Last Updated on January 21, 2025
The development of Monero was a significant evolution in the world of cryptocurrency. However, unlike unlike Bitcoin, the history of Monero is not very well known.
Monero (XMR) is a private by default Proof of Work cryptocurrency that was created in April 2014 as a fork of Bytecoin, using the CryptoNote protocol.
The key value proposition of Monero is its first mover advantage among privacy coins.
Unlike Bitcoin, Monero does not have a hard cap. Instead it has an initial supply of 18.4 million coins with an infinite block reward of 0.6 XMR per block, known as the tail emission.
Monero ensures that the identify of the sender, the receiver and the transaction amount are all kept private.
Who Created Monero?
The origins of Monero lie in the CryptoNote protocol, which was developed by Nicolas van Saberhagen.
The pseudynomous van Saberhagen released the CryptoNote whitepaper in December 2012 and then a further update in October 2013.
In it he discussed Bitcoin’s deficiencies, in particular its lack of privacy.
“Privacy and anonymity are the most important aspects of electronic cash. Peer-to-peer payments seek to be concealed from third party’s view, a distinct difference when compared with traditional banking…Unfortunately, Bitcoin does not satisfy the untraceability requirement. Since all the transactions that take place between the network’s participants are public, any transaction can be unambiguously traced to a unique origin and final recipient. Even if two participants exchange funds in an indirect way, a properly engineered path-finding method will reveal the origin and final recipient. Bitcoin…is not an anonymous but a pseudo-anonymous electronic cash system.”
Bytecoin was the first cryptocurrency to be created using the CryptoNote protocol.
Bytecoin became mired in controversy but its codebase was forked into a new cryptocurrency called Bitmonero in April 2014 by Bitcointalk forum member who went by the name of thankful_for_today.
Thankful_for_today noted that Bitmonero was not a relaunch or a replacement but a fork with a new coin and its own genesis block.
The name Monero is Esperanto for “coin.” So Bitmonero was an Esperanto translation of Bitcoin.
Bitmonero came under some criticism from the community and thankful_for_today disappeared.
Bitmonero was then taken over by a group of developers who decided to drop the “bit” and renamed the coin “Monero.”
Monero’s Early Days
In the early days Monero was a small and obscure project, but one with big ideals. The development team was led by Riccardo Spagni aka fluffypony and David Latapie, along with five other anonymous developers.
The key ideals of Monero are privacy, security, decentralization and fairness. There was no premine where developers could rewards themselves. Monero also initially used the CryptoNight mining algorithm which was designed to be ASIC resistant, so as to level the playing field and avoid centralisation of the mining pools.
Monero’s privacy meant it quickly appealed to those who used the dark web. This has meant that many disparage it as a coin only used by criminals. However, there are many legitimate reasons why people might seek money that is private by default.
The Evolution of Monero
Monero’s early innovations were Ring Signatures and Stealth Addresses.
Ring signatures give privacy to the sender by grouping the transaction along with a number of other decoys. This group is known as a ring.
Stealth addresses provide privacy to the receiver. Every transaction received is recorded on the blockchain as going to a one-time proxy address rather than the actual address of the receiver.
In 2017 Monero added Ring CT or Ring Confidential Transaction which obscures the transaction amount.
In 2018, Monero integrated Bulletproofs, which reduced transaction sizes and fees, improving scalability and making Monero more efficient.
In 2019 Monero introduced the RandomX mining algorithm. This was designed to discourage the use of specialised mining hardware (ASICs) so as to keep mining decentralised.
Can Monero Be Traced?
The combination of Ring Signatures, stealth addresses and Ring CT means all aspects of a Monero transaction are private and cannot be traced.
This is the core of Monero’s mission and its key use case.
The IRS has even offered a $625,000 reward for anyone who can crack Monero.
So far nobody has been able to do it.
The Differences Between Monero and Bitcoin
Monero and Bitcoin share many similarities. They are both decentralised proof of work blockchains. They are both scarce.
However, there are important differences and Monero seeks to be an improvement over Bitcoin in these areas.
The first key difference is that Bitcoin is not private. At best Bitcoin could be considered pseudonymous but it is not anonymous. All transactions and addresses are recorded on a public blockchain, visible to everybody for the rest of time.
This has an important implication for fungibility. Each Bitcoin and each Satoshi has a history. It is a very real possibility that in the future the market will command a premium for “clean” Bitcoin over those that have been “tainted” by association with either illicit or unfashionable activity.
This means that Bitcoin will potentially become non-fungible. In other words 1 BTC will not equal 1 BTC.
Monero’s privacy will prevent this from happening which will ensure it retains its fungibility, something that is necessary to considered money.
The second key difference is that Bitcoin has a hard cap of 21 million coins. Monero has no such hard cap. Instead it has an initial supply of 18.4 million coins with a tail emission of 0.6 XMR per block.
This means that when all 21 million Bitcoin are mined there will be no more block reward. Monero will have an infinite block reward.
It is speculated that when the Bitcoin block reward ceases to exist, transaction fees alone will be enough to incentivise miners to continue to secure the network.
However, some speculate that the exact opposite will happen and miners will abandon the Bitcoin network when the block reward ends.
We do not know for sure what will happen. This creates some risk.
Monero has no such risk.
Monero’s Role in the Crypto Ecosystem
Monero is the first mover among privacy cryptocurrencies and is the leader in that sector.
However, I see Monero’s key role as being a direct challenge to the “Bitcoin only” point of view that considers every single altcoin to be a shitcoin doomed to fall to zero.
While most altcoins have no future and many are indeed scams, Monero supporters see it as short sighted for Bitcoin maximalists to completely write off all alternative blockchains, especially Monero.
Privacy, fungibility, decentralisation and the tail emission are all valid arguments that challenge the “Bitcoin only” narrative and there are valid reasons to buy high quality altcoin projects, especially in the privacy sphere.
The market will determine whether the future of cryptocurrency is single chain or multi-chain.
If it is single chain, there is no guarantee that Bitcoin will emerge the winner. If it is multi-chain then it is highly likely that privacy coins will play a significant role.
Why Buy Monero?
The investment case for Monero is that privacy coins are being undervalued by the market.
This is for two reasons.
Firstly, people don’t fully understand the implications that come from Bitcoin being a transparent immutable ledger. Once the market recognises the importance of privacy coins there will be a repricing.
Secondly, people don’t fully understand the fungibility implications of transparent coins. To be truly fungible, and therefore qualify as money, a cryptocurrency needs to be private by default.
Monero could potentially flip Bitcoin, or it could exist alongside it as a valuable companion.
Read More: Is Monero A Good Investment?
How To Buy Monero
Monero can be bought at an exchange just like any other cryptocurrency.
However, not every exchange carries it.
Of the major crypto exchanges, Kraken is a good option.
Conclusion
Monero exists as an improvement on Bitcoin.
Built on the CryptoNote protocol, Monero was originally Bitmonero, itself a fork of Bytecoin.
Monero is private by default and provides privacy at three levels – the sender, the receiver and the transaction.
As the first mover in the privacy space, Monero plays a critical role in the cryptocurrency ecosystem.
