By Nicholas Brown – Follow me on Twitter
Monero Basics: What Is Monero?
Monero is a digital currency that uses cryptography intrinsically to settle transactions, secure its network, and generate new coins. Monero is denoted by the currency symbol XMR and is listed on many cryptocurrency exchanges around the world. A key goal of Monero is to protect its users privacy, unlike most other cryptocurrencies.
Monero is a fully automated network of nodes and miners that execute hashing functions to ensure the authenticity of transactions, and maintain the integrity of its blockchain. Nodes and miners are computers that store and maintain a copy of Monero’s blockchain. Both nodes and miners play their own roles in facilitating and verifying the authenticity of transactions.
Monero is a fully open-source project maintained by volunteers in the Monero Community via GitHub.
Monero’s fully automated, non-custodial nature means that there are no tellers and no customer service representatives to conduct or alter transactions for you. If you accidentally send coins to a wallet address, you can’t reverse that transaction. All you can do is ask the recipient to send the coins back.
Monero’s blockchain is a database of all transactions ever to occur on its network.
Monero is non-custodial in nature, meaning that only you have access to the coins in your Monero wallet. Monero allows you to store your coins securely on its blockchain without a custodian such as a bank, and it processes your transactions without any banking or remittance institutions involved. This combines the benefits of physical cash with the benefits of electronic payments.
Table Of Contents
- What is a Monero wallet?
- How to get Monero coins.
- Exchanges that sell Monero.
- What to do if you don’t have access to exchanges that support Monero?
- How to create a Monero wallet.
- Tips to protect your coins.
- What determines XMR’s value?
- The origins of Monero.
- Governance: Who controls Monero?
- Censorship resistance: The freedom to transact, anywhere.
- Misc. facts about the cryptocurrency.
What Is A Monero Wallet?
Your wallet is a set of cryptographic keys associated with your transactions. A wallet app uses your keys to pull up your transaction history and calculate how many coins you own based on that. The wallet app will also use your private keys to sign your outgoing transactions.
How To Get Monero Coins/How To Purchase XMR
You can acquire Monero coins (XMR) by purchasing them on cryptocurrency exchanges. If you don’t want to purchase Monero, you can mine it using mining software. Miners are paid with XMR for facilitating the settlement of transactions and securing the network. This is called block rewards. Miners are also paid the transaction fees incurred when you do transactions.
Exchanges That Sell Monero (XMR)
- Binance.com (not Binance.us).
What To Do If You Can’t Buy Monero Directly On An Exchange
If you don’t have access to those exchanges in your region or you simply don’t want to use them, you can buy XMR directly from another person by paying them with cash or any other payment method, then have them send you XMR. Please be wary of the risks involved. Unscrupulous people may take your money, but won’t necessarily send you the XMR.
If you don’t trust a particular exchange with your card number, bank account, KYC data (KYC data theft/leaks are a serious risk), you can purchase Bitcoin (BTC) and then trade it for Monero on another exchange. That way, you won’t have to provide the exchange with access to your bank account.
For example: You can buy Bitcoin on an exchange that doesn’t sell Monero, such as Coinbase and then use that Bitcoin to buy the Monero on another exchange that does support it.
Note: Don’t store your Bitcoin, XMR, or any other cryptocurrency on an exchange. That poses a high risk of getting your coins stolen. After purchasing your XMR, withdraw it to a non-custodial wallet such as Monero Core, Cake Wallet, Monerujo, or another reputable app that doesn’t store your private keys.
How To Create A Monero Wallet
You can create a Monero wallet in seconds by installing a wallet app such as Monero Core (available for Macs and PCs) or Cake Wallet (Android and iOS) and you’ll be prompted to create a new wallet (or it will generate one automatically). The wallet app will generate a set of keys for viewing and signing transactions.
You must immediately create a backup copy of these keys and store them in a safe place.
If you don’t, then you’ll lose access to your coins (forever) in the event your computer malfunctions. These backup keys (or recovery phrase in the case of some wallet apps) can provide access to your coins from any device. This means that you should never send anyone your private keys (or any of the secret keys).
Note: Your coins are stored on the Monero blockchain, not your PC. What your PC contains is the keys to those coins, and your wallet app uses your keys to sign outgoing transactions.
Tips To Protect Your XMR Coins
- Never send anyone your private key.
- Don’t post your wallet balance online.
- Don’t upload your keys to cloud services, especially not if they don’t have zero-access encryption.
- Don’t go to any websites that may have malware.
- Exercise caution when searching for wallet apps (in mobile app stores or on computers). There are fake apps pretending to be reputable wallets, but which steal your keys.
- Don’t send anyone XMR if they promise to send you back more. That’s a common scam.
- Don’t store your XMR on an exchange. Exchanges pose an especially high risk of coin theft. Withdraw it to a hardware wallet if feasible. Otherwise enable app-based 2FA (not SMS 2FA).
- If trading XMR on an exchange, ensure it is a reputable exchange and check the URL in your address bar to ensure that it is the correct address for that exchange. For example: If you’re using Binance, ensure that you are at binance.com and that it isn’t incorrectly spelt, or any other URL for that matter.
What Determines XMR’s Value?
The value of Monero (XMR) coins is determined by demand and supply economics. This applies to almost all currencies. However, Monero’s algorithm controls the supply of coins to some extent to prevent hyperinflation. Miners are only allowed to generate a limited number of coins per block, and mining is also an expensive process — unlike printing fiat currency.
Fiat currency (most national currencies are of the fiat variety) is not backed by gold or any other tangible item and is printed as well as distributed by central banks. Fiat currencies have a history of catastrophic hyperinflation events that have resulted in the loss of purchasing power. This is due to central banks printing too many notes (thereby increasing supply, and reducing the value of their currencies).
The Origins Of Monero
Monero was created in 2014 as a fork of Bytecoin (BCN) — a private cryptocurrency project based on the CryptoNote protocol (created by Nicolas van Saberhagen). Monero currently uses the RandomX protocol.
Ring Signatures Help To Protect Your Privacy
One of the concepts Monero utilizes to protect your privacy is ring signatures. Ring signatures enable any one of a trusted group of members to sign a transaction without knowing who signed it. Monero incorporates this by using your account keys plus other public keys pulled from its blockchain to form a ring of signers.
Monero Governance: Who Controls Monero?
Monero’s code is maintained by volunteers via GitHub and changes to its code can only be applied to the network if the Monero community approves of them. The community refers to nodes and miners. Monero is governed collectively by thousands of nodes and miners all over the world.
The purpose of this architecture is to ensure that control of the network is not centralized. Thousands of nodes and miners have to agree to any changes to Monero Core, and thousands of nodes and miners verify the authenticity of transactions.
Individual nodes and miners don’t have the power to censor transactions or make changes to the network. Aside from privacy, decentralization has always been a core focus of Monero.
Censorship Resistance: The Freedom To Transact, Anywhere
Monero offers censorship resistance, which means that it does not allow anyone to block your transactions or freeze your funds — including governments. This, combined with its non-custodial nature provides its users with the same level of freedom that physical cash provides — except you can use it for electronic transactions.
Censorship resistance is of use to both criminals (unfortunately) and innocent people who happen to be whistle blowers, journalists, human rights activists, and political opponents. There have been cases throughout history in which abusive governments and banks have used their censorship abilities to obstruct the activities of activists and political opponents.
This freedom to transact also enables it to bypass international trade sanctions imposed via banking systems. The political implications of Monero are likely to be significant for this reason.
Misc. Characteristics Of Monero
|Date Released:||April 18, 2014|
|Consensus Algorithm||Proof-Of-Work (PoW)|
|Full Node Software||Monero Core/Monero Daemon (monerod)|
|Supported OS (for Monero Core)||Linux, Windows, MacOS|
|Blocks Generated Every||2 Minutes|
Did You Know: Monero mining is ASIC-resistant. This means that regular computers can still make a profit mining Monero. ASIC mining computers are expensive and more efficient. They have a tendency to squeeze out ordinary miners due to their competitively high performance per watt.
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