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Friday, September 30, 2022

How The Monero Cryptocurrency Is Built For Privacy

Hey, everybody and welcome to another episode of BLOCKCHAIN CENTRAL! In this video, we’ll take a closer look at Monero: a cryptocurrency which has the potential to become your personal bank. INTRO– I would argue that the two most important elements of a reliable bank are: security and privacy.

While there are many cryptocurrencies that advertise themselves as fully secure, only a few of them offer the level of security similar to Monero. The secret here is, of course, decentralization. As all transactions are confirmed by a distributed consensus and then recorded on the blockchain, there is no need for any third parties to protect transactions.

A community of miners together with state-of-the-art encryption tools are there to ensure transaction security Monero is also completely private since all transactions are kept confidential. Using so-called ring signatures, Monero mixes addresses for transactions with another user’s address, making the path between sender and receiver virtually untraceable.

An analysis of the Monero blockchain would reveal nothing more than a cryptographic hash of the transaction. This hides the origins, destinations, and quantities of every transaction. In other words, transactions made on this blockchain are impossible to link to a real-world identity. By contrast, the vast majority of existing cryptocurrencies, including Ethereum and Bitcoin, feature transparent blockchains. That means that anyone with an internet connection can trace and verify transactions.

Transactions made with those cryptocurrencies can, under certain circumstances, even be linked back to the person’s real-world identity. According to the developers, that is not the case with Monero. That is good because if you end up owning a bitcoin that was once used in an illegal transaction, for example, to buy drugs, that transaction would forever be imprinted on the coin.

That, in essence, taints your bitcoin. In certain bitcoin service providers and exchanges, these tainted coins will never be worth as much as clean ones. Why should you suffer just because one of the previous owners of your Bitcoin has used it for illegal purchases? At the same time, there is also a downside to this privacy. The main problem is that the impossibility to trace transactions paves the way for illegal activities.

That is what makes Monero a very attractive currency for criminals. For this reason, some crypto exchanges, such as Coincheck in Japan have already begun excluding Monero from their offering. Monero is also fungible because of its private nature. What does it mean? Suppose you borrowed $20 from a friend.

If you return the money to them with a different $20 bill than the one you borrowed, or even one $10 bill and two $5 bills; it is still perfectly fine. The dollar is fungible and it does not matter which specific bill you borrowed.

However, if you were to borrow someone’s car for the weekend and come back and return some other car, then that person would probably not be very pleased with that. That is because it matters which specific car you borrowed and returned. Cars, in this example, are a nonfungible asset, since it is important that the returned car is exactly the one that was borrowed in the first place.

Ok, so what have we learned in this video? Well, first of all, Monero is a new cryptocurrency that is highly secure, private and untraceable. While this certainly can have its advantages, it also comes with the downside of making it very attractive for criminal activities.

After all, why do you need a transaction to be totally private and untraceable if you have nothing to hide? Because of its attractiveness to criminals, many exchanges already stopped offering Monero.

It will, however, be interesting to keep an eye on Moreno and to follow its development. Before you go, please note that this content neither represents financial, legal, or tax advice, nor is it supposed to be understood or interpreted as a solicitation to buy or sell any securities, coins or tokens.

Read More: What is Monero?

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