The promise of cryptocurrency is not only its simplicity and decentralization features.
In fact, many people turn to crypto for what it has to offer in terms of privacy and, well, it just so happens that Monero is the king of privacy in the crypto universe.
In this edition of Coin Spotlight, we’ll try to understand why some argue that Monero is what Bitcoin was intended to be.
Why privacy matters
It is a fact that criminals are no strangers to cryptocurrency.
However, the very definition of criminal can be contested here as history shows us time and time again that many people have been persecuted by protesting their government’s actions, not following certain views, or simply even because of their sexual orientations.
Monero’s privacy policies ensures that a person’s right to dissent doesn’t correlate with him or her losing their financial freedoms.
What exactly is Monero and how does it work?
Monero is the word for coin in Esperanto.
It is based on an open-source code which goes by the name of crypto note and its software allows it to stay completely private by means of using several different keys in tandem with a concealing mechanism known as ring signatures.
As such, Monero basically gives its users a way to have stealth addresses which in turn allows for the creation of randomly generated keys every time they wish to make a transaction.
By doing so, users are given a target to where they should send the money but at the same time their privacy is kept in the process as they use a randomly generated key created only for that specific effect and a ring signature which obscures the process even further.
Ring Signatures
The ring signature mechanism, to put things simple, works in a way in which whoever is looking at it from the outside can see a total pool of people from whom the money might have been sent, but without ever being able to track who actually performed the transaction.
Consequently, this means that there is no way of tracking where it came from, where it went, and how much was sent. Moreover, unlike every other blockchain, you are not able to even see his or her account balances.
Fungibility
In terms of fungibility, big name coins like
Bitcoin
Bitcoin
Bitcoin is the largest and world’s first digital currency launched back in 2009 by the entity, Satoshi Nakamoto. Being a digital currency, a defining feature of Bitcoin is that it functions without a central bank or single administrator. Rather, Bitcoin instead can be sent by peer-to-peer (P2P) networking, which is itself absent of any intermediaries.Instead of being a physical currency, Bitcoins represent pieces of digital code that can be sent and received across a kind of distributed ledger network called a blockchain. As Bitcoins are not issued or backed by any governments or central banks, it is considered to be legal tender. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called Bitcoin mining. In exchange for Bitcoin mining, computers receive rewards in the form of new Bitcoins. Over time, mining grows increasingly difficult, leading subsequent rewards to become smaller and smaller. Given the structure of code, there will only ever be 21 million Bitcoins in existence. However, as of 2020, there were already 18.3 million Bitcoins in circulation. Bitcoin Making HistorySince its launch back in 2009, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Its popularity has also contributed significantly to the release of thousands of other cryptocurrencies, that are now known as altcoins. At its inception, the crypto market was originally hegemonic, though presently the landscape contains countless altcoins.Bitcoin has also been controversial since its original launch. It has been heavily criticized for its use in illegal transactions and money laundering given its decentralized nature.As Bitcoin is impossible to trace, this makes the cryptocurrency an ideal target for illicit behavior. Critics also point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen by some as a speculative bubble given its lack of oversight.
Bitcoin is the largest and world’s first digital currency launched back in 2009 by the entity, Satoshi Nakamoto. Being a digital currency, a defining feature of Bitcoin is that it functions without a central bank or single administrator. Rather, Bitcoin instead can be sent by peer-to-peer (P2P) networking, which is itself absent of any intermediaries.Instead of being a physical currency, Bitcoins represent pieces of digital code that can be sent and received across a kind of distributed ledger network called a blockchain. As Bitcoins are not issued or backed by any governments or central banks, it is considered to be legal tender. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called Bitcoin mining. In exchange for Bitcoin mining, computers receive rewards in the form of new Bitcoins. Over time, mining grows increasingly difficult, leading subsequent rewards to become smaller and smaller. Given the structure of code, there will only ever be 21 million Bitcoins in existence. However, as of 2020, there were already 18.3 million Bitcoins in circulation. Bitcoin Making HistorySince its launch back in 2009, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Its popularity has also contributed significantly to the release of thousands of other cryptocurrencies, that are now known as altcoins. At its inception, the crypto market was originally hegemonic, though presently the landscape contains countless altcoins.Bitcoin has also been controversial since its original launch. It has been heavily criticized for its use in illegal transactions and money laundering given its decentralized nature.As Bitcoin is impossible to trace, this makes the cryptocurrency an ideal target for illicit behavior. Critics also point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen by some as a speculative bubble given its lack of oversight.
Read this Term are not entirely fungible, meaning that each coin has a recorded history from the time it was created to the present day which makes them slightly different from one another, unlike, for example, a $20 dollar bill, or a pound of silver or gold.
As such, one can determine if each coin is actually good money as it is possible to see and track down who and where they were used.
This, in turn, makes it so that users face the risk of seeing his or her coins be refused if, for example, they were previously used in criminal activities.
As for Monero, this is totally not the case as it is completely untraceable, meaning that is also in fact 100% fungible.
Decentralization
Monero is mined mostly by CPUs which means that everyone who wishes to participate is more than welcomed to do so.
By committing to such strategy, the mining power becomes even more decentralized than, for example, Bitcoin’s, which uses very expensive mining gear.
In turn, the whole network is less prone to failure and makes every single participant much more responsible for the project.
The bear case
Monero, as well as any other privacy coin, is a prime target for
regulation
Regulation
Regulation is a key attribute of any forex broker in the retail industry. When investing money with a brokerage it is important to first see if they are regulated as this affords several client protections and safeguards.The financial services industry is tightly regulated to help prevent illicit behavior and manipulation. This is not unlike any other industries with a high net worth, that rely on transparency.Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Why Regulation Matters in FXThere are several regulators globally that help police the forex industry. Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.First and foremost, regulators help ensure the filing of reports and transmission of data to help oversee and monitor the activity by brokerages. Moreover, regulators also serve as a deterrent against market abuse and malpractice by brokers. Brokers that engage in services with clients must adhere to a set of rules that ensure they are in fact authorized to provide investment activities in a given jurisdiction. Unfortunately, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, retail brokerages are also required to regularly file reports about their clients’ positions to the all requisite authorities. Brokers also typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.
Regulation is a key attribute of any forex broker in the retail industry. When investing money with a brokerage it is important to first see if they are regulated as this affords several client protections and safeguards.The financial services industry is tightly regulated to help prevent illicit behavior and manipulation. This is not unlike any other industries with a high net worth, that rely on transparency.Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Why Regulation Matters in FXThere are several regulators globally that help police the forex industry. Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.First and foremost, regulators help ensure the filing of reports and transmission of data to help oversee and monitor the activity by brokerages. Moreover, regulators also serve as a deterrent against market abuse and malpractice by brokers. Brokers that engage in services with clients must adhere to a set of rules that ensure they are in fact authorized to provide investment activities in a given jurisdiction. Unfortunately, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, retail brokerages are also required to regularly file reports about their clients’ positions to the all requisite authorities. Brokers also typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.
Read this Term. Moreover, no exchange will risk losing their operating license.
The added privacy might come with the added cost of “flagging” one’s activity on account of neither exchanges nor the IRS will be able to trace the origin of one’s funds.
The inherent irony in Monero is this: the more you try to hide your activity, the more you will stand out and while some might be ok with hidding their activities (or risk getting audited), others may not.
Wrapping up
Monero might seem shady, but it is in fact the ultimate bastion for privacy in crypto and, as we’ve pointed out, privacy matters, a lot.
In a market so uncertain and with the evergrowing fear of government regulation, the question which remains is: is the fundamental demand for these types of privacy coins exists in a way that justifies their recent price action or are they still driven by speculation?
The future will certainly tell.
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