The king of cryptocurrencies versus the king of privacy coins.
The debate between Monero versus Bitcoin can be a good starting point to several key important points and characteristics that we have not yet introduced.
This will not be only concepts connected to privacy, but also to fungibility, transactions (connected to speed as well as fees) or availability. But before we do that, let's introduce Monero a bit more.
What is Monero (XMR)?
While we have spent some time on Monero in our article on anonymous cryptocurrencies, we have not introduced it properly. There are dozens of online descriptions of this privacy coin that describe its technology, features, tools or ideology. Without going too much into depth, we want to brush over some of the most important topics and themes connected to Monero, before diving deeper into the comparisons.
Monero is a privacy-focused coin, which has privacy as a default feature. That means that unlike other privacy coins such as Zcash or Dash, with Monero all the transactions are always private and anonymous without the need of the users to do anything with it. This is done thanks to several features and technologies applied to Monero.
First of them is Ring confidential signatures (RingCT). To put it simply, ring confidential signatures help with decoying the transactions by mixing completely random funds into the same transaction. Typically, about 10 decoys are added to each transaction, making it almost impossible to track.
Another important feature that Monero uses to help with privacy is stealth addresses. Stealth addresses act almost like burner addresses (one-time public keys). Essentially, they are addresses that can only be used once and will always lead to a generation of a new address. This means that, since the addresses are always generated by each sender, the transactions are not linkable on the blockchain. It is like calling someone from a different phone number each time, making it impossible to track. The only person that knows you called is the one on the other side of the phone.
Other privacy-related features include bulletproofs or Dandelion ++. These privacy features make Monero so safe and private that even the IRS (Internal Revenue Service) in the United States have issued a reward to anyone who would help hack it. And the reward? Approximately 625 000 dollars.
What is Bitcoin (BTC)?
Since the purpose of this article is not the introduction of Monero vs Bitcoin, but rather a comparison of each-other, we will not go too deep into what Bitcoin is. However, to provide a solid base for those, who are not very familiar with Bitcoin, here are some useful links to our previous articles that can help you get to know Bitcoin better:
Fungibility is one of key concepts connected to the cryptocurrency world, but also money that we have not yet properly explored. To put it simply, fungibility means that one unit of money is interchangeable with any other unit of money. But why are we bringing this up with the privacy debate?
While many people might not think about this, most of the fiat currencies are fungible, since one dollar bill is completely equal to another dollar bill. These will be without any problems accepted by any merchants even if they were before used for any kind of illicit activities. Studies have already shown that over 80 % of dollar bills have traces of cocaine, even though the payees or merchants might have not used them for “this type of activity.”
But, thanks to the fungibility, a dollar bill with cocaine traces is equal to a dollar bill without cocaine traces.
This is not true for Bitcoin. If any chain analysis company or government finds out that you are holding bitcoins that are “tainted,” used for illicit activities, it might be very difficult to spend that bitcoin. It will be forever flagged as bitcoin that has traces of illegal activities, even if you have not used them for it.
But this does not ring true with Monero. There is no such thing as a “tainted” Monero, which means that one Monero should always equal any other Monero (1 XMR = 1 XMR). This is due to the fact that each Monero is completely the same, since there is no history to it, unlike bitcoins, which can be “tainted” or “flagged” by cryptocurrency exchanges, chain analytic companies or governments if they are able to trace it back to any malicious activity.
Real life example
If you are a merchant who decided to accept bitcoin as a means of payment, you do not know what “type” of bitcoin you will receive. If, for instance, some political dissident that is fighting against the oppressive government of the country where your restaurant is located comes in and pays for the food in bitcoins, you will not know whether you might have just received “tainted” bitcoin.
If, at some point, the government finds out that this dissident is connected to the wallet, from which you received the bitcoins, the capital that you received in form of BTC, might be unusable. And while you have not done anything wrong, your capital and purchasing power connected to Bitcoin might have just been defiled by the government.
Key differences between Monero vs Bitcoin
The above-mentioned example and fungibility as such already bring an interesting comparison. If Bitcoin is not fungible and private and Monero is, why is not Monero the biggest cryptocurrency? This might be the best time to compare these two cryptocurrencies.
Privacy
Without any doubt, this is a key difference between Monero and Bitcoin. While Monero is private by default and uses technologies such as stealth addresses or RingCT, Bitcoin is pseudonymous. This means that there are some features that can help with obscuring the identity of the senders, receivers or owners of different wallets; to be completely private, they need to actively use different anonymous features. Even this might not be enough, if you leave somewhere some trace of your identity, it will immediately be picked up.
Availability
Due to Monero being often connected to illicit activities, this cryptocurrency is often chased by regulators all around the world. This is, for instance, true in South Korea or Australia, where the cryptocurrency exchanges had to delist Monero due to regulatory pressure.
Thus, Monero is not only much more sought-after cryptocurrency due to its privacy features, but its availability is affected also by impacts of crypto exchanges themselves. For instance, exchanges such as Kraken have delisted Monero cryptocurrency already.
In contrast, Bitcoin is by far the most used, traded, paired and famous cryptocurrency of all. It is also available almost everywhere, where cryptocurrencies can be seen. The difference in availability is thus very clear.
Transaction speed and fees
This might surprise some, but the difference between transactions is very significant. The first confirmation of a Monero transaction usually takes 2 minutes, but it is processed only after it has been confirmed 10 times, which means that Monero transactions actually take 20 minutes. On the other hand, Bitcoin transactions mostly take about 10 minutes.
So while Monero takes longer to process, which can be considered a con, it also has its pros when it comes to transactions, which is the fee. In the case of comparing Monero to Bitcoin (not Lightning Network or other Layer-2 solutions), the transactions of the privacy coin are cheaper. Usually, they only cost about 2 cents, which in the case of Bitcoin is a bit more.
There are countless other facts, statistics or data points that we could use for comparisons. To name just a few there are circulating and total supply, technologies behind the cryptocurrencies, mining algorithm, network effect and many more. However, the point of this article is not to list as many differences as possible, but to show how these two compare to each other.
What is the final verdict?
When looking at privacy, the winner is clear. Monero is by far the most dominant privacy related cryptocurrency in the world. It has had this status for a long time and so far, nothing about this has changed. There are some developments on the Bitcoin network that might bring improved privacy features, but as of now, these cannot compare to what Monero offers.
Yet, one cannot simply look at one aspect of a cryptocurrency and use that as an ultimate answer to the “which is better” question. In terms of popularity, usability, network effect, transaction speed or availability, Bitcoin trumps Monero all day long. Moreover, with improvements in Lightning Network, it is possible that Bitcoin might soon offer even cheaper transactions than Monero, with the same level of privacy. But for now, Monero in this sense, is much more reliable, since Lightning needs a bit more time and development.
The chart below will quickly summarize some of the main differences between these two cryptocurrencies. While some of them have already been talked about, others might just add more information for you to decide which one to use.
As we have stated previously, when deciding which cryptocurrencies to use, it is important to know what is the primary reason for its usage. If you clearly know your goal, then it might be easy to choose between Monero and Bitcoin.
Would you like to use, send or spend Bitcoin privately without switching to Monero? Use Whir. A tool for an average Joe who wants to protect their privacy. Send Bitcoin privately, without KYC, using a privacy-enabled CoinJoin transaction.
Disclaimer: This article does not serve as a piece of financial advice or encouragement and inducement for the usage of Bitcoin and other cryptocurrencies. Its primary role is informative, explanatory, and educational. The readers have to decide themselves whether to use or not to use these types of services.
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