Monero explained: what it is and how it works

Since its humble beginnings in 2008, cryptocurrency has grown in popularity over the years. Blockchain technology and the decentralized model of crypto captured the imagination of developers, researchers and investors alike. While Bitcoin is the first and arguably most popular cryptocurrency today, users and traders now have a bountiful selection of cryptos to choose from. One cryptocurrency in particular has been making waves in the crypto industry for its highly advanced privacy features: Monero (XMR).

As Monero grows in popularity, learning more about these cryptocurrency could help traders looking to bolster their portfolio or users looking for a more personalized form of crypto. Read on below for a quick overview of what it is and how it works.

What is Monero?

Monero is an open-source cryptocurrency primarily focused on privacy. It is one of the first cryptos to offer this feature. This capability is a major development in the cryptocurrency space, where everything runs on blockchain technology.

In blockchain, all executed transactions are recorded in a ledger that all users have access to. This means that information such as the identity of the sender and recipient, along with the amount exchanged, can be viewed by other users. Monero turns this concept on its head by offering all parties involved a form of anonymity. This allows merchants and users to XMR Wallet and conduct more private online transactions.

Another important advantage of using Monero is that the coins are replaceable. It means that two currency units are interchangeable. Cash is a classic example of a replaceable asset, as a one dollar bill has the same value as another dollar bill. XMR’s fungibility protects users from having their coins blacklisted in the event that their coins have been used for illegal activities, such as gambling or drug sales.

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Over the years, Monero has made a name for itself as a pioneer for privacy-focused features in cryptocurrency. The eager pursuit of new features and technologies in the crypto space caught the interest of not only researchers and cryptographers, but also potential investors who wanted to learn more about the crypto space and its potential.

How does it work?

First, XMR is not the only cryptocurrency to offer privacy features. Cryptocurrencies such as Dash and Zcash also provide their users with a degree of anonymity online. However, the technology and method by which these features become possible may vary from currency to currency.

For Monero, their methods lie in obfuscating user information on the blockchain. This makes the blockchain opaque and, as a result, it becomes more difficult to trace the people involved in a transaction. Here are the main methods they use to achieve this result:

ring signatures

Ring signatures refer to the technology that enables obfuscation of data. In this process, Monero mixes a person’s digital signature with that of others before committing it to a blockchain. It does this by combining the sender’s account keys and the public keys of the blockchain. As a result, it becomes difficult to determine who signed the transaction, effectively hiding the user’s identity.

Stealth addresses

In Monero, each user has a public address that works the same way as an account ID. To protect user privacy in transactions, XMR implemented stealth addresses in 2017. Stealth addresses refer to one-time public keys generated automatically by the Monero platform. Through them, transactions cannot be fed back to the sender or recipient. Moreover, only these two parties have the key to determine where the payments in the blockchain are sent.

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Call CT

Ring CT is an abbreviation for Ring Confidential Transaction. Introduced in 2017, the primary purpose of this feature is to hide the amount exchanged during a transaction. In addition, it also introduced an upgrade for ring signatures, which allows hidden origins, destinations and amounts.

What are Monero’s challenges?

At this point, it becomes clear that Monero has many useful features when it comes to protecting users’ privacy. However, Monero’s greatest strength could also be its Achilles heel. Since XMR platforms guarantee anonymity to all their users, individuals engaged in criminal activity see it as a lucrative tool for underground transactions. For example, before the popular darknet markets AlphaBay and Oasis were closed, authorities found increased XMR use.

As such, several figures and institutions have called out Monero and expressed concern about its lack of regulation and how it could be used for illegal activities. In particular, the government expressed concern about how it could finance illegal and even dangerous businesses, especially drug trafficking and terrorism.

Taken together, it becomes clear that Monero is both a subject of fascination and discussion. Some find it helpful, while others are more skeptical. After all, it’s just a technological tool that can be used for various purposes – both good and bad.

Monero itself is not illegal, but the issues surrounding it raise important questions about the role of cryptocurrency in society. To find out, developers and researchers will have to keep studying this technology and pushing the boundaries.

121 Best Advisor is a leading technology blog that focuses on various domains such as Blockchain, AI, Chatbot, Fintech, Health Tech, Software Development and Testing. For guest blogging feel free to contact

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