A history of Monero
Monero (XMR) is a decentralised cryptocurrency laying claim to a crypto holy grail of true privacy and untraceability. Monero claims its technology elevates it above the rest as it delivers 100% anonymity or as it calls it “censorship resistant” and scalability. It also means it treads the border between legality and illegality as WannaCry ransomware attackers highlighted.
A perceived flaw of cryptocurrencies such as Bitcoin and Ethereum is that in allowing for transparency, information about transactions are verifiable and traceable by anyone, anywhere, which defeats the purpose of cryptocurrencies and third-party oversight. Monero vaults that barrier by using cryptography to shield a person’s real-world identity allowing for transactions to be truly private.
Developers of Monero set out to enhance privacy and ensure confidentiality. The activity of every Monero user enhances the privacy for all users, which is different to other enhanced security cryptocurrencies such as Zerocash (Z-Cash) where it is an optional feature. Popularity has been growing for this cryptocurrency since launch as those features continue to heighten interest.
Just this past April, Monero’s price climbed 25% to around $275 on news of a new cryptocurrency fork, Monero V, helped in no small part by its “extreme privacy”, superior mining algorithm and adaptive block size limits.
Monero launched as Bitmonero
Monero, which means coin in Esperanto, was launched in April 2014 by founder known as thankful_for_today. It was first called Bitmonero (so literally Bitcoin) before consensus agreement shortened it to Monero. However, within months of launching a major disagreement led to a fork by the Monero Core Team with the community following them.
Monero is open sourced, crowd funded and driven by its community. The Monero Core Team, who serve as guides, comprises members with areas of expertise in software architects, coding, applied cryptography, public relations and economic development.
Sticking to its ethos of privacy and security only two go public. There is Riccardo ‘Fluffy Pony’ Spagni, who does high-level software architecture and project management, and Francisco “ArticMine” Cabañas. Other members use pseudonyms only:
Monero used CryptoNote protocols and became the first CryptoNote coins. CryptoNote, is electronic cash, evolved as a solution to a deficiency in Bitcoin. Like other CryptoNotes, the focus is on privacy, decentralisation and fungibility (one coin can be exchanged for another). Its public ledger records transactions and new units are mined.
Monero’s goals spread beyond privacy and developers described in an early missive that in its “global, decentralised, censorship-resistant timestamping database, there is a world of functionality that can be bolted on top. Thus, the aim with Monero is for it to become more than just a private cryptocurrency; we want Monero to become an entire suite of easy-to-use tools and systems designed to enhance personal privacy.”
Not without the Monero community
Monero is an open source project and says it is built on the back of its “volunteers, contributors, and donations.” The growth of the grassroots community fuels the growth of the project. More than 240 developers have contributed to the project which includes 30 core developers.
The organisation’s arms include:
- Monero’s Research Lab (research and academic arm)
- Core Development Team
- Community Developers
For a group like this to function successfully “governance” guidelines were issued in 2015 to help manage decision making among the community.
Governance may seem an anathema to a coin dedicated to privacy. As the Core Team wrote in its end-of-year missive: “In the context of cryptocurrencies and consensus systems, the term “governance” seems to be quite taboo. However, for anyone that has ever been involved in an open-source project, a lack of governance is as good as a death knell.” Governance layouts the running of everything from ideas in development, funding through to the way tasks are ran.
For example, posts and comments that are visible to a user are unique and tailored to them through their trust relationships. Post that get a lot of comments by people that are trusted directly or indirectly (trust-of-trust and trust-of-trust-of-trust) appear at the top more often than from someone else who has no trust relationship with those commenters. The expectation was for this to lead to a more personal forum experience, one eventually bypassing trolls and shill posts.
When it comes to funding Monero simplifies the interface for users allowing for streaming of development. Any ideas suggested, which if the community supports it and it reaches a level of maturity, the core team can move it into the open task category.
There it can be pitched for by anyone (individual or group) in the community explaining why they are suited along with a projection of costs. The core team decides which candidate/group/team is going to run with the task, and moves a task along to ‘funding required’.
The community can fund the effort at this point, with individuals being able to reach status levels and earn badges the more funding they provide. Funding has to exceed 60% for work to begin and the task moved to ‘work in progress’. Those working on the task can only request payment at most once a week, with funds released if there is general agreement and observation by the community that the work is being done.
Philosophy of privacy and security
There is, like other digital coins, a philosophy guiding Monero and, like the others, it is based on the pillars of security, privacy and decentralisation. This is becoming “your own bank” with Monero providing a safe space to conduct private transactions such as businesses that may want to conceal business with suppliers.
Or, as the introductory video outlines, “citizens who may want to escape governments… or nosy neighbours or crooks, but it can be selectively transparent and you can choose who you want to see the transactions.”
Integral to security are the miners. Monero gives miners the full block reward, which it says will “never drop below 0.3 XMR, making Monero a disinflationary currency: the inflation will be roughly 1% in 2022 and go down forever, but the nominal inflation will stay at 0.3 XMR per minute. This means that there will always be an incentive for miners to mine Monero and thus keeping the blockchain secure, with or without a fee market.”
The block reward at the time of publishing was 4.47 XMR. Transactions are cryptographically secure using the latest encryption tools available. Mining is meant to be more democratic, helped by the proof-of-work algorithm, which makes it more accessible to a wider range of people since normal computers can mine. Individuals are free to mine or to join a mining pool.
It also contributes to decentralisation another key feature. Lowering the risk of revealing sensitive transaction information, nodes connect to each other with I2P. However, Monero points out that all “development decisions are extremely clear and open to public discussion. Developer meeting logs are published online in their entirety and visible by all.”
Monero says it must be able to protect “users in a court of law and, in extreme cases, from the death penalty.” It’s a level of protection that extends to the more novice to the most competent.
Privacy nets other troubles
Monero can be bought on exchanges such as Poloniex (first to list the coin), Kraken and Bitfinex. It was also found on the now defunct AlphaBay.
The high level of privacy Monero ensures makes the coin fungible with every coin able to be substituted for another. Public-ledger cryptocurrencies such as Bitcoin and Ethereum can have addresses linked to coins and those that were associated with illegal activities can be blacklisted and refused by merchants and exchanges. Monero’s fungibility means that past transaction history has no impact on the coin’s future transaction.
An inescapable fact is that the privacy features of coins such as Monero are also attractive to those dealing in illicit activities such as drug dealing. On the day AlphaBay announced it would list the cryptocurrency, Monero’s market cap was $40m by Tuesday morning it jumped to more than $60m.
It even developed a meme after AlphaBay was folded and arrests were made as a result of tracking Bitcoin transactions on the blockchain. Investigators indicated they could only quantify an “unknown amount of Monero” – Should Have Used Monero became the meme.
Monero was also caught up in the WannaCry cyberware attack, which was considered the most widespread of ransomware attacks as it locked down hundreds of thousands of computers in more than 150 countries. Any computer infected were told to pay $300 in Bitcoin. Some of the funds gained from the criminal heist were converted to Monero.
Bitcoin users may legitimately use Monero to break a link between transaction and obfuscate identity. Signs are that Monero’s is achieving a high profile because it is able to provide users with a higher level of privacy. How widely it will be adopted and whether it is useful and useable by end customers remain big question marks.
- July 2014 – Poloniex Exchange adds 8 separate currency pairs
- Aug 2014 – Hacking attempt
- September 2014 – Monero Gear store with royalties towards Monero development
- September 2016 – Dark web exchange AlphaBay (now defunct) lists Monero
- November 2016 – Bitfinex Exchange also allows Monero deposits and withdrawals
- January 2017 – Kraken Exchange adds Monero pairs
Monero in its own words
“In case you haven’t watched the #Monero-Dev Fireside Chat, we’d like to take a moment to discuss an upcoming terminology change. To take it from the github issue that has been at the centre of the discussion: It’s been suggested that “wallet” is a poor description for laymen, and may hinder adoption. It’s also arguably sexist – men have wallets, women have purses, and whilst “moneybag” is genderless it’s probably the wrong term;)
Whilst Monero is quite far from a point where this terminology becomes an issue, it’s the sort of change that we can make sooner rather than later. The term we’re going to be moving to is “account”. We are aware that some may think that this implies centralisation, but there are key advantages to making this switch, especially as it pertains to new users not familiar with cryptocurrencies:
- It fits in with the whole “be your own bank” motion, which is a good way to explain cryptocurrency in general to people
- The idea of separation of accounts is already familiar to people – a married couple may have a joint account, a company will have an account (or accounts), a savings account would be separate, and so on
- People are familiar and happy with paying a fee for moving funds between accounts, so it won’t be foreign to them
- It’s the most familiar path for the general public. They understand creating an account, using a strong password, password recovery, etc. It’s a natural transition for them.”
Source: Monero Missive 11
‘The academics in the MRL also had an opportunity to meet up with Riccardo Spagni (fluffypony) and Tom Winget (tewinget) towards the end of the year, in a weekend of epic nerdiness that included a trip to a natural history museum and getting stuck on the side of the highway with no petrol due to a faulty gauge. Don’t worry, the emergency petrol fill up wasn’t paid for by donations;)”