Monero is a popular and controversial digital currency with its many advocates praising its anonymity, privacy, and adherence to old-school cryptocurrency values. Many of its critics point to its potential lapses in security, poor relations with governments, and an association with cybercrime.
Monero is something of an infamous member of the community. Yet it maintains a function and use case that many find to be central to the very ideals of blockchain technology.
What is Monero?
Monero or XMR is an open-source privacy-oriented cryptocurrency that was launched in 2014. Based upon the protocol layer CryptoNote and created by lead designer and author of the White Paper, Nicolas van Saberhagen. In keeping with the ethos and design of Monero, Saberhagen is likely a pseudonym. The real identity or identities of Monero’s creator is a mystery, much like Bitcoin creator Satoshi Nakamoto.
The key to understanding Monero is anonymity. Privacy and anonymity are utterly central to the entire design and function of this privacy coin and as such it has attracted a mixture of advocates and critics. Monero was created with something of an egalitarian streak in mind, largely funded by donation and without the creators withholding a stake in the coin.
Monero functions with a PoW or Proof of Work system and allows for users to mine along with the blockchain with relative ease. This ease stems from a rather low technological bar for entry, requiring little more than a CPU and no specific form of hardware. This has also led to malicious actors creating malware that allows for remote Monero mining without consent.
Monero is traded on various crypto exchanges such as Poloniex, Bitfinex, and Kracken. As an addition to one’s portfolio, Monero can be volatile, experiencing some rather larger surges over the past few years. This surging is often the result of increased efforts on the part of authorities to prevent the use of Monero and privacy coins in general. For example, this increase in attention and scrutiny has manifested itself as an effort to delist the coin in the UK, an increase in tracking and scrutiny by the EU, and the outright banning of the coin in Japan. These are just some examples of the mounting pressures that Monero and privacy coins more broadly are facing.
Monero Use Case: Anonymous Routing
Different blockchain systems, like Bitcoin, make use of a public ledger system that validates and authenticates itself throughout the nodes of the chain. This system offers a host of security, stability, and decentralization benefits. The system while very secure and considered to be largely private, especially when contrasted against other forms of currency trading, isn’t exactly anonymous. Bitcoin and many other blockchains might be much more accurately described as pseudonymous.
Monero explicitly sought to implement Satoshi’s security concerns as a matter of function and appears to do so rather well. Monero uses a protocol of Ring Signatures, Stealth Addresses, and Ring Confidential Transaction, or RingCT.
In simplified terms, these systems incorporate a randomly generated user address for each transaction and mix them with a host of other users’ addresses to obscure the ledger of the transactions. Ring Signatures are anonymous, coupling account keys with public keys to hide the ledger. As of 2017, all transactions on Monero implements RingCT protocols as a matter of function. This final privacy protocol hides the transaction amounts, thoroughly insulating the privacy of the ledger.
Monero Use Case: Preventing Corporate Espionage and Competitor Research
Crypto looks set to be integrated into global finance in a big way, but this poses problems in some cases. While many businesses are interested in transacting in crypto due to the low fees and 24/7 transaction features which traditional banking often lacks, cryptocurrencies like Bitcoin are not suitable for all use cases.
Most cryptocurrencies display a list of all transactions ever made on a publicly accessible ledger (the blockchain). If you receive Bitcoin, Ethereum, or any other major cryptocurrency, you can look view the wallet that sent you funds and analyze every transaction it has ever made. For businesses, this means that their financial holdings would be on public display, allowing competitors to gain key insights into how much money a business has, when it tends to restock, and more.
Monero allows businesses to send money any time of the day and on any day of the week, but to do so privately, and this is one of the potential use cases of Monero.
Monero Use Case: Protecting High Net Worth Individuals
Anyone travelling abroad while using crypto could potentially become a target of crime, especially high-net worth individuals with significant crpyto holdings. For example, someone travelling through an impoverished area and spending their crypto funds could draw undue attention to themselves.
Unlike money stored in a bank, crypto transactions cannot be reversed, meaning if someone steals your crypto from you, it is likely gone forever. Monero allows people with large sums of money to hide their balance while still spending their crypto as intended.
Monero Use Case: Anonymous Donations and Fundraising
Monero also allows for users to raise funds for causes without identifying themselves. For example, when NSA whistleblower and free speech advocate Edward Snowden began to raise funds for his legal defence, the American government made it illegal to donate to his cause.
However, there was a huge backlash against the U.S. persecution of the whistleblower, especially seeing as the government program he had unveiled to the public was illegal and targeting the public themselves. Despite the ban on raising funds for Snowden, WikiLeaks was still able to raise funds using crypto from crypto such as Bitcoin.
Bitcoin, of course, is pseudonymous, meaning it’s possible to identify donors to the fund. On the other hand, Monero is the ideal currency for such a purpose.
MONERO USE CASE: CRIMINAL TRANSACTIONS FOR CONTRABAND
As a privacy coin, Monero has also found itself to be popular amongst Dark Web users dealing in illegal contraband. Many marketplaces that exist throughout the Dark Web have moved entirely away from using BTC for transactions and Monero is increasingly becoming the privacy coin of choice.
The now-defunct Dark Web market ‘White House Market’ functioned via the use of Tor and Monero. This combination of Tor and Monero facilitated the anonymous purchase of drugs, fake ID, and fake credit cards until it eventually shut down in October of 2021. White House Market was certainly not the only black market on the Dark Web, and evidence has emerged of Monero’s use in sex crimes, blackmail, and even human slavery.
Little wonder that authorities seem committed to limiting the use of Monero, supposedly to combat these shady activities, or simply to maintain greater degrees of financial control. There are many different factors at play when considering the future of Monero and it is difficult to ascertain the future of the coin, as there appears to be a mixture of tightening resistance against the coin, and an inversed uptick in its popularity among the Dark Web.
Monero occupies a strange position in the digital currency community, being both the best and the worst of what many ideological proponents of cryptocurrency think the technology should be. Decentralized, deregulated, and community-controlled. Secure from the attentions and efforts of stagnant financial systems.
Yet Monero is also risky, rooted in dark communities and directly opposed to powerful authorities that fully intend to oppose its use, making it both a useful and controversial project to this day.