What is Monero? (XMR) | Monero Explained for Beginners
What is Monero?
You may have heard that using Monero enables you to keep your transactions on the blockchain confidential and untraceable. Monero (XMR) was one of the first cryptocurrencies to feature cryptography that offered real privacy. Monero’s key differentiator being the ability to allow users to send and receive transactions without making this data available to anyone examining its blockchain.
Monero’s Origin Story
Monero has a more unusual origin story in comparison to other major cryptocurrencies and projects. There have been plenty of unknown developers working on the project, some accusations of fraud, and several rebrands of the project thrown in for good measure.
This began back in 2013 following the release of the CryptoNote whitepaper, written by Nicolas van Saberhagen. The paper drew notice in the cryptography community, particularly from renowned Bitcoin developers Andrew Poelstra and Gregory Maxwell. They went on to write their own paper outlining implications of the CryptoNote technology on cryptocurrencies. CryptoNote technology was used to create the first iteration of Monero, called ‘Bytecoin’. This project didn’t last very long following allegations of the supply being tampered with by its developers. Monero was launched in April 2014 as ‘Bitmonero’ – through the founder, thankful for today. Monero was born when the Monero Core Team forked the CryptoNote project, and supporters followed. Since then, this Core Team has provided oversight to the Monero project. Monero makes each of its development decisions open and available for public discussion, with every developer meeting published online.
A Different Kind of PoW
In a similar way to Bitcoin, Monero is a Proof of Work (PoW) project. What is different however, is that Monero uses an ASIC-resistant and CPU-friendly PoW algorithm created by its community members – called RandomX. The goal of Monero is to discourage the use of specialized hardware for mining its token, XMR, whilst maintaining decentralization of the network. To keep the network safe, Monero offers miners incentives. An initial 18.1 million XMR tokens were made available as rewards for keeping the network secure. From May 2022 the rewards that miners will receive will be fixed at 0.6 XMR per block mined.
How Does Monero Maintain Privacy?
Simply put, it obscures user data on the blockchain, making its users more difficult to trace. Monero uses ring signatures to mix the digital signature of the individual making an XMR transaction with the signatures of other users before recording it on the blockchain. Should someone look at the data, it would appear as if the transaction was sent by any one of the signers. As of 2019, however, a default Monero transaction is now set, adding 10 signatures to every transaction group and mixing 11 signatures in total. Another feature that contributes to keeping Monero transactions private is stealth addresses. These enable users to publish one address that automatically creates many one-time accounts for every transaction. Using a secret “view key,” the owner can then identify their incoming funds as their wallet can scan the blockchain to identify any transactions with that key. In 2017, Monero implemented Ring Confidential Transactions (RingCT). This allows the amount given in a transaction recorded on the blockchain to be hidden. In effect, RingCT makes it so transactions can have many inputs and outputs, while preserving user anonymity and protecting against double spends.
Monero has made several large improvements since launch. This year they are looking to decrease the size of transactions, so that they are faster for their wallets to generate and networks to verify. They also plan on implementing layer two solutions for even more speed and scalability.