In this guide, we will answer the question, what is Monero, as well as cover how a cryptocurrency transaction works in general.
Monero, in the most basic terms, is a form of cryptocurrency similar to Bitcoin. However, it has a number of features that differentiate it from Bitcoin. One of the most exciting is that all of the transactions that happen with Monero are completely private and untraceable. This will make it very appealing to those who value their privacy. We will cover the cryptocurrency in detail in this guide.
You may have heard of CryptoNote. CryptoNote is the name of the application layer protocol at the core of several cryptocurrencies. It is very similar to the application layer that runs Bitcoin but there are also some major differences. The first incarnation of CryptoNote was called ByteCoin and it was launched in 2012.
ByteCoin definitely showed promise, but there were some things going on that concerned people. One of the things was that most of the coins were already published or mind. So the blockchain network of ByteCoin was split and new coins in that new chain were called BitMonero which eventually became just Monero. Monero means coin in the language Esperanto.
The project is open source and funded using a crowd funding model. There are 7 developers working on the Monero project. Most of them are known only by their usernames.
Let’s take a look at some of the things that make Monero so different and special among cryptocurrencies. The properties that it has, thanks to the CryptoNote algorithm, differentiates it from many of the other altcoins out there.
The first thing that you need to be aware of is that you have all the control when it comes to Monero. You also have complete privacy. No one will be able to know what you spent your money on, or more accurately, who it was that spent money on a particular thing.
Another thing about it that makes it different is that it is interchangeable with other goods are a sense of the same type. This property is called fungibility.
To demonstrate this, suppose that you borrowed $100 from your boss. He gave you $100 bill. You do not need to return the exact same $100 bill to your boss. In fact, paying him back might be with two fifties or five twenties or even a few hours of work. That means that this particular asset is fungible. As you can imagine, this might not work as well if you borrowed someone’s car.
To demonstrate why it is different, let’s quickly go over how the transaction transactions within a cryptocurrency work. Each transaction has an input and output. For example, if you were to send a cryptocurrency to a friend you would need to first buy the coins with another asset such as cash, and then send it to that friend. You buying the coins would be the input and your friend receiving them would be the output.
However, suppose that you already had cryptocurrency to spend. That means that the output of you receiving those coins would also be the input of you sending them. You may be pulling from several different transactions in order to make the one transaction. In simplified terms, if someone sent you $10, another person sent $20 and another person sent $5, then 3 transactions would go into you sending someone $35.
The way the Bitcoin works in particular, is that transactions happen very publicly. Everyone can see the input and the output. Each Bitcoin user has a private key and the public key is made from their private key. So, if you sent that friend Bitcoin to his public key he would still receive them and everyone could see it.
What this means is, everyone on the blockchain will know what transaction someone has made and how much Bitcoin they actually own. So, Bitcoin is definitely a decentralized currency and quite useful, but it is not private at all.
The people behind Monero believe that for a cryptocurrency or electronic cash system to be ideal it should fulfill three things: first it should be electronic, second it should be decentralized and peer-to-peer, and third it should be private. Bitcoin only fills the first two of these requirements, but Monero fulfills all three.
The technical explanation of how this privacy works is a little more complex, but you can find some explanations online if you are really curious how it works.
Obviously, you cannot avoid comparing it to Bitcoin. Bitcoin was the first cryptocurrency and everything is compared to it. Bitcoin is completely open and transparent, which can be a good thing, but it also makes privacy impossible.
On the other hand, it is completely private and every transaction is secret. Monero can definitely be a little bit more technical than Bitcoin, especially for beginners.
While Bitcoin may be the big thing right now, there is no doubt that those who are looking for privacy will turn to cryptocurrencies like Monero. Monero has been fascinating to follow because it is not based on Bitcoin, but it is growing faster than many of the currencies that are. The future of Monero looks very good, and investors should consider buying Monero for the future, as well as using Monero for transactions that they prefer to keep private, which is really something that everyone should be doing. While Bitcoin may be the giant in the field of cryptocurrency right now, there is no doubt that Monero has a great deal to offer anyone wishing to use cryptocurrency with a little less transparency.