Monero XMR – a year in the life
The past year performance for Monero XMR coin is a master class in the volatility of altcoins. It held at a relative steady price between $49 and $52 at this time last year before it ricocheted to more than double its price a few months later at the end of December when it hit $329. Monero skyrocketed as high $458 in early January. What is behind the price action?
Anonymity is its superpower. Monero XMR is a decentralised cryptocurrency and privacy and security are its innovation ensuring untraceability – a drawback of Bitcoin and other cryptos that allow for transparency. All while retaining its proof of work.
Monero has gained a great deal of respect but there is a whiff of renegade attached to it given its adherence to, and defence of, a right to privacy. That privacy by definition extends to those who may be using the coin for illicit activities on the dark web.
It is considered a leading privacy altcoin, though there are others such as ZCash and Dash. Monero’s two key features are, first, its creation of ring signatures which getmonero.org describes as “a type of digital signature that can be performed by any member of a group of users that each have keys. Therefore, a message signed with a ring signature is endorsed by someone in a particular group of people…computationally infeasible to determine which of the group members’ keys was used to produce the signature.”
The other key feature is generating stealth keys whereby creating random one-time addresses for each transaction on behalf of the recipient means only the sender and receiver can determine where a payment was sent. This makes it more difficult to trace but not improbable as a recent academic paper attests.
Like all cryptocurrencies, volatility is a hallmark and this piece is not investment advice. It’s important to understand the risks of investing in cryptocurrencies. A year in the life of Monero can reveal something about the properties underpinning XMR.
Fans of anonymity
This inherent privacy and anonymity has won it a great number of fans and investors. In talking about how the landscape of our payments system has changed over time which Monero’s lead developer, Riccardo ‘Fluffypony’ Spagni noted while it “increased our convenience. It decreased our privacy.” Monero addresses this providing the same fungibility as cash.
Spagni wants us to understand that “privacy is not just for criminals.” For example, some people prefer to avoid advertising based on our spending habits. Or based on something I bought on another site yesterday…or reveal sensitive business relationships,” he explains.
A snapshot of its price in June 2017 (see chart below) showed the price was averaging around $48. It spiked in August 2017 to around $72 and has traded well above that mark since then and the XMR is currently trading at $136.47 that’s a 64% rise in a year.
At look at alTanga, cryptocurrency tracking site, shows the average price return of XMR however is 0.89% in 2017 and down -0.51% thus far in 2018. And, its current price is 27% of its all time high.
Price predictions, however, for 2018 forecast around $650 and up to $2000 in five years. One analyst suggested $400 in 2018 and suggested gains could be compounded by a “privacy premium”. Currently Monero ranks 13th by market cap of $2.19bn. There are 16 billion coins circulating and a total volume of $41bn.
Darling of the dark web?
Cryptocurrencies continue to see a negative trend as sentiment continues to be bearish. At the time of publishing, crypto markets experienced a drop attributed than investigation by the US Commodity Futures Trading Commission into price manipulation at four crypto exchanges.
Total crypto market cap at time of publishing is $320bn and over the past 30 days it has lost around 26% of its value. However, XMR has traded between a lower limit of $167.39 (which is not considered exceptionally low by alTanga) and $183.22.
While it’s clear that the coin has a supportive, committed community, among its fans are the users of dark web for which privacy remains a key attraction.
Spagni admitted to last year in the International Business Times: “The reality is, right now, the majority of Monero use cases are drugs and tax evasion. I can’t pretend that’s not the case,” Spagni said. “At the same time, the reason we work on Monero is the real, practical use cases. If you live in an oppressive regime, and you need to buy something without your government knowing, then Monero exists for that.”
“Privacy arms race”
There are currently 1520 active nodes around the world and China and Russia are among the top five countries with the most nodes. There are other legitimate uses for an altcoin like Monero outside of a possible workaround for countries with issues of censorship. Spagni notes that multinationals may want to move funds without revealing it to competitors and family members may also want to move funds.
Still there are criticisms directed at Monero’s very core of existence.
Something that plainly rankles Spagni as noted by Twitter user at a recent Consensus conference on a panel on privacy @fluffypony uses @snowden’s argument: When you say I don’t need privacy because I have nothing to hide, that’s like saying I don’t need free speech because I have nothing to say.”
In fact, David Floyd, Coindesk reporter, tweeted that a panellist described the outlook on privacy “is going to be an ongoing technological arms race for the foreseeable future.”
Spagni sees “Privacy tends to be either a taboo subject or have a negative connotation,” which makes companies that focus on it “outliers”. That’s not a great position for a for-profit company to be in.”
While Monero waits for the average person to catch up to its philosophy, the coin’s longevity remains to be seen. Circulating coins remain steady. Its community designed Monero to be mined by the average person without massive computing power. It is ASIC resistant and without the centralised mining problem plaguing Bitcoin.
However, there may be computing devices are created that could change the Monero market. Although it is something Spagni defends against and has riven its community somewhat. For another, it’s got sizeable competition from Ethereum, which has added privacy features through its Byzantium fork.
Also, the biggest threat, which hangs over the cryptomarket, remains regulation. However, Monero is not standing still. It’s price point to it being undervalued according to some analysts as it has fallen from its peak.
According to Spagni there’s a whole bunch of stuff coming down the pike in future such as “scaling and enhancing solutions.” He’s also excited about other cool stuff “like building systems on top of Monero like Monero ID and Monero Trust which are trust and identity systems which use Monero as a base layer.”
Monero expects to build out these components, eventually adding other things that hinges on to trust and identity systems, eventually he says if “we’re still around we’ll have stuff like smart contracts.”