The Privacy Coin
Monero (XMR), is a cryptocurrency that definitely fits in the category of currency design in the same way that the flagship cryptocurrency Bitcoin does. Something to note about Bitcoin is that information such as payment details and your identity are readily available pieces of information that anyone with sufficient know-how can access.
In a world where most private information isn't so private, Bitcoin isn't really a solution to this problem in the financial world. In the US, the IRS now has the authority to monitor the route, destination and amount of money transferred for any money movement over $600. Privacy concerns of the modern world has seeped into our own financial world, and Monero is one of the leading crypto projects that seeks to be an antidote to this.
The privacy-oriented cryptocurrency has been effective in achieving its goal to date, going further than any other crypto project in battling financial information privacy concerns. By masking the addresses used by participants of Monero's blockchain network, with the identity of senders and recipients, and the amount of every transaction hidden from the world.
Roadblocks - Illicit activity
There is an idea in this world that the more private the world is, the easier it is to break the law. In this instance it is certainly the case, and is one of the major downsides to supporting this particular cryptocurrency. Its privacy does make it a very attractive destination for cyber criminals, that cannot be ignored by prospective investors. However, there are some obstacles for illicit activity that have been downplayed.
First there is a liquidity issue. Large transactions involving Monero will change the value of each token to a degree where it makes agreements denominated in the currency complex. Perhaps more significantly, companies such as Chainanalysis and Integra FEC have been awarded bounties for being able to 'beat' Monero's opaque system, serving the justice system in beating cyber-crime.
In this instance there are two arguments to be made. One, that Monero provides the happy medium in the world of cryptocurrency between complete exposure of sensitive information and complete privacy to the point that it is easy to carry out illicit behaviour, by allowing governments to circumvent the privacy obstacle in a surgical manner. Two, is that the ability for a government to circumvent the privacy obstacle at its discretion defeats the purpose of the cryptocurrency and that you're better off just using Bitcoin as a result.
Supply Side
Another interesting side of Monero is how the coins are supplied. While this is done through the mining process which you may be familiar with (if not refer to this article under the 'Distributed Ledger Technology' title), there are a number of key differences in this process that you'd think give it a competitive advantage over Bitcoin.
The hardware required to actually mine Bitcoins has a much higher barrier to entry than the Monero system, with Monero not requiring expensive hardware in addition to a basic computer. This makes it more 'egalitarian' than most cryptocurrencies, with respect to each individual's influence on the system, and their proportionate reward.
While promoting a higher user base by lowering the barrier to entry is a notable advantage, perhaps what is more telling is the liquidity effects of this feature on Monero's blockchain network. The easier it is to facilitate Monero transactions, the easier it is to make a transaction, that's one part of the argument. The other part is, the more decentralised the 'transaction facilitators' are, the stronger the resistance is against a technology shock in a specific part of the world.
Currently just under half of all Bitcoin miners are located in China. If a series of events were to take place, where China's electricity system failed, there would be serious liquidity concerns for people looking to buy and sell and transfer Bitcoins. The liquidity of the currency would half. So it's easy to see why a system that promotes more decentralisation would act as a shock absorbent if such events were to transpire.
The idea of an egalitarian system in cryptocurrencies are hardly an exclusively kumbaya concept, and lends itself to a potential upside for investors in the space.
Takeaways
Monero is a cryptocurrency geared towards privacy which is something that Bitcoin completely neglects
The privacy concept of Monero has made it an attractive destination for illicit activities
Its egalitarian mining system promotes greater liquidity throughout the system
Coming Soon...
The Economic Edge
Proof in Crypto
Exploring Crypto World #4 - Monero
Great read, fascinating!