Which crypto currency is the best to invest in? The answer to this question is getting more and more complicated. Especially because there are so many different cryptocurrencies nowadays, and more and more are being added. At the moment, CoinMarketCap already has almost 10,000 different coins and tokens.

However, the coin we are going to talk about today was an early one. It was founded in 2014 as a fork of Bitcoin (BTC). It concerns Monero (XMR), the privacy powerhouse in the crypto world. Monero ensures that you can handle your money completely privately and that nothing you do with your money can be found.

Is this an advantage or a disadvantage? How does Monero work? And how does the $XMR token come in handy in this system? You can read that and more in today’s blog about Monero.

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• What is Monero (XMR)?
  • Monero background
• How does Monero work?
• The $XMR token
  • How can you mine $XMR?
• The pros and cons of Monero
  • Advantages
  • Cons
• Conclusion

What is Monero (XMR)?

Monero is an open-source blockchain that focuses primarily on privacy . Everything at Monero is about privacy. Practically, this means that everything you do on the Monero blockchain remains completely anonymous. This also ensures that, unlike with almost all other blockchains, you cannot see the full transaction history with Monero.

Monero background

The launch of Monero took place on April 18, 2014, but the first we can find of Monero dates back to October 2013, when Nicolas van Saberhagen posted a white paper for a crypto protocol called CryptoNote . In this white paper, he described privacy and anonymity as “the most important aspect of digital money” and called this the biggest pitfall for Bitcoin. Nicolas van Saberhagen is not the real name of this person, by the way, but a pseudonym under which he, or a group of people, work(s).

A user on Bitcointalk , a well-known Bitcoin forum, created a cryptocurrency called BitMonero from this whitepaper . However, not everyone agreed with BitMonero, so a fork (fork) called Monero was created in 2014. This is where the birth of Monero, which means ‘coin’ in Esperanto, took place. Both Nicolas van Saberhagen and the forum user remain anonymous to this day, appropriately with Monero.

Since then, Monero has gotten bigger and bigger and the project now has a market cap of over $3.5 billion (at the time of writing, March 22, 2022). Besides the fact that Monero’s growth can be seen in terms of money, the size of the network can also be seen in the developers team. After Bitcoin and Ethereum, Monero has the largest development team in all of crypto. Most of these developers choose to remain anonymous, so we know next to nothing about the team behind Monero.

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How does Monero work?

Although transparency is a property that blockchain technology is often praised for, Monero chooses to go completely against this. Monero is anything but transparent. Most of the transaction data, such as the address of the sender and the recipient, but also the amount that is sent in a transaction, is hidden in the Monero explorer. This makes it impossible to retrieve this data .

You can see this complete anonymity of the network as both an advantage and a disadvantage. Where it can improve the decentralization of the network, because data is not available, it also offers the possibility of financing criminal activities, because data is not available.

Monero’s operation is powered by its proprietary ‘Nitrogen Nebula’ software . This software therefore ensures that the network can carry out transactions that cannot be traced back. To be able to perform transactions on the Monero network, you as a user need a software wallet. Where you can use a MetaMask wallet with most networks, this is not possible with Monero. Wallets that are compatible with the Monero network are: MyMonero, Exodus Wallet and Guarda Wallet. As a user, you are the only one who can see which tokens are in your wallet, unlike most other networks.

As with any network, Monero must have a certain consensus algorithm to check and verify the transactions on the network. Monero uses, just like Bitcoin, the Proof of Work (PoW) consensus algorithm . This means that miners have to solve mathematical problems, for which they receive $XMR coins. The computing power provided by these miners ensures that transactions can be carried out on Monero’s network. Monero can process about 1700 transactions per second, more than Bitcoin or Ethereum, for example, but less than Solana.

quite cheap compared to many other networks . An average transaction on Monero costs an average of $0.0022. When you compare that with other networks, you see that a transaction on Bitcoin costs an average of $5.3708, an average transaction on Ethereum cost $14.17 last month, but an average transaction on Solana costs $0.00025. Monero is certainly not the most expensive, but it is also not the cheapest.

The $XMR token

The $XMR token , the native token of the Monero ecosystem, plays an important role within the Monero blockchain . Without this token, you cannot do anything on the network. Outside of the means of transaction, $XMR has no specific utility within the network. For example, $XMR does not serve as a governance token, nor can you stake it within the network. $XMR is simply a means of transaction that holds a certain value.

$XMR is a fungible token , which means that all $XMR tokens are basically the same. There is no difference between one $XMR and another $XMR, but that doesn’t matter, because they have exactly the same value and you can do exactly the same with them.

In theory, the number of $XMR that can come into circulation is unlimited . In principle, $XMRs can always be added through the mining system. However, this process is not that fast. Since its foundation in 2014, a total of ‘only’ 18,097,563 have come into circulation so far (at the time of writing, March 24, 2022).

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How can you mine $XMR?

As mentioned earlier, Monero uses the Proof of Work consensus algorithm. This also means that you can mine $XMR. In this way you contribute to the network, because without the miners the network cannot run, and you can also receive $XMR tokens and thus earn money. But how do you do this?

Compared to mining Bitcoin, for example, mining $XMR is much more accessible and cheaper . As a Monero miner you need to have much less computing power at your disposal than as a Bitcoin miner. This means that a device is suitable much sooner and also uses much less power. To actually earn something from mining Bitcoin, you need a good mining setup, which should include good video cards, for example. However, you can already mine $XMR on the average laptop.

You can mine $XMR in three different ways: as a solo miner, in a mining pool, via cloud mining services.

• As a solo miner you are immediately a node in the Monero blockchain. When you mine $XMR as a solo miner you will receive the full block rewards if you solve the math problem. However, this chance is quite small. If you are not the one who solves the problem, you will not receive anything, even though you have contributed to the process.
• As part of a mining pool , you share your computing power with hundreds, if not thousands, of other Monero miners. The chance that you, as a group, will then be the ones to solve the mathematical problem is of course much higher. When this happens, you all share the rewards. In general, you will earn more as part of a mining pool than if you mine solo. However, if you are lucky enough to find a new block as a solo miner, this will give you more than the rewards you would get in a mining pool.
• When you use Monero Cloud Mining Services , you are actually using computing power hosted in the cloud. So you actually use computing power in data centers, which you also pay for. This is very advanced compared to the other two variants.

The pros and cons of Monero

Like basically every ecosystem within crypto, Monero also has both advantages and disadvantages. Let’s take a look at the main of these pros and cons.

Advantages

The first and most frequently mentioned advantage, although you can also see it as a disadvantage, is that the privacy on Monero is better than with any cryptocurrency . It is practically impossible to see transaction data on Monero and this makes money impossible to track. Transactions and addresses cannot be found and it is also impossible to see where money is and where it comes from. On the one hand, you can see this as an advantage, but on the other hand, it also ensures that Monero can be used, for example, to finance criminal activities.

Another advantage is that the Monero blockchain has no block limit , which means that the blockchain is very scalable. There is no limit to the number of blocks that can exist, so there is no limit to how big Monero can get.

Although Monero is known for its privacy, not everything you do on the Monero blockchain has to be private. Monero is selectively transparent . This means that you can, for example, choose that a certain person can see which transactions you perform or something similar.

Cons

A major drawback for Monero is that the cryptocurrency is not compatible with most wallets . For example, you cannot store $XRM in your MetaMask wallet. This is not such a big problem for the operation of the network, but it can cause problems for the adoption and therefore growth of the network.

Also, Monero is not really beginner -friendly to use, which has meant that Monero has not grown that much in users compared to other crypto networks that emerged at the time. The large development team dealing with Monero could of course change this.

What can also be seen as a disadvantage is that the transactions on Monero are much larger than the transactions on another network, for example Bitcoin. Transaction size in this case refers to the amount of encryption involved in a transaction. The more encryption, the larger a transaction, and therefore the heavier this is for the network. When Monero grows a lot and many transactions have to be executed, it could be that Monero is going to have a hard time.

Conclusion

Monero is therefore the coin that can keep everything in crypto private. When you make a transaction on the Monero blockchain, no one will ever be able to find its contents. Monero brings both advantages and disadvantages.

An advantage, for example, is that there is no block limit, which means that Monero can theoretically grow infinitely large. At the same time, the transactions on Monero are generally very large when you talk about crypto, which in turn means that the network can have a relatively rough time.

Monero has been around since 2014 and offers something that is still quite rare in the crypto market: complete privacy. Whether this is an advantage or a disadvantage, you can really only decide for yourself. $XMR has been around for a long time, but has lagged somewhat behind in growth compared to other coins from 2014. So it could just be that $XMR will grow a lot. Who’s to say…

Do you have any questions Monero? Or do you want to know what others think of $XMR as investing? Ask us in our AllesOverCrypto Facebook group where we now have more than 100,000 members! You can also easily find the answer to a question about crypto in our FAQs. Furthermore, you can also find a lot of information by googling your question + AllesOverCrypto.

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