What is Monero (XMR)?
Monero is a descendant of Bytecoin. Bytecoin is a little different from bitcoin, as it uses technology called CryptoNote. CryptoNote's block hashing algorithm ensures that mining specialization is not possible, so no ASICs and all that stuff. This is to counter centralization miner centralization. The operations required to support the network are basically best done with general purpose chips like the standard GPUs and CPUs. So we know that Monero is more resistant to miners because of CryptoNote, but CryptoNote offers a lot of other things like untraceable payments, unlinkable transactions, and blockchain analysis resistance.
You might ask why Monero became the better known currency (vs. Bytecoin), and that's because there were some incidents in the early stages of the launch. 80% of the currency that was planned to get minted was already minted, meaning that the developers pre-mined the currency at the disadvantage of the public. This didn't allow for growth and people wanted to fork it, but with a fairer distribution. The birth of Monero.
What also makes Monero unique is its use of ring signatures. To explain this, let's look at bitcoin. To create a transaction, a known person signs off on the balance he's trying to send. This is not a completely anonymous process, although people think it is. In Monero, instead of one person, a group of individuals signs off on a transaction thereby creating a ring signature, but only one person in that group owns the monero. Let's make this visual.
Normal Signature (as in bitcoin transactions):
An individual signs a transaction with the private key, and that transaction gets verified with the public key of that same individual. The public key can be linked back to an individual's identity, therefore transactions are not private. We need another type of transaction.
Ring Signature (as in monero transactions):
A ring signature is more sophisticated. The process of signing off on a transaction requires the public and private keys of more than one individual. The statement proven by ring signatures is that the signer of given transaction is a member of the group. The signer needs a single private key, but any verifier cannot pinpoint the individual who actually sent the monero.
Untraceable Transactions:
This concept can be used to make digital transactions sent to the network untraceable by using the public keys of other members in the ring signature one will apply to the transaction. This approach proves that the creator of the transaction is eligible to spend the amount specified in the transaction but his identity will be indistinguishable from the users whose public keys he used in his ring signatures.
That concludes my brief description of Monero. It is always required to learn the fundamentals behind a crypto-asset before investing. This is what I aim to do for my readers. Vote in the comments what crypto-asset you like me to describe next!
Sources:
- CryptoNote website: https://cryptonote.org/inside/
- Book by Chris Burniske and Jack Tatar: Cryptoassets - The innovative investor's guide to Bitcoin and beyond