What is Monero (XRM): The Complete Beginner’s Guide

What is Monero? Monero (XRM) is a popular privacy coin that protects your transactions with advanced cryptography. Developed by a decentralized and mostly anonymous community, Monero has become an open-source cryptocurrency that hides all transaction data with ring signatures, RingCT, and stealth addresses. It has provided true financial privacy in the era of mass surveillance—since its launch in 2014 as a Bytecoin fork.

Eager to find out more? Here’s what this guide will cover:

1. What is Monero?
2. Privacy vs. Anonymity
3. How Does Monero Work?
4. How Monero Solves Privacy and Fungibility Issues
5. XMR Crypto
6. Final Thoughts: The Future of Monero

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1. What is Monero?

Monero is a private decentralized cryptocurrency that obfuscates the three parts of any transaction: the sender is obfuscated through ring signatures, the amount sent is obfuscated through RingCT, and the receiver is obfuscated through stealth addresses. It operates on its own, independent blockchain, specifically designed to prioritize privacy and decentralization.

The Monero project is still in active development, including ongoing improvements to enhance privacy features and transaction efficiency. Additionally, the integration of technologies like Kovri is on the horizon to further mask the users’ IP addresses.

Fun fact: Do you know what Monero means? Monero is coin in Esperanto, a constructed international language.

2. Privacy vs. Anonymity

Firstly, let’s draw a line between privacy and anonymity. Privacy is having the power over who knows about your personal details and actions—it can be compared to closing the door to keep your most personal space. Anonymity, on the other hand, ensures that even if information is made publicly accessible, it won’t be connected to you.

For instance, strict privacy settings on your social media account ensure that only trusted contacts see your updates, and anonymous posting on the web gives you the freedom to offer opinions without revealing your identity.

In the cryptoverse, Bitcoin is probably the best example. Its blockchain is entirely public—all transactions are public, and all of the data (amounts, addresses, and timestamps) is set in stone forever. The only way to remain private when using Bitcoin is to use external tools, i.e., transaction mixers, VPNs, or Tor. Is Bitcoin anonymous? Not in the least: the addresses are pseudonymous, and transactions can be linked back to real-world identities.

As higher levels of regulation and more sophisticated tracking systems are developed, the distinction between anonymity and privacy is evident. Understanding your privacy and anonymity needs enables you to choose the cryptocurrency and level of security.

3. How Does Monero Work?

What makes Monero private? The Monero protocol obfuscates the three parts of any cryptocurrency transaction—the sender, the receiver, and the amount sent. Let’s see how this is done for each part.

Obfuscating the sender

To obfuscate the sender’s identity, when he or she signs a Monero transaction, their signature is combined with past signatures from the Monero blockchain. These act as decoys and make it impossible for an outside observer to determine who actually sent the transaction.

Here, we need to mention that Monero hides the majority of the transaction data. However, the sender’s IP address can still be tracked. Due to this problem, a feature called Kovri was proposed to be integrated in Monero. Such integration would route transactions through multiple virtual nodes, thereby hiding the sender’s IP. However, as of today, Kovri hasn’t been implemented within the Monero network. If ever to be completed, it would provide additional privacy by fully anonymizing Monero users.

Obfuscating the amount sent

The amount being sent is obfuscated by ring confidential transactions, or RingCT for short. Simply put, RingCT presents an improved version of ring signatures. We won’t go into the technical aspect of how RingCT works, but it will suffice to say that instead of broadcasting the actual amount being sent, the user transmits only a small random-looking piece of information. This information is enough to verify that the amount being sent is legit while keeping the actual amount private.

The Monero protocol also uses bulletproofs—a unique type of cryptographic test—to increase efficiency and reduce transaction size. Since the implementation of bulletproofs in 2018, the average transaction has been reduced in size by at least 80%, as well as the transaction fees.

Obfuscating the receiver

Finally, we want to obfuscate the receiver. This is done through the use of stealth addresses. A public—raw—Monero address is a 95-character string that starts with a ‘4’ or an ‘8’. However, when I send funds to that address, the funds are actually sent to a different address.

Monero address example:

443o1Zttug2hRCndg9ZDtNPTLq6uaspsH4tLs1AddKCGiwfTs8Jwfirb8TQQrfdDTFB5Tyug93WVbYKAR1vyAsC8VH5BtLo

So, if you’re the recipient, funds are sent to a one-time stealth address that is derived from your public address. This creates a separation between your public address and the funds sent to you, so no one can know your balance.

Only the recipient’s private key “knows” they can spend funds from that one-time stealth address and each time the Monero wallet launches, it will scan the blockchain for addresses it can spend in order to know the actual balance.

4. How Monero Solves Privacy and Fungibility Issues

Transactions on Monero are untraceable and unlinkable, so you can’t tell where they originated from, and you can’t connect any two transactions together. Now, you might be asking yourself, who really needs a private coin? Let’s have a look at how Monero solves privacy and fungibility issues, and how it compares to Bitcoin.

Focus on privacy: Monero vs. Bitcoin

Criminal activity can benefit a lot from a private cryptocurrency like Monero. Monero’s privacy has piqued the interest of regulators aiming at shutting down illicit activity. As a result, several cryptocurrency exchanges have delisted Monero along with other privacy-focused coins. In February 2024, Binance, a top international exchange, delisted Monero from its exchange. In April 2024, Kraken also announced that it would be delisting Monero for Irish and Belgian users. Kraken then widened this step for all European Economic Area (EEA) users, shutting down all trading and Monero deposits. By the end of 2024, Kraken shut down all Monero withdrawals, converting any balance outstanding into Bitcoin.

These delistings are just the tip of an iceberg—an international trend known as the War on Privacy Coins. Regulatory bodies globally are trying to isolate cryptocurrencies with increased anonymity. As the argument goes, these coins could be utilized in money laundering, tax evasion, and other criminal activities. Such regulatory requirements challenge privacy coins like Monero in terms of accessibility and liquidity.

However, there are more than enough legitimate reasons for privacy as well. For example, with the amount of data being displayed on blockchains like Bitcoin, it has become easier these days to identify patterns, map real-life identities, connect between addresses, and uncover behavioral information about users. This is concerning as the blockchain analysis industry continues to grow, with governments and companies actively investing in blockchain surveillance technology.

So, if you don’t like companies analyzing your data to map out your behavioral or purchasing patterns, you may consider using a private cryptocurrency. Additionally, since all address balances are completely transparent, you may become subject to attacks if you hold large amounts of Bitcoin.

Another thing to consider is market prediction. If you know a certain address belongs to an exchange, you can track it for incoming transactions. If you see a large amount coming in, you can assume that a big sell order may be on its way and short the currency for profit. In a truly perfect market, such loopholes wouldn’t exist. This type of market manipulation is only possible because of the transparency of traditional blockchains like Bitcoin.

Focus on fungibility: Monero vs. Bitcoin

Finally, we come to the issue of fungibility. Fungibility means that currency units should be completely interchangeable with one another. Simply put, if you have a $20 bill, it shouldn’t matter to you where it came from or when it was made. A $20 bill is just a $20 bill, and it’s equivalent to any other $20 bill you can find.

However, in Bitcoin crypto, for example, you can trace each coin back, even as far as to when it was first created as a mining reward known as the coinbase transaction. So, if somewhere along the way this Bitcoin was used for illegal activity, you may find some law enforcement agency knocking on your door as part of an investigation they are running.

While this is all theory for now, it could easily happen since bitcoins are 100% traceable. So you might have different prices for freshly minted bitcoins as opposed to “used” bitcoins. For Bitcoin to truly become a currency, it will have to deal with this fungibility issue. On the other hand, a private coin that can’t be traced has complete fungibility. Monero does offer full fungibility, however, by making each transaction anonymous so that each unit is indistinguishable from the other, thereby fixing Bitcoin’s fungibility problem.

5. XMR Crypto

Next up—what is Monero coin, and how is it mined? Monero uses XMR as its currency. Similar to Bitcoin, XMR is mined through computers that guess the solution to complex math problems, also known as Proof of Work. However, the algorithm used to mine XMR, called RandomX, is completely different from the SHA-256 algorithm used to mine Bitcoin.

RandomX is an ASIC-resistant algorithm. It has been progressively improved to offer decentralization by favoring general-purpose CPUs. This means that you won’t be able to mine more XMR if you have a more powerful specialized computer. This makes XMR still open to mining with your personal computer, something that is completely out of the question with more popular coins like Bitcoin that rely on ASICs.

XMR Max Supply and Circulation

Unlike Bitcoin which is limited to 21M coins, there’s no limit to how much XMR crypto can be produced. New XMR is issued each time a block is mined, every 2 minutes on average. The actual reward varies and decreases over time. As of 2025, approximately 19.8 million XMR are in circulation, and the block reward remains fixed at 0.6 XMR per new block. This reward model ensures a stable and predictable inflation rate, with XMR maintaining a steady rate of issuance to prevent deflationary pressures and incentivize miners.

• Looking to buy XRM? How to Buy Monero – A Beginner’s Guide

6. Final Thoughts: The Future of Monero

Monero is one of the leading decentralized private cryptocurrencies out there today. With a robust development team and a loyal following it seems like it will be quite a challenge to dethrone Monero as the choice for private cryptocurrency transactions.

With increasing pressure from governments and taxation authorities on public blockchains, it seems only natural that as the cryptocurrency space grows, Monero will grow with it.

FAQs

What is Monero?

Monero (XRM) is an anonymous cryptocurrency that conceals the sender, amount, and recipient in every transaction. This makes it completely untraceable and unlinkable.

How does Monero ensure privacy?

Monero uses digital signatures and techniques to obscure transaction details: ring signatures, or RingCT (Ring Confidential Transactions), and stealth addresses.

Is Monero anonymous?

Although Monero is known for being anonymous, the network can still be tracked for blockchain validation. Future updates will also conceal users’ IP addresses.

How do I buy Monero?

You can buy Monero on most large crypto exchanges. You’ll need to look for exchanges that list XMR and have reliable payment methods.

Can I mine Monero?

Yes, you can mine Monero with CPUs and GPUs. So, it is accessible to beginner and professional miners.

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Having delved into futures trading in the past, my intrigue in financial, economic, and political affairs eventually led me to a striking realization: the current debt-based fiat system is fundamentally flawed. This revelation prompted me to explore alternative avenues, including... Read More

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