Blockchain continues to make news.
Ten years ago, cryptocurrencies like Bitcoin and Ethereum had next to no monetary value and little else were used as digital collectibles. In 2010, Bitcoin, which hit highs of over $ 20,000, traded for less than $ 0.003 per token. The first transaction in Bitcoin, as is well known, took place when two enthusiasts exchanged 10,000 Bitcoins (now valued at over 100 million US dollars) for two great Papa Johns
((PZZA) – Get the report Pizza.
Fast forward to today. Developers and entrepreneurs have created hundreds of cryptocurrency projects using blockchain, the technology format behind Bitcoin. Their market is worth hundreds of billions of dollars even after several downturns, indicating that this is not just a short-term bubble. There’s something stable here (even if that “something” isn’t quite worth $ 22,000 per Bitcoin token).
New projects are constantly coming into this market in the hopes of finding a new perspective on blockchain’s ability to create unique digital assets. In 2014, one of those participants was Monero. Here’s why.
What is Monero?
Let’s back up a second. To understand what Monero is, we must first understand the cryptocurrency. In order to:
What is cryptocurrency?
Cryptocurrency is digital, private / decentralized money. To understand cryptocurrency projects like Bitcoin and Monero, you need to understand both aspects of this description.
Digital money
Digital money is a currency that only exists online. It was never printed, has no note anywhere, and does not take any other physical format. It only exists as an entry in a database.
This is … actually nothing new. Most American consumers spend their lives exchanging money that is almost entirely digital, given that 91% of the US dollar is a digital currency itself. At the time of writing, the U.S. economy had approximately $ 18.5 million in cash in circulation and cash equivalent in circulation and approximately $ 1.7 trillion in actual physical print.
Most of the money in the 21st century only exists in a computer. In practice it will never be anything other than paying in an account, even if in theory you could always pull any of it out in physical bills.
What makes cryptocurrency different is that it is only digital. It’s entirely a blockchain, an encoding format that allows programmers to create unique digital assets that cannot (for the first time) be copied endlessly.
Private / decentralized
If most of the currencies are digital in practice, if not in theory, then decentralization is what really separates government issued currency from cryptocurrency.
Cryptocurrency is issued by private organizations. As with projects like Bitcoin, it is often completely decentralized, which means that there is no central owner of the money. Nobody chooses to release more or less at any given time, nobody controls where it goes.
Unless a currency is decentralized, it works much more like a government backed currency. An organization can decide at any time to issue a new currency or to withdraw a currency from circulation.
Until now, centralized gatekeepers were essential for virtual currencies to work. When there is $ 1,000 in a bank account, there’s nothing technological about stopping someone from making themselves a millionaire by just adding a few zeros to that account. Any payment and credit system in the world would treat this person as if they had $ 10 million in their name. Central oversight prevents this from happening between federal law, the FBI, the IRS, and the banking system. (This is not new either. Even before computers, the mistake kept someone from typing those extra zeros into a bank book with ink and paper.)
This is necessary because someone who could endlessly duplicate money would render it worthless. Cryptocurrency, through a combination of cryptography and the format of blockchain databases, enables computers to organically exercise this control and solve the problem of duplication without the need for central authority.
This is cryptocurrency. It’s money that only exists online, based on the blockchain coding format and either privately organized or (more often) completely decentralized.
Back to: What is Monero?
So Monero is a cryptocurrency that was introduced in 2014. Like Bitcoin, it is an entirely digital form of money. This means that unlike many blockchain tokens, running or creating a service is not part of any larger project.
Monero is a privacy-oriented cryptocurrency. A Monero token does not publicly indicate who it belongs to, who spends it, or who receives it. Even the amount of a particular transaction is kept hidden from the public … and by public we also mean the founders of the Monero project themselves. This information is locked in the blockchain database. If you don’t have the key to open a particular entry, all you will see is garbled code.
Wait, I thought bitcoin was the private currency
We all did.
Contrary to its reputation (and widespread adoption by pirates, scammers, and thieves), Bitcoin is not and never was private. Blockchain uses what is known as a “public ledger” for its databases. This means that everyone can see what is happening in each block of data. This is key to the security of the format, but it also means that the default privacy setting is zero.
With Bitcoin, anyone can view a record of every account that every single Bitcoin has owned, sent, and received for the entire existence of that token. Now users can forge their account information to hide their identity. However, the account itself is a public record.
This is how Monero tries to differentiate itself from others. It obscures any record of transactions and ownership, and in particular relies on a process known as “ring signature”. This signature is a key that the blockchain database generates during a transaction. Essentially, when a user receives a ring signature, it means that the transaction has been verified as legitimate by the database without revealing the user who verified it.
Monero generates ring signatures for one-time use. Even if someone could look up the signature that authorized a transaction, they would only get worthless data.
How much is Monero worth?
A lot of.
The privacy-oriented approach to cryptocurrency worked. Since its inception, Monero has climbed the ranks and was the eleventh most important cryptocurrency in the world at the time of writing. It sold for $ 92 per token, with all tokens in circulation having a total value of more than $ 1.5 billion.
Problems with Monero
As you can probably guess, Monero’s success comes with a number of problems.
While Bitcoin was still the currency of choice for criminals at the time of writing, Monero has gained increasing acceptance within this community. Outlets like Reuters have noted the “growing trend for criminals to seek alternatives to Bitcoin,” especially as law enforcement becomes more sophisticated when it comes to tracking the currency’s publicly logged transactions. This has resulted in more and more illegal online markets and hackers accepting Monero as a means of payment.
It has also led to a practice known as “cryptojacking”.
Creating new Monero tokens, a process known as “mining”, requires far less processing power than creating new tokens for Bitcoin. The latter is actually notorious for its exorbitant loads on computers and electricity; By one estimate, Bitcoin uses as much electricity as the nation of Ireland.
Monero is trying to fix this through a simplified process that allows individual computers to look for new tokens more efficiently. However, this has also made it easier for hackers to install illegal mining malware on the laptops and PCs of unsuspecting users. It is an issue that is not unique to the Monero Project, even if it has gained greater notoriety due to the success of Monero.
Comments are closed.