Monero, the True Bitcoin?

“Monero is THE use case for crypto.” “Monero is the true Bitcoin.”

While many crypto philosophers love to debate over Monero being at its core even more Bitcoinest than Bitcoin (or not), for criminals, the response is clear.

Monero is the best use case for crypto today.

Today, Monero is the most popular cryptocurrency for malicious mining, the crypto of choice for ransomware, plenty of black markets on Darknets choose to operate solely with Monero to the extent that it may potentially become the Darknet standard currency, and so on and so forth.

This criminal endorsement alone could put an end to this philosophical debate if we measure the degree of Nakamotoity of a cryptocurrency based on the “Crypto is only good if it works for criminals” rule.

Why?

Because the intense criminal use of a cryptocurrency is proof that core blockchain values like privacy, decentralization and censorship resistance are ensured.

As Monero continues to gain traction among criminals at an accelerated rate, it could become the go-to crypto for both traditional criminals and crypto criminals, fulfilling their need to obfuscate their traces and having transformative effects on the tracing industry.

“It may seem that this golden age of cryptocurrency tracing is coming to an end and that people are wising up but I think it’s maybe just accurate just to see it as another phase, another step in this cat-and-mouse [crypto tracing] game,”

commented Andy Greenberg, cybersecurity expert, in an interview with crypto journalist Laura Shin.

So, what makes Monero such a tough cookie to crack for law enforcement and crypto tracing experts? In what way does it differ from “classic” cryptocurrencies like Bitcoin?

The answer is in our decrypt!

Satoshi Nakamoto’s vision for Bitcoin, in alignment with cyberpunk ideals of privacy, liberty, and resistance to censorship, was to create a decentralized digital currency that operates without the need for a central authority, such as a government or financial institution.

The main goals were to establish a peer-to-peer electronic cash system that would enable secure, fast, and low-cost transactions worldwide.

Nakamoto’s vision included removing reliance on intermediaries, reducing transaction fees, ensuring privacy, and providing financial inclusion to individuals who may not have access to traditional banking services.

For years, the idea that Bitcoin and crypto at large were fully anonymous and untraceable was taken at face value by criminals and law enforcement alike, leading to the establishment of criminal markets on the Darknet built around cryptocurrencies.

The real first breakthroughs in dispelling this misconception came in 2013 with the research article: “A fistful of Bitcoins: characterizing payments among men with no names”, led by Sarah Meiklejohn, which proved that Bitcoin transactions were neither anonymous nor untraceable.

As well as the highly publicized take down of the biggest black market operating with crypto at that time: the Silk Road. Made possible after the investigators were able to trace crypto transactions that led them to the arrest of its founder: Ross William Ulbricht, pseudonymously known as Dread Pirate Roberts.

Since then cryptocurrency tracing boomed into the industry it has become today with leading actors like Chainanalysis paving the way and building tools that law enforcement use to now track criminals and crypto criminals.

Where Bitcoin’s alleged anonymity and untraceability were proven to be untrue, Monero, although not foolproof, is now widely recognized as a reliable tool to protect anonymity and ensure untraceability.

Pseudonymous Vs Anonymous

One of the key distinctions between Monero and Bitcoin lies in their approach to privacy.

Bitcoin operates on a transparent blockchain, where all transaction details are visible to anyone. While pseudonymous, it is possible to trace the flow of funds and link addresses to real-world identities with sophisticated analysis tools.

On the other hand, Monero is designed with a strong focus on privacy and anonymity, to the point of making privacy mandatory. Unlike some other cryptocurrencies, all transactions are private by default, and it is not possible to opt-out of privacy enhancements.

It utilizes three key technologies: ring signatures, stealth addresses, and confidential transactions. Ring signatures obfuscate the sender, stealth addresses hide the recipient, and confidential transactions obscure the transaction amount. These features make it extremely challenging to trace Monero transactions and link them to specific users, ensuring enhanced privacy.

A breakdown of these features:

. Ring Signatures — Monero uses ring signatures to obfuscate the transaction source. A ring signature combines the spender’s input with a group of other possible spenders, making it difficult to determine which specific input was used to initiate the transaction.

. Stealth Addresses — When a recipient provides their Monero address, a unique one-time address is generated for each transaction. This ensures that the recipient’s actual address remains hidden and makes it challenging to link the sender and receiver.

. RingCT (Ring Confidential Transactions) — RingCT hides the transaction amount by using cryptographic techniques. It ensures that the sum of inputs and outputs balances while obscuring the exact values involved.

. Kovri Integration — Monero integrates the Kovri project, which is an implementation of the I2P (Invisible Internet Project) network layer. Kovri enhances privacy by encrypting and routing transactions through a decentralized overlay network, making it difficult to trace IP addresses or geolocations.

Blockchain Analysis Resistance

Logically then, if all and beyond is created with the sole attempt of protecting the identity of its users, successfully obfuscating transactions is a logical corollary.

Bitcoin’s transparent blockchain allows for detailed analysis, enabling entities to track and analyze transaction history.

Although Bitcoin users can adopt best practices like using multiple addresses, coin mixing services like the infamous Tornado Cash, or privacy wallets, they are still susceptible to de-anonymization. Plus, it’s time and money-consuming with little to no guarantee of anonymity. It’s way too much of a hassle for any criminal worth their salt.

Monero, with its privacy-centric design, resists blockchain analysis to a much greater extent. The ring signature technology used by Monero enables the mixing of transaction inputs, making it difficult to determine the true sender. Additionally, Monero’s default use of stealth addresses ensures that the recipient’s identity remains hidden. By implementing these privacy features by default, Monero offers users a higher level of anonymity, thus untraceability.

Governance and Censorship Resistance

Outside of anonymity and blockchain traceability, the other most important feature crucial for criminals is censorship resistance.

In blockchain frameworks, censorship resistance ensures that all network regulations are established and enforced impartially by users, and cannot be altered for personal gains by a person or an entity.

Within a censorship-resistant blockchain, a user is assured the ability to conduct immutable transactions on a blockchain network without requiring permission from any third party.

No entity, whether it be a nation-state, corporation, law enforcement or third party, possesses the authority to regulate who can engage in transactions or retain their assets within the network. Censorship resistance guarantees that the network’s governing laws are predetermined and cannot be modified retroactively to conform to a particular agenda.

A neutral, censorship-resistant and decentralized system is theoretically robust enough to be able to deflect attacks from even well-resourced actors.

The architectural feature that promotes censorship resistance is decentralization, whichtheorically ensures that no central authority can control or restrict access to the network.

Bitcoin’s Censorship Resistance

Bitcoin, in particular, has gained a reputation as the most censorship-resistant cryptocurrency and is unsurprisingly reasonably decentralized.

Bitcoin’s decentralized network consists of a vast number of nodes globally, making it highly resistant to censorship attempts. With no central authority or controlling entity, it becomes exceedingly difficult for any single party to manipulate or restrict transactions on the network.

Bitcoin’s consensus mechanism, known as Proof-of-Work (PoW), requires miners to solve complex mathematical puzzles to validate transactions and add blocks to the blockchain. This energy-intensive process ensures that any attempt to censor or manipulate transactions would require an enormous amount of computational power, making it economically infeasible and highly impractical.

Bitcoin’s widespread adoption and large network of users and miners contribute to its security and censorship resistance. The more participants there are in the network, the more decentralized and resilient it becomes against censorship attempts.

Monero’s Censorship Resistance

Monero’s governance model differs from Bitcoin’s, but is as, if not even more censorship resistant than Bitcoin.

It offers censorship-resistance through mechanisms shared with Bitcoin like PoW and (large) network effect, a distributed development model that prevents a single point of control and enhances the network’s resilience against external pressures.

Its peculiarity lies in its community-driven approach with an emphasis on privacy, security and censorship-resistance. Decisions are made through open discussions and community consensus. Monero has a vibrant and decentralized development community that allows for continuous development and implementation of privacy enhancements. This very dynamic and continuous commitment to privacy helps protect users’ financial sovereignty and prevents potential censors from identifying and targeting specific transactions or users.

It offers users a high degree of financial privacy, making it difficult for third parties or authorities to censor or manipulate transactions based on the content or transaction history.

Its commitment to privacy and censorship-resistant financial transactions has made Monero the favorite of privacy-seeking Web3 users, as well as criminals of all walks of life.

Its immense success among criminals has drawn a worldwide-shaped target on Monero’s back. Labeled as a privacy coin or anonymity-enhanced coin (AEC), Monero, alongside other AECs like Zcash, faces increased scrutiny from regulatory authorities.

This has resulted in certain exchanges not listing, delisting, or imposing restrictions on Monero trading, such as Coinbase, Huobi, or Bittrex.

Moreover, in February of this year, Dubai announced plans to ban all privacy coins, following the footsteps of Japan, South Korea, and Australia, which did the same in the last few years.

Now, if you ask yourself how a currency popular among criminals, unpopular among law enforcement and regulatory bodies, with such wholesome features by Web3 standards, is so rarely talked about and far behind in terms of popularity, recognition, and use compared to the likes of Bitcoin, Ethereum, etc.

Well, it lies in one single fact: Monero excels at everything but being a speculative asset.

Opposed to Bitcoin’s maximum cap of 21 million coins, which prevents inflation and “promotes scarcity” (speculation), Monero does not have a fixed supply cap and is designed to be inflationary to ensure a continued incentive for miners to secure the network.

Additionally, they are primarily focused on their privacy mission and do not market themselves as the go-to friendly crypto designed to onboard the next billion Web3 users. They distance themselves from the popularity contest and build their reputation far away from the crowd.

Their invisibility and quiet popularity are likely what has protected them for so long from intensive scrutiny by regulatory authorities around the globe. The actions taken against Monero are few and far between, considering how much it has become entangled in the realm of cyber and crypto criminality.

However, as the criminal use popularity of Monero continues to rise in a worldwide regulatory landscape intent on reining in crypto actors involved in criminal activity, chances are that the noose around Monero’s neck will tighten with more strength and at a faster pace than ever before.

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