One of the basic rules of blockchain technology is to provide users with unshakable privacy. As the first ever decentralized cryptocurrency, Bitcoin relied on this premise to market itself to a broad audience that then needed a virtual currency free from government interference.
Unfortunately, Bitcoin has proven to be fraught with several flaws along the way, including a lack of scalability and a volatile blockchain. All transactions and addresses are recorded on the blockchain, making it easy for anyone to connect the dots and reveal users’ private information based on their existing records. Some government and non-government agencies are already using blockchain analytics to read data on the Bitcoin platform.
Such shortcomings have led developers to seek alternative blockchain technologies with improved security and speed. One such project is Monero, which is commonly represented by the ticker XMR.
What is Monero?
Monero is a privacy-focused cryptocurrency project whose main goal is to provide better privacy than other blockchain ecosystems. This technology protects users’ information using Ring’s hidden addresses and signatures.
A hidden address refers to creating a single address for a single transaction. No two addresses can be attached to the same transaction. The resulting coins go to a completely different address, making the whole process incomprehensible to an outside observer.
Ring signature, on the other hand, refers to mixing account keys with public keys, thus creating a “ring” of multiple signers. This means that the monitoring agent cannot associate the signature with a specific account. Unlike cryptography (a mathematical method of protecting crypto projects), the ring signature is not new to the world. Its principles were researched and documented in a 2001 paper by the Weizmann Institute and MIT.
Certainly, cryptography has won the hearts of many blockchain developers and fans, but the truth is that it is a nascent tool with little use. Since Monero uses the already tested Ring signature technology, it has distinguished itself as a legitimate project to adopt.
What you need to know before you start trading Monero
The Monero market
The Monero market is similar to that of other cryptocurrencies. If you want to buy it, Kraken, Poloniex, and Bitfinex are a few exchanges worth checking out. Poloniex was the first to adopt it, followed by Bitfinex and finally Kraken.
This virtual currency mostly appears to be pegged to the dollar or other cryptocurrencies. Some of the available combinations include XMR/USD, XMR/BTC, XMR/EUR, XMR/XBT and many more. The trading volume and liquidity of this currency have very good indicators.
One of the good things about XMR is that anyone can participate in its mining either as an individual or by joining a mining pool. Any computer with reasonably good processing power can mine Monero blocks with little glitches. Don’t worry about choosing ASICS (Specific Integrated Circuits) which are currently mandatory for Bitcoin mining.
Price volatility
Although the cryptocurrency network is powerful, it is not that special when it comes to volatility. Virtually all altcoins are extremely volatile. This shouldn’t worry any avid trader as this is what makes them profitable in the first place – you buy when prices fall and sell when they rise.
In January 2015, the price of XMR was $0.25, and in May 2017, it rose slightly to $60, and now it has crossed the $300 mark. Monero coin recorded its ATH (all-time high) at $475 on January 7 before starting to fall along with other cryptocurrencies to $300. As of this writing, virtually all decentralized currencies are in a price correction phase, with Bitcoin hovering between $10-11k from its magnificent ATH of $19,000.
Substitutability and acceptance
Due to its ability to provide strong privacy, XMR has been adopted by many people who make its coins easily replaceable with other currencies. Simply put, Monero can easily be exchanged for something else.
All bitcoins on the bitcoin blockchain are recorded and thus if an incident such as a theft occurs, all the coins involved will go out of business, making them non-fungible. With monero, you cannot tell one coin from another. Therefore, no seller can refuse any of them because it was due to a bad incident.
The Monero blockchain is currently one of the most popular cryptocurrencies with a significant number of subscribers. As with most other blockchain projects, its future looks bright despite looming government crackdowns. As an investor, you should do your due diligence and research before trading any cryptocurrency. If possible, seek help from financial experts to get you on the right track.