Even today, many users are pleased to buy, send, and use Bitcoin. However, the fact that Bitcoin is pseudo-anonymous, rather than anonymous, crashed dreams of many Bitcoin enthusiasts. Fortunately, not for too long. Soon, Monero got into the game and changed the world of privacy coins forever.
What's wrong with Bitcoin?
Bitcoin transactions are made by forwarding Bitcoins from the sender's wallet to the receiver's wallet. Each transaction includes the sender's address, the receiver's address, transacted value, and the timestamp. All of this information is stored in the blockchain and available to everyone. Forever.
As Bitcoin gained popularity, so did the tools used for tracking Bitcoin transactions. These tools are beneficial for users who want to check the status of their transactions.
However, once governments realized the power of digital coins, they started to invest in the development of sophisticated blockchain analysis tools to trace, monitor, and restrict digital currencies.
Monero vs. Bitcoin security
As the governments found a way to reveal the identities behind the wallets, so did the hackers.
The traceability of Bitcoins makes you a potential target for hacking attempts, especially if the balance of your Bitcoin wallet is high enough to be appealing for the bad guys.
Furthermore, if somebody used a Bitcoin for illicit activities, and eventually, the Bitcoin ended up in your wallet, then you might own a "contaminated" Bitcoin now. This Bitcoin can get rejected by crypto exchanges, lose its value, or in the worst-case scenario, become unusable.
Also, blockchain analysis companies that detect illicit transactions can hand your identity to authorities, as you are the current owner of the contaminated Bitcoin.
Is Monero more anonymous than Bitcoin?
The main selling point of Monero is anonymity.
Monero is derived from Bytecoin, the first private, untraceable cryptocurrency created in 2012. Bytecoin quickly plummeted, once the users discovered that 80% of all the existing coins were already pre-mined.
However, seven of its developers formed a separate group that developed Bitmonero, later renamed to Monero. Monero, or short XMR, was released without a fuss, by an anonymous developer putting it on a message board.
Today, David Latapie and Riccardo Spagni are two Monero developers known to the public. The rest of the developers are unknown.
Monero vs. Bitcoin anonymity
Contrary to its portrayal, Bitcoin is not anonymous. Just because you hide behind the wallet's address doesn't mean that nobody sees you. However, the fact that there is no personal data in the transaction still makes Bitcoin transactions less transparent than those in the bank.
Monero, on the other hand, is entirely anonymous. To accomplish this, Monero takes advantage of dozens of privacy features, including Ring Signatures, Ring Confidential transactions, and Stealth Addresses. Let's take a quick look at the major ones.
Ring Signature is used to hide the identity of the sender by a group of users signing the transaction simultaneously. The real sender's identity is protected, and there is no way to pair anyone from the group of signers with a specific input or output in that transaction.
A ring of signing parties can involve real users, Bots, and Mixins. Mixins are the shadows of earlier Monero transactions, automatically added to help conceal the identity of real senders in the transaction. Once your transaction is completed, it can become a Mixin, too, and help to protect future transactions.
Ring Confidential Transactions
Ring Confidential Transactions is a protocol added as another step to protect Monero's privacy further. The main goal of this protocol is to conceal the transacted amount. Even if the transaction is visible in the blockchain, it becomes impossible to know the amount unless you are the sender or the receiver of the transaction.
Stealth Keys and Stealth Addresses
Stealth Keys, or "spend keys," are used to add another layer of anonymity. While Ring Signatures protect the sender, Stealth Keys protect the receiver. The sender has to generate a Stealth Key or one-time Stealth Address and send the coin using this address. The receiver then uses a private view key to see the incoming transaction.
Monero has dozens of other features that make it anonymous. To learn more about them, we recommend you to read our article on Monero privacy.
Monero vs. Bitcoin comparison
Doing a transaction with a Bitcoin is like buying with a credit card. Even though your name won't be on the receipt, everything else will: the number, the amount, and the type of a card. If the authorities decide to monitor your spending, they will have the tools to do so.
Instead, doing transactions with Monero is like using a secret joint fund. Since many people have access to it, there is no way to know who made the transaction or how to trace it back to your identity.
Monero vs. Bitcoin privacy
The governments around the world are tightening their grip around the Bitcoin transactions.
Bitcoin tracking companies such as Chainalysis, Ciphertrace, or Crystal Blockchain are blooming. The Chainalysis's role in the Silk Road scandal, which got a lot of attention, is one of many successes of such companies.
On the other hand, Monero is resisting governments' limitations. During the recent financial crisis in Greece, the government limited people to withdraw a maximum of 60 Euros per day. Cryptocurrency proved useful in these circumstances as the government couldn't trace spending. During this period, thanks to its anonymity, Monero was one of the popular options.
Additionally, a cybersecurity company revealed that it had detected a software mining coins and sending it to a server in Pyongyang, North Korea. The company concluded that they probably opted for Monero because of its anonymity. It was understood as an attempt of North Korea to provide a much-needed influx of funds despite limitations and embargo imposed by the world.
Monero vs. Bitcoin differences
When it comes to improving the service, the Bitcoin network and its blockchain have quite a few issues.
First of all, Bitcoin has a limited block size that cannot adapt, which puts a limit on the processing capacity, speed, and cost of each transaction.
To improve the network's transaction ability, the changes in the Bitcoin operations, known as a fork, need to be implemented.
A hard fork is a radical change in network operation and protocols. Once done, the old protocol is seen as invalid. If both versions, old and new, remain active, they are considered split. Many coins were created as a result of splitting Bitcoin blockchain. In the past, many Bitcoin hard forks proved damaging and dangerous for the network, which poses a limitation on changing and improving it.
On the other hand, Monero has a flexible block size, which means that it can adapt to the network's needs. Upgrading its protocols is also easier and done regularly. Monero does an update every half a year, and all users receive an obligation to update the software to a newer version.
One of the growing issues of Bitcoin is the fact that its mining is becoming more and more centralized.
The cryptocurrencies are processed using general hardware such as GPU and CPU. However, the entire mining process got more productive with the introduction of ASICs or Application Specific Integrated Circuits.
ASICs are chips dedicated to mining cryptocurrencies. They are so effective, especially in mining Bitcoins, that it is becoming unprofitable and hopeless to avoid them.
Even worse, there is only a small number of companies that develop ASICs. As they introduce more specialized chips, they gain more mining power. If ASIC chips can manage to acquire more than 50% of the blockchain's hashing power, they can put other miners out of business.
Also, such power over the blockchain allows for a so-called 51% attack, that will enable hackers to take over the blockchain's protocols and use their power for fraudulent activities and altering transactions.
Monero continually manages to find a way around this trend by creating ASIC-resistant algorithms, which gives way to the general processing of Monero coins.
The tricky part is that there is no end battle when it comes to avoiding ASICs. However, the network keeps investing and hard forking the system to maintain its decentralized mining status.
Monero privacy vs. Bitcoin
Without a doubt, in the privacy battle of Bitcoin vs. Monero, Monero takes a clear win.
It is not to say that Bitcoin is dying out. However, the Monero team did a great job of creating anonymous cryptocurrency and a scalable network with decentralized mining. It has become an excellent option for people concerned about their privacy and privacy of their transactions.
If you prefer using Bitcoin, but love the anonymity of Monero, then we recommend you check out Tumbler. By using the Bitcoin anonymization tool, you can erase the transaction history of Bitcoin, with the strength of Monero. Give it a try now.