Monero is the currency Bitcoin tried to be...

by Eli
on 20 December 2016
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Monero

DOCUMENT MODIFIED: 2016/12/20 - Note: Removed incorrect statement on the discussed, but unactioned "mining halt".

In June 2016, the head of the Commonwealth Bank had infamously stated "If we don't innovate successfully, we're toast". And he wasn't kidding. Ian Narev was fundamentally speaking of the new world economy that entails peer-to-peer business, decentralized business models, and the bitcoin blockchain. The threat is as real as Uber is to the taxi industry.

Fast forward 6 months, and the price of 1 bitcoin has literally almost doubled. The blockchain is quickly becoming a trusted investment solution that is making headway in mainstream channels, and this sentiment is reflected in the now confirmed tea-cup pattern spanning several years. Bitcoin is going strong, but this isn't just a story about Bitcoin. In truth, the market cap among many cryptocurrencies has been going strong.

Bitcoin may have doubled in value in the last 6 months, but Monero, has increased by 500%.

Monero is like a distant cousin to bitcoin. Built on the same fundamental idea that is the blockchain, but employing striking differences in the protocol and execution of its handlings.

What many investors are not aware of, is that at present, Bitcoin is suffering from a capacity limitation, that has its transaction count hamstrung at an approximately 7 transactions a second. As a result many transactions end up taking many hours to confirm, and some fail to confirm at all. In order to ensure your transaction is processed, a user can add a transaction fee - which would promote its priority, at the potential expense of another user's transaction. Hence, its use case will also transform as a direct result. With higher transaction fees, its purpose will naturally evolve to serve only major transactions, and investment opportunities. After all, nobody in their right mind will want to pay 5 dollars for a coffee, only to pay 50 cents in fees.

Addressing this capacity limit has proven to be one of the great schisms of our digital age. The community is so divided on how to address this limit, that the result has been an ongoing stalemate. Not helped, by some who believe the limit should remain as it is, and that small transactions shouldn’t be what Bitcoin gets used for.

While the price of bitcoin will undoubtedly continue to rise, it is indeed a far cry from the original purpose it seems. Satoshi Nakamoto himself, coded the following message in Bitcoin’s genesis block – “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. There is no mincing of words here. Satoshi’s motivation to create the biggest paradigm shift the finance industry has experienced in recent years was born out of the chaos that was the global financial crisis. But more specifically, at the handling of it all by politicians, and banks, which saw them safely bail-out at the expense of home-owners, and ordinary citizens.

So if Bitcoin was supposed to be a liberator of sorts for the ordinary citizen, then its artificial 1MB blocksize limit, and its resulting high transaction fees – are not.

Enter Monero (XMR).

From its humble beginnings (like Bitcoin), through its community driven development (like Bitcoin), to its now decentralised, privacy focused, state (unlike Bitcoin).

Monero doesn’t have the issue of a hardcoded limit – so it can grow without crippling the network, nor adding any fees to the system that Bitcoin now experiences. It remains a currency for all people, rich and poor. It also future proofs this concept because miner rewards on the network will never run out. Following the initial reward curve, Monero supply will continue with a sub 1% inflation ensuring the currency keeps providing.

Monero transactions are hidden. That is the blockchain itself is only viewable by allowance, -the viewkey.

Although the currency is not unique in having privacy capabilities, its recent developments have certainly paved its way as a leader. But it also differs from many other cryptocurrencies in that the developers and users had to make brave moves early on, to make changes and corrections to the supply curve. It’s this sort of community togetherness that shaped the development of this software to be what it is today, and to what it can be tomorrow.

With its maturity quickly emerging, so are use cases. In particular of note is the https://xmr.to/ website, which allows totally private Monero (XMR) payments to any Bitcoin address.

Bitcoin may become whatever it intends to become among the hustle and bustle of political persuasions. But when it comes to Satoshi’s vision, Monero may very well be the product that was ultimately envisioned.

 

Author: Eli (MA IT)
Developer and Analyst.