monerologo 800x500 - Opinion: Monero Is The Best Privacy Coin On The Market Right Now

Opinion: Monero Is The Best Privacy Coin On The Market Right Now

We live in a day when online privacy, and by extension financial privacy, is a hot-button issue. Large corporations are misusing private user data. Hacks are still frequent, as are compromises of sensitive information. This means that privacy-specific coins appear poised to shoot up in popularity.

Since its release in April of 2014, Monero (XMR) has risen to become one of the leaders in the privacy coin sector. We’re going to look at why Monero is pulling away from its main competitors, as well as the coin’s long-term use case and potential.

Why Privacy Coins?

When the layman thinks about cryptocurrency, they’re probably thinking about a privacy coin. A secure, untraceable digital currency. Free from the reach of governments, special interest groups, hackers and more.

While market leaders such as Bitcoin, Ethereum and Litecoin have their advantages, it remains that they are totally transparent. There are many cases in which this is an advantage, but it’s not ideal for everyone. Traditional coins have all transactions stored on an immutable digital ledger, which is available for anyone to see. For some individuals or businesses, the lack of privacy is a deal-breaker.

A public ledger also invites security risks. While wallets are still protected by a private decryption key, the publicly visible address gives hackers something to target. If someone has a wallet with a large amount of crypto, that address will always be under a certain degree of risk.

These concerns are the reason privacy coins exist. Coins such as Monero, Dash and Zcash have in-built privacy measures designed to protect the identity of sender and receiver. The transactions can’t be tracked the same way a Bitcoin or Ethereum transaction can. Plus many privacy coins will also shroud wallet addresses, so as to give malicious individuals no base point to attack.

The Advantages of Monero

Monero has established itself as the leader amongst privacy coins, addressing all the reasons people value privacy coins. Let’s have a look at some of the significant advantages of Monero.

Privacy

Monero is genuinely untraceable, untrackable, and unlinkable. In short – it’s private. The privacy features are always on too. As a sender or receiver of Monero, you don’t have to worry about the person on the other end of the transaction taking due precaution. You’re automatically protected by the way Monero operates.

Each step of a Monero transaction has a unique way of protecting the parties involved:

  • Transactions are signed using “Ring Signatures”. Each crypto transaction has an ID that verifies and signs off on that transaction. With most coins, this is a way to track a transaction from sender to recipient. Monero’s feature uses a total of six IDs when confirming a transaction – five are dummy IDs, and one is the real one that signs it off.
  • “Stealth Addresses” hide wallets and balances. Instead of a public address that is reused for every transaction, each time you send and receive Monero a one-time address is randomly generated. Hiding the identity of each party.
  • The “Ring Confidential Transactions” (or RingCT) feature hides the value of each transaction. The blockchain doesn’t show the value of individual Monero transactions. Instead, a number of transactions are grouped together, and the total amount of the transaction pool is visible and verifiable. But the amount of a single transaction is private at all times.

Some of Monero’s privacy features can be made transparent if need be. Users have two private keys. A spend key allows one to access and transact funds. While a view key lets someone view their transactions – useful when people need to allow access to auditors, for instance.

Decentralization

The question that decides whether a coin sinks or swims – is it decentralized? With some privacy coins, the network’s stealthy nature leads to significant concerns of how much control the founder(s) really have.

Monero has thus far escaped much of this FUD. The founding dev team consists of seven members, five of which are known by pseudonyms only. While founding member Riccardo “fluffypony” Spagni is at the fore of the public’s view, as a whole, the project is the culmination of a lot more. With over 170 contributors to their codebase on Github, it appears to be an active community effort behind Monero’s development. As opposed to the effort of one or several individuals.

Lightweight Mining

Privacy aside, an advantage Monero gives over coins like BTC and BCH is a much lower entry point to start mining. Crypto mining is increasingly becoming controlled by large-scale operations, due to the heavy-duty hardware required to do so. This brings about a whole new concern of centralization. One company holding a majority of the mining rigs potentially gives them control over the network.

Where Monero differs, is their lightweight mining algorithm that doesn’t need expensive mining chips to operate. Almost anyone can mine Monero on their PC or Laptop, which is impossible for the big coins these days. This reduces the chances of network abuse and opens Monero up to a wide audience at the base level.

Monero vs. Dash vs. ZCash

So how does Monero stack up against the sector’s main competition?

Dash (DASH) has long been the closest competitor. As of writing this, the two sit at numbers 10 and 11 on CoinMarketCap, just several million apart in total market cap. Monero’s inbuilt privacy features make it an attractive option for people looking for a privacy-centric coin. Dash’s privacy features are more of an optional extra – something that users can turn on when they want. Dash appears to be aiming more for mainstream adoption, raising concerns over whether their dedication to user privacy.

Dash has also been the subject of significant FUD recently. Most notably, a bug in Dash’s early days caused a large amount of Dash to be pre-mined – 2 million Dash, out of the current total supply of just over 8 million. Many speculate that the coin’s founders hold these coins. This could render Dash’s DAO (Decentralized Autonomous Organization) governance structure redundant.

The other coin capitalizing on the privacy coin market is Zcash (ZEC). It currently sits just outside the top 20 in market cap, at about a third of the value of Monero and Dash. Zcash, built on the Bitcoin codebase, uses zero-knowledge proofs to verify fully encrypted transactions.

Zcash is rising among privacy coin enthusiasts for the privacy technology they bring to the table. But they also have questions around decentralization, which offer some concern. For a privacy coin, decentralization is vital. As a newer project, Zcash is run and developed by the Zcash Company, drawing some degree of trepidation. In addition, Zcash mining is becoming more dominated by heavy-duty commercial miners. Commercial mining offers yet another threat to decentralization. For Zcash to grow, this is something they may need to address.

The Future of Monero

There’s no doubt Monero is at the head of the class right now. Dash offers great performance and is seeing increasing mainstream adoption. But several significant red flags are a concern. Zcash looks to have some teething issues to go through, being at an earlier stage in development.

Monero may never threaten Bitcoin as the number one coin. Many need the transparency of regular cryptocurrencies. And while Monero’s transactions are fast and cheap compared to Bitcoin, some question whether it can scale with heavier use, as the inbuilt privacy features lead to larger transactions than with many coins.

In the end, the primary threat to Monero is not from other coins, but from external powers. Because of its robust privacy layer, Monero is seen by many as enabling criminal activities. This has lead to pushback from some exchanges, concerned over potential liability stemming from Monero users conducting illegal activities.

It appears to be a roadblock for privacy coins in general. One that will persist as long as crypto regulation is still a murky grey area. But the privacy coin sector will always have strong advocates, and right now Monero offers everything a privacy coin enthusiast looks for.

 

Andrew is a writer and digital marketer from New Zealand, now based out of South East Asia. Along with his work in many areas of the e-commerce space, Andrew has a keen interest in cryptocurrency, especially altcoins and projects focused on mainstream crypto adoption

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