Monero vs bitcoin: The pros and cons

Monero and bitcoin have big differences in terms of tokenomics and privacy

Contents

Monero vs bitcoin – what’s the difference?

Well, bitcoin (BTC) is the cryptocurrency that started it all, back in 2009. BTC has a fixed supply of 21 million tokens – and these coins are gradually being released through bitcoin mining.

Although BTC is the undisputed champion when it comes to overall market cap and trading volume, monero (XMR) delivers something unique as it is a privacy coin – a cryptocurrency that hides data about its users.

What is the difference between monero and bitcoin?

Contrary to popular belief, bitcoin transactions aren’t anonymous. These payments are fully traceable on the public blockchain – indeed, it’s even possible to keep an eye on stolen BTC, as we’ve seen following an array of high-profile hacks over the years.

What sets the Monero and Bitcoin blockchains apart is the cryptography that’s used when transactions are executed. Monero (XMR) uses a technology known as ring signatures to ensure that the senders and recipients of a crypto payment cannot be identified.

The premise behind ring signatures is simpler than you may think. The person who is responsible for authorising a transaction is included in a group that contains people who have authorised transactions in the past. This creates decoys that make it difficult for outside observers to work out where a payment has come from.

In recent years, the number of ring signatures used by monero has increased, boosting the level of anonymity users can expect substantially.

Lost bitcoin

When it comes to monero vs bitcoin, there are other key differences concerning their tokenomics.

BTC currently has a circulating supply of around 19.06 million coins – although a sizeable chunk of these are feared to have been lost forever. Some BTC holders have lost the keys to their wallets, while one unfortunate man in Wales accidentally left thousands on a hard drive that went to landfill.

That means that there are about 1.94 million left to discover in the next 120 years or so. In other words, just under 9% of the total supply is still unmined.

Contrast this with monero – there are over 18.1 million tokens in circulation and it has almost met its total supply, but logistically it has no maximum supply. From June 2022, block rewards are scheduled to be fixed at 0.6 XMR per block and under the new software rules, rewards for new blocks will never drop to zero. This is also known as “Tail Emission”.

However, because the supply of XMR is known, users can prove they have ownership over their coins and secure a value.

Should I use monero or bitcoin?

When it comes to using monero vs bitcoin, and which would be better for you personally, a lot will depend on your personal circumstances.

You may value XMR because it affords you privacy when you’re completing transactions – the type of anonymity that’s often seen with cash. This doesn’t necessarily suggest you are buying something illegal – it may simply be that you’re concerned about your activities being monitored.

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However, it’s fair to say that monero’s existence creates some rather tricky issues when it comes to regulation. Countries around the world have expressed concern that XMR could be used to finance terrorism, launder money or evade taxes. Monero’s decentralised nature means it can be difficult to uncover these illicit transactions.

In 2020, America’s Internal Revenue Service (IRS) announced it was offering a $625,000 bounty to anyone who had the wherewithal to crack XMR’s code. The contracts were awarded to cryptocurrency forensic data analysts Chainalysis and Integra FEC.

Impact on value

If these companies are able to develop solutions to crack the privacy of monero transactions, it could have a substantial impact on the battle of XMR vs BTC.

Any evidence that Monero’s cryptography isn’t as effective as first thought could affect the overall value of this privacy coin – causing its value to plunge. We’ve already seen how much of an impact regulatory activity can have on the value of an altcoin, with XRP crashing by more than 50% after the US Securities and Exchange Commission (SEC) announced it was pursuing a lawsuit against Ripple.

But there’s another problem when looking at XMR vs BTC: their availability on crypto exchanges. Concerned with regulatory compliance, many trading platforms don’t offer monero to their customers. As a result, most mainstream customers will only find themselves able to invest in bitcoin.

Kraken delisted monero for UK customers in November 2021, so the coin might be facing availability issues in the future, depending on how regulation evolves with the market.

XMR vs BTC: Is monero used by criminals?

A common question when it comes to monero is whether criminals regularly use this privacy coin to fuel their illicit activity.

Earlier in 2021, research from Chainalysis suggested that BTC remains the criminal’s cryptocurrency of choice – primarily because it is easier to use. There has, however, been a marked rise in the number of darknet markets (commercial websites on the dark web, which function as a black market) that accept XMR. This has been a concern for governments.

Unfortunately, the emergence of ‘mixing services’ for bitcoin – which blend tainted crypto with clean assets – has meant that many criminals still have a way to cover their tracks. The IRS has also expressed interest in tackling this trend.

Advantages and disadvantages

Beyond the age-old debate regarding privacy, there are other pros and cons associated with these two digital assets.

Generally, transactions on the XMR blockchain can take as long as 20 minutes – meaning this altcoin isn’t really practical as a means of payment. Bitcoin’s blockchain averages out at approximately 10 minutes. Although this is still far slower than more mainstream alternatives such as Visa and Mastercard, it does amount to a sizeable improvement on the Monero blockchain.

One way XMR redeems itself is through transaction fees, which are substantially cheaper than those of the world’s biggest cryptocurrency. Generally, monero can be sent for a couple of cents, whereas – depending on levels of congestion – sending bitcoin can cost 20 times more.

And to return to the issue of privacy, let’s just shed a spotlight on fungibility. This basically means that how an asset has been used in the past cannot be traced. XMR is fungible because these funds lack a trail, whereas each BTC has a unique identifier that means its journey since the coin’s inception can be traced.

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FAQs

As of 6 June 2022, there are 18,131,002.03 monero coins currently in circulation.

As of 6 June 2022, there are 19,059,518.00 bitcoins in circulation, so approximately two million coins are left to mine (9%).

Further reading

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