Monero: What Is It And How Does It Work?

Cryptocurrencies have gained widespread popularity in recent years, but concerns over privacy and anonymity have prompted the development of privacy-focused alternatives. One such cryptocurrency is Monero, which offers enhanced privacy features that make it nearly impossible to trace transactions.

Monero, a privacy-focused cryptocurrency, was launched in 2014 and has garnered substantial interest since its inception due to its unique blockchain technology that ensures transaction details and amounts remain anonymous. Unlike Bitcoin, Monero can be mined using just a simple CPU, without requiring specialized hardware.

While its distinctive features have made it popular for illicit activities, including on the dark web, in this guide, we will examine Monero's various functions, advantages, and drawbacks, as well as highlight some platforms where it can be purchased.

🦄 Symbol XMR
🚫 Initial Coin Offering (ICO) Price No ICO, Monero is a cryptocurrency that is not pre-mined
🌐 Platform Independent, runs on its own blockchain
⛏️ Consensus Monero uses Proof of Work (PoW)
💰 Total Supply Monero does not have a maximum supply. It is, however, a disinflationary crypto currency, which indicates that the XMR inflation rate is decreasing over time while remaining positive
💰 Circulating Supply ~18.4 million XMR (as of April 2023)
💸 Use Case Monero is primarily used for private and secure transactions, as well as a means of payment and store of value
🔥 Token Burn N/A (Monero does not have a token burn mechanism)

How Monero (XMR) works?

Monero Overview
Monero Overview

Monero (XMR) is a cryptocurrency that uses a decentralized blockchain to keep track of transactions. It is designed to be a private and secure way of transferring value, with a focus on preserving the anonymity of its users.

Ring Signatures of Monero: How They Work in Practice

One of the main features of Monero is its use of ring signatures and stealth addresses to provide privacy. Ring signatures allow a user to sign a message on behalf of a group, without revealing which member of the group actually signed it. This means that Monero transactions are unlinkable and untraceable, as it is not possible to determine which address sent a particular transaction.

Stealth Addresses of Monero: How They Work in Practice

Stealth addresses, on the other hand, provide privacy by allowing the recipient of a transaction to create a new address for each transaction they receive. This makes it difficult for third parties to link different transactions to the same recipient.

Another important feature of Monero is its use of mixins. A mixin is a randomly selected input from the blockchain that is added to a transaction to increase its privacy. When a transaction is made, several mixins are included to make it more difficult for outside observers to detect which input and output addresses are involved in the transaction.

Monero also employs a dynamic block size limit, which allows the blockchain to adjust to changes in demand for the network. This helps to prevent congestion and keeps transaction fees low.

Overall, Monero is designed to provide users with a high degree of privacy and security when sending and receiving value. Its features make it difficult for outside observers to determine the identities of users or the details of their transactions, making it a popular choice for those who value their privacy.

Monero: Tech Specs

Outlined below are some essential technical details regarding Monero:

  • Proof-of-Work (PoW): Monero utilizes RandomX, a CPU-friendly and ASIC-resistant POW algorithm created by members of the Monero community. The algorithm was developed to prevent the use of mining-specific hardware. Previously, Monero utilized CryptoNight and its variations. More detailed information can be found in the Monero GitHub repository;
  • Emission Curve: To ensure that there is always an incentive to mine and protect Monero, the emission is unlimited. There are two primary emissions: the first, main curve, which yielded ~18.132 million coins and ended in June 2022, and the tail curve, which kicks in once the main emission is completed and translates to <1% inflation decreasing over time (Tail Emission);
  • Blocks: A new block is created approximately every two minutes. There is no maximum block size; instead, the system has a dynamic block size and a block reward penalty to ensure dynamic scalability;
  • Main Privacy-Enhancing Technologies: RingCT Stealth Addresses Ring Signatures Transactions over Tor/I2P Dandelion++.

How to buy Monero

There are several ways to buy Monero (XMR), including:

  1. Cryptocurrency exchanges: Monero is available on many popular cryptocurrency exchanges such as Binance, Coinbase or KuCoin. To buy Monero on an exchange, you will need to create an account, verify your identity, and fund your account with fiat currency or other cryptocurrencies. Once your account is funded, you can place an order to buy Monero.
  2. Peer-to-peer marketplaces: Platforms like LocalMonero allow you to buy Monero directly from other users in a peer-to-peer (P2P) marketplace. This can be a good option if you prefer to buy Monero anonymously, but be aware that prices on P2P marketplaces may vary widely.
  3. Monero ATMs: Monero ATMs are becoming more common, particularly in larger cities. These machines allow you to buy Monero with cash or other cryptocurrencies, and some also allow you to sell Monero for cash.
  4. OTC trading desks: Over-the-counter (OTC) trading desks allow you to buy and sell Monero directly with a broker, without having to use an exchange. This can be a good option for high-volume trades or for those who prefer a more personalized trading experience.

Before buying Monero, it's important to do your research and understand the risks associated with cryptocurrency investing. You should also make sure to store your Monero securely in a wallet that you control the private keys to, rather than leaving it on an exchange.

How To Store Monero Securely

As privacy is a core focus of Monero, it is essential to choose a secure wallet to send, receive and store your coins. An ideal option is a hardware wallet, which ensures your seedphrase is never exposed to potential threats.

The Trezor Model T is an excellent open source hardware wallet that supports Monero, as well as numerous other cryptocurrencies.

To use it with Monero, simply download the Monero GUI, run monerod to synchronize your blockchain, run monero-wallet-gui, choose "Create a new wallet from hardware" and follow the on-screen instructions.

For more information, you can read our Trezor Model T Review or take advantage of our special price offer by purchasing directly from the official Trezor website:

👉 Click here to get the Trezor Model T from the official Trezor website. Apply code BLOCKDYOR during checkout for an exclusive 10% discount.

Monero Price and Market Cap

Hodlers and Investors have been delighted by the recent price surge of Monero (XMR), especially in light of the crypto winter's negative impact on other altcoins.

The XMR's strong recovery is a promising indicator of its practical use cases. Keep track of XMR's constantly evolving price and market capitalization through our real-time widget.

Monero Future

Monero's development team and community are constantly working on improving the privacy and security of the cryptocurrency. Monero's privacy features are highly valued by its users, and the development team aims to further enhance these features.

Additionally, Monero introduced in the past years new technologies such as atomic swaps, which could increase its interoperability with other cryptocurrencies.

Another interesting addition is the recent hard fork in 2022 (Monero v0.18), which introduced many new features, some of them are the following:

  • Bulletproofs+: reduced the transaction size and increased the transaction speed);
  • Updated Ring Signatures: the number of signers for a ring signature increased from 11 to 16 for every transaction.

In terms of market performance, Monero has shown steady growth over the years, and its market capitalization continues to increase. However, like all cryptocurrencies, its value is subject to market volatility and regulatory developments.

Overall, Monero's future it's definitely promising, with a dedicated development team and a strong community backing the project.

Monero Pro & Cons

Pros Cons
✅ Privacy-focused, with strong encryption techniques to obfuscate transactions ❌ Somewhat limited adoption compared to more mainstream cryptocurrencies
✅ Decentralized and community-driven development ❌ Can be slower and more resource-intensive to use than other cryptocurrencies
✅ Resistant to ASIC mining, which helps maintain network decentralization ❌ Monero's privacy features have led to some regulatory scrutiny and criticism
✅ Ring signatures and stealth addresses make it difficult to trace transactions and balances ❌ Monero's privacy features can also make it attractive to criminal elements
✅ Transactions are private by default, unlike Bitcoin and other cryptocurrencies ❌ Difficulty in tracking transactions could make it challenging for businesses to comply with anti-money laundering regulations
✅ Monero's emphasis on privacy makes it more fungible, since all coins are equal and not traceable to specific transactions ❌ Monero's privacy features can also make it more difficult to recover lost or stolen funds

Bottom line

Monero (XMR) is a privacy-focused cryptocurrency that provides strong anonymity features and a fair distribution model.

While its privacy features make it popular among those concerned with financial privacy, they also present potential regulatory challenges and limitations for trading and spending.

Frequently asked questions (FAQ)

What is Monero?

Monero is a privacy-focused cryptocurrency that aims to provide anonymity to its users. Unlike Bitcoin and other cryptocurrencies that use a public ledger to record transactions, Monero uses a private ledger, making it nearly impossible to trace transactions. Monero also uses a different mining algorithm than Bitcoin, which makes it more accessible to average users and more resistant to ASIC mining.

How can I buy Monero?

Monero can be obtained through cryptocurrency exchanges, mining, or by accepting it as payment for goods or services.

Is Monero truly anonymous?

Monero is considered to be one of the most anonymous cryptocurrencies available today. It uses several privacy features, such as stealth addresses and ring signatures, to keep transactions private and untraceable. Monero's anonymity makes it a popular choice for those who value their privacy, including activists, journalists, and whistleblowers. Additionally, Monero can be used for various online transactions, including the purchase of goods and services, as well as for investment purposes.