Monero is a privacy-oriented cryptocurrency that was launched in April of 2014. Unlike many cryptocurrencies that are derivatives of Bitcoin, Monero is a singular entity that has unique algorithmic codes focusing on obscuring the user’s identity.
Monero means coin in Esperanto; it is a variation of one of the names initially proposed for this cryptocurrency: Bitmonero. Monero saw a fast growth and was the best performing cryptocurrency of 2016; each Monero was worth around 50 cents at the beginning of that year and was worth 12$ at the end of it. This was mainly a result of Monero’s ability to enhance users’ privacy, something that even cryptocurrencies like Bitcoin has had some problem in fulfilling.
Monero relies on several techniques to enhance the privacy of its users, one of which is ring signatures that aim to hide the identity of the sender and the receiver. Ring signatures operate by mixing a user’s account key with public keys from Monero’s blockchain, forming a ring of possible signers. This prevents outside observers from accurately detecting the user that provided the signature.
The blockchain is a digital ledger that publicly records and displays the transactions made by a certain cryptocurrency.The ring signatures method allows to bypass the publicity imposed by the blockchain of Monero by using elements from the blockchain itself.
Even though many cryptocurrencies allow users to mix coins, Monero makes this a default operation. Choosing to mix coins give the impression that the user is trying to hide something, but when it’s done automatically by the system, it helps to eliminate suspicion from all users.
Another technique that Monero relies on is stealth addresses. Stealth addresses are randomly generated addresses on the behalf of the recipient that are created for each new transaction. The recipient will publish a single address but the transactions they receive will reach to separate and unique addresses, which prevents the transaction from being publicly linked to both the sender and the recipient.
Monero also offers fungibility, which means that each individual unit of currency can be substituted by another, or that all the units have equal values. This is a great benefit when compared to cryptocurrencies like Bitcoin.
The transaction history of each individual Bitcoin is recorded on the blockchain, and coins that have been involved in undesirable transactions – like theft – can be rejected by merchants. This is not the case with Monero: because transactions cannot be traced, no Montero unit is different from another and therefore will not be rejected by merchants.
