What is Monero?
Monero (XMR) is a decentralized, blockchain-based cryptocurrency. It is very similar to Bitcoin but with more focus on privacy and mining. Monero utilizes ring signatures and stealth adresses to make cover up origins, amounts and destinations of transactions.
Monero was introduced in 2014. The main focus of the currency is to improve anonymity of users. Transactions on the blockchain cannot be linked to a particular user or real-world identity. With Bitcoin on the other hand, every transaction is linked to users through public adresses. The Monero blockchain is less transparent because transactions can be completely anonymous for third parties.
How does Monero work?
Monero is very similar to Bitcoin from a technical aspect. Just like Bitcoin, Monero uses proof of work as a consensus mechanism. However, there are some major differences between the two currencies. The hash algorithm used by Monero is called CryptoNight, which is different to Bitcoin’s SHA-256. Mining on CryptoNight is less computationally intensive and more memory intensive. This means that traditional ASIC hardware, which are computers only built for cryptocurrency mining, are not better for mining than traditional computers when mining Monero. Normal users can successfully mine Monero without having to purchase expensive hardware.
Monero focuses on privacy. Monero puts transactions into groups. They disappear in the large group and transactions can only be assigned to the group. This makes the transaction more anonymous because you can’t find out the public adress of a certain transaction. RingCT is a function that lets users hide the amount of a transaction. This prevents data mining and traffic analysis. However, Monero offers users a seperate key to make transactions on the blockchain visible for everybody.
Is Monero used for illegal activities?
Monero is an anonymous and better mineable version of Bitcoin. Through laws and processes like KYC (know your customer) exchanges know the identities of their clients very well, which means that transactions of cryptocurrencies like Ethereum or Bitcoin can be traced to fairly well through public adresses. With Monero, transactions disappear in a large pool of transactions and can’t be traced. This makes it more likely to be used by criminals. There are many shops in the darknet who support Monero because it is safer to use for criminal activities than Bitcoin or Ethereum.