plans and strategies.