what Monero is all about and how dose it works?

What is Monero?

Monero (the Esperanto word for “money”) is a cryptocurrency based on unlinkability and untraceability concepts. In layman’s terms, this means you shouldn’t be able to link two Monero transactions together, nor should you be able to ascertain the source or destination of funds.

Monero’s appeal is this. It also uses a blockchain to trace transactions, but it uses some clever cryptography to hide transaction origins, numbers, and destinations. To demonstrate this, consider the Bitcoin ledger, which looks something like this:

In contrast, the Monero blockchain looks like this:

Soon, we’ll look at what makes this sort of obfuscation possible.

A very brief history of Monero

Monero is a fork of Bytecoin, which was launched in 2012 as a privacy-focused cryptocurrency.
Bytecoin was the first protocol to use CryptoNote, an open-source technology designed to address some of Bitcoin’s flaws. ASIC mining (the use of advanced mining hardware) and a lack of transaction protection are two of these flaws. Many cryptocurrencies that prioritize anonymity now use CryptoNote as their foundation.

In 2014, developers who were dissatisfied with Bytecoin’s initial distribution forked it into Bitmonero, a new project.The name was later changed to Monero by removing the “Bit” from the name.

How does Monero work?

You’ll come across the words “ring signature” and “stealth mail” when studying Monero.
These are two of the core inventions that let Monero transfers remain anonymous. We’ll offer a high-level outline of both definitions in this section.

Ring signatures and Confidential Transactions

A ring signature is a digital signature that is formed by a group of people .Anyone will check that one of the participants supplied the signature using the signature and the community members’ public keys. They can’t say which one did so, though.

The government cabinet is used as an analogy in the 2001 paper How to Leak a Secret, which details this construct. Assume that one of the members of this government, Bob, has facts against the Prime Minister. Bob needs to prove to a journalist that he is a cabinet member, but he prefers to keep his identity hidden.

For a standard digital signature, Bob wouldn’t be able to do this. Anyone might tell with confidence that only Bob’s private key could have created the signature by comparing it to his public key. For blowing the whistle on the Prime Minister’s actions, he could face serious consequences. You wouldn’t be able to tell who sent the message if the other cabinet members’ keys were included in a ring signature scheme. Still, you might argue that the material was leaked by a cabinet official, proving its veracity.

Any time you make a transaction, this strategy is used to have plausible deniability. Your Monero wallet creates a ring by combining the keys of other users on the blockchain. These keys essentially serve as decoys, giving the impression that someone in the ring may have signed your deal. As a result, an observer would never be able to tell whether or not an output has been wasted. They can only guess that one of the eight outputs in the picture below has been used. The number of dummy outputs is referred to as the mixin.

A ring with seven mixins.

The green production in the above picture is the one you’re really investing, while the red ones are the decoys you’ve gathered from the blockchain. To the untrained eye, it seems that you might be using all of the eight outputs.

Previously, all of the outputs in the ring had to be the same dimension. Otherwise, since account numbers were obvious, it would be simple to work out what was going on. For example, you might have a ring that only contains 2 XMR outputs or one that only contains 0.5 XMR outputs.

That changed with the upgrade to RingCT (Ring Confidential Transactions). It included Confidential Transactions, a tactic for concealing transaction quantities. Its inclusion into the Monero protocol provided a significant privacy boost by eliminating the need to deal for fixed denominations. You can now make a ring of various production sizes without disclosing any detail that might be used to identify you.

Stealth addresses

Ring signatures conceal the source of donations, but you’d also be able to see where they’re going if you used standard public addresses. If your identity is linked to one of your blockchain addresses, this may be a challenge.

Assume that the e-commerce store uses the same address for all orders. Anyone who placed an order could see the balance you have and use it to spread the word about your company’s location. You can become a priority as a result of this.

The destination of funds is hidden behind a stealth address. They do this by requiring the sender to create a one-time address dependent on a public address that can only be used for that transaction. This is how the public address would sound:


If you look up the address in a Monero block explorer, you’ll see that no transactions have been linked to it. That’s because when someone wants to give you money, they generate a stealth address by combining the above two. When they send XMR, they send it to a new address on the blockchain. Each new address would be distinct from the previous one, and they will not be able to be connected.

The private display key and the private spend key, on the other hand, are two pieces of keys that you can use.The view key, as its name implies, allows you to see all transactions connected with your address. You should hand things over to someone (like the accountant) to check the funds you’ve got. The spend key is similar to your private key in that it allows you to spend your coins.

Monero has a privacy by default scheme, which means you can’t use a stealth address if you don’t want to.Although the public ledger is immediately hidden, you can also make your purchases visible to everyone you choose.

Looking to get started with cryptocurrency? Buy Monero on Binance!

Monero vs. Bitcoin — what’s the difference?

Monero and Bitcoin have some parallels as cryptocurrencies. However, there are certain differences between the two.


In the Bitcoin community, fungibility is a point of contention. It refers to a product’s interchangeability with another product of a similar kind. Gold, for example, is called fungible so an ounce of yours can be swapped for an ounce of someone else’s to remain functionally equal. The same is true for cash: a ten-dollar bill may be exchanged for another. A one-of-a-kind work of sculpture, such as the Mona Lisa, on the other hand, is not fungible and there isn’t any one like it.

It’s a little more difficult to assess fungibility of certain digital currencies. At the protocol level, Bitcoin units are fungible, since the program can not distinguish between each BTC unit. At the social and political stages, things get murkier. Some claim that Bitcoin is non-fungible since each production is distinct, while others argue that it makes no difference.

Transaction information such as sums and destinations can be traced because Bitcoin’s blockchain is clear.
Assume you were sent a five-dollar bill as cash at the supermarket. The bill may have been used in a fraudulent transaction ten years earlier, and it would have had little effect on its current usability. There have been instances when coins have been rejected or stolen because of their “tainted” past with Bitcoin. Even if users are unaware of previous purchases, chain surveillance will blacklist coins, affecting their currency usability. And this is why some consider Bitcoin a non-fungible asset.

In some circles, these activities are thought to jeopardize some of the characteristics that render public ledger cryptocurrencies appealing. “Clean” coins that have only been mined (and therefore have little history) could be considered more valuable than older, “dirtier” coins.

Opponents of coin profiling argue that it employs inefficient and biased methods of study.
Indeed, end-users are gradually having access to resources for coin mixing and CoinJoining, all of which obfuscate the source of funds.

Monero is designed from the ground up to eliminate these flaws. It’s more akin to currency than non-privacy coins because observers can’t know where funds come from or where they’re headed. XMR from dubious transactions can be traded without problem, even in companies with strict research policies.

However, Monero’s increased anonymity comes at a price. Since transactions are much bigger, the infrastructure would have to solve certain major challenges before it can expand to meet the masses.

Surprisingly, the cryptocurrency’s high fungibility has gained it reputation, surpassing Bitcoin as the asset of choice among cybercriminals engaged in cryptojacking, ransomware, and dark web purchases.

Blocks and mining

Monero, like Bitcoin, uses Proof-of-Work to connect transaction blocks to the blockchain.
It is, however, intended to be ASIC-resistant, as are all CryptoNote-based protocols. The aim is to keep mining pools of advanced, high-performance mining hardware from dominating the market.

Monero’s Proof-of-Work algorithm (which was recently revised from CryptoNight to RandomX) seeks to make the scheme more equitable by preferring CPU mining and reducing the efficacy of GPU mining. The reasoning behind this is that as long as consumer-grade PCs stay competitive, mining would be more evenly spread. Regardless, hashing capacity remains concentrated in a small number of mining pools.

Monero does not have a set block size limit, unlike Bitcoin, which has a limit of 4 million block weight units. Instead, it uses a dynamic block scale, which allows blocks to stretch to meet increased demand.As a result, if demand declines, the allowed size will decrease. The scale is determined by looking at the previous hundred blocks’ median size (which are mined every two minutes, on average). Miners will create blocks that are larger than the cap, but they would receive a lower payout.

It’s worth remembering that, unlike Bitcoin, the supply isn’t restricted. Monero’s block incentive schedule is also diminishing, but it does not tend to zero over time. Instead, the block subsidy will stay at a set level forever to encourage participants to continue mining blocks.

Hard forks

Another fascinating distinction between Bitcoin and Monero can be seen in terms of governance.Bitcoin is wary of forks, to the point that even minor updates are debated for a long time before being introduced. There is, though, an explanation for this. Bitcoin developers must be cautious at times in order to keep the system safe, reliable, and decentralized.

Of definition, forks are really frameworks for upgrading protocols. They’re always need to fix crucial glitches or add new functionality. Users of Bitcoin, in the other hand, tend to ignore them since they can trigger division which could jeopardize decentralization. In general, anytime a party tries to build a new cryptocurrency from the original network, a hard fork occurs. Aside from that, they’re normally only used to fix critical flaws.

Frequent hard forks, on the other hand, are a part of the Monero roadmap. This allows the app to respond to improvements and roll out security updates rapidly. Some people see “mandatory” protocol changes as a flaw, but hard forks in Monero don’t have the same detrimental connotation as they do in other cryptocurrencies.That’s not to claim they’re without flaws: repeated hard forks raise the risk of a security flaw going unnoticed, and they can force non-upgraded users off the network.

Monero development

Monero’s production, like Bitcoin’s, is open to all.The source code and notes are open to all.
What features to incorporate, delete, or change are decided by the community. The project has over 500 participants as of this date. Riccardo Spagni (aka FluffyPony), Francisco Cabañas (ArticMine), and pseudonymous writers NoodleDoodle, othe, and binaryFate make up the Core development team.

The Community Crowdfunding System (CCS) is used to finance production in addition to sponsorships. Users will pitch projects, which, if chosen by the audience, can go through a crowdfunding process. The funds are paid out to those liable after certain goals have been met in getting the project to completion.

Closing thoughts

Monero (XMR) has been the go-to cryptocurrency among those looking for solid privacy guarantees for years. It has a devoted developer community dedicated to improving the security of its users’ transactions. The addition of new features (such as Kovri integration) aims to advance the goal of offering unlinkability and untraceability in cryptocurrencies.




NFT & cryptocurrency blogger, next month i'll keep writing about NFT

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Mo Almohtasib

Mo Almohtasib

NFT & cryptocurrency blogger, next month i'll keep writing about NFT

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