One of the basic precepts of blockchain technology is to provide users with unbreakable privacy. Bitcoin, as the first decentralized cryptocurrency, relied on this premise to market itself to a wider audience that then needed a virtual currency free of government intervention.
Unfortunately, along the way, Bitcoin proved to be riddled with several weaknesses, including non-scalability and mutable blockchain. All transactions and addresses are written on the blockchain, making it easier for anyone to connect the dots and reveal users’ private details based on their existing records. Some government and non-government agencies are already using blockchain analytics to read data into the Bitcoin platform.
These flaws have caused developers to look for alternative blockchain technologies with improved security and speed. One such project is Monero, usually represented by the ticker XMR.
What is Monero?
Monero is a privacy-oriented cryptocurrency project whose primary goal is to provide better privacy than other blockchain ecosystems. This technology shield protects user information using stealth addresses and ring signatures.
Stealth address refers to the creation of a unique address for an individual transaction. You cannot pin two addresses to a single transaction. The coins received go to a completely different address, making the whole process unclear to an outside observer.
Ring signature, on the other hand, refers to the mixing of account keys with public keys, thus creating a “ring” of multiple signers. This means that a monitoring agent cannot link a signature to a specific account. Unlike cryptography (mathematical method for securing cryptographic projects), ring signature is not a new kid on the block. Its principles were explored and recorded in a 2001 paper by the Weizmann Institute and MIT.
Cryptography has certainly won the hearts of many developers and blockchain enthusiasts, but the truth is that it is still a nascent tool with a handful of uses. Because Monero uses the proven Ring signature technology, it has stood out as a legitimate project worth adopting.
Things you need to know before starting to trade with Monero
Monero market
The Monero market is similar to that of other cryptocurrencies. If you want to buy it, Kraken, Poloniex and Bitfinex are some of the exchanges to visit. Poloniex was the first to adopt it followed by Bitfinex and finally Kraken.
This virtual currency appears mainly linked to the dollar or other cryptocurrencies. Some of the available pairings include XMR/USD, XMR/BTC, XMR/EUR, XMR/XBT and many more. The trading volume and liquidity of this coin register very good statistics.
One of the great things about XMR is that anyone can participate in mining as an individual or by joining a mining pool. Any computer with significantly good processing power can mine Monero blocks with a few hiccups. Don’t bother looking for ASICS (Application Specific Integrated Circuits) which are currently required for Bitcoin mining.
Price volatility
Despite being a formidable cryptocurrency network, it is not that special when it comes to volatility. Virtually all altcoins are extremely volatile. This should not worry any avid trader, as this factor is what makes them profitable in the first place: buying when prices are down and selling when they are trending up.
In January 2015, XMR was at $0.25, then it jogged a bit to $60 in May 2017 and is currently above $300. The Monero coin recorded its ATH (all-time high) of $475 on January 7 before starting to fall alongside other cryptocurrencies to $300. At the time of writing, virtually all decentralized currencies are in a price correction phase with Bitcoin teetering between $10-11,000 from its glorious ATH of $19,000.
Fungibility and adoption
Thanks to its ability to provide reliable privacy, XMR has been adopted by many people making its coins easily replaceable with other coins. In simple terms, Monero can easily be exchanged for something else.
All Bitcoins on the Bitcoin Blockchain are recorded downwards, and therefore when an incident such as a theft occurs, all the coins involved are defunct, so they are not exchangeable. With monero, you cannot tell one currency from another. Therefore, no seller can reject any of them because it has been associated with a bad incident.
The Monero blockchain is currently one of the most trending cryptocurrencies with a significant following. Like most other blockchain projects, its future looks great, despite the looming government crackdown. As an investor, you should do your due diligence and research before trading any cryptocurrency. Whenever possible, seek help from financial experts to get you on the right track.