What is the difference between bitcoin and monero?

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

What sets Monero and Bitcoin apart is the cryptography that’s used when transactions are executed. XMR utilises 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, which contains people who have authorised transactions in the past. This creates decoys that make it difficult for outside observers to deduce where a payment came from.

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In recent years, the number of ring signatures utilised by Monero increased – boosting the levels of anonymity that users can expect substantially.

When it comes to Monero vs Bitcoin, there are other astute differences concerning tokenomics. BTC currently has a circulating supply of about 18.5 million coins (although a sizeable chunk of this is feared to have been lost forever). That means that there are about 2.5 million left to discover in the next 120 years or so. Contrast this with XMR. Here, there are 17.8 million in circulation, and there’s no hard cap.

Should I use Monero or Bitcoin?

When it comes to Monero vs Bitcoin, and which one you should use, a lot of this will depend on your personal circumstances.

You may value XMR because of how it affords you privacy when you’re completing transactions – the type of anonymity that’s often seen with cash. This isn’t necessarily to suggest that you are purchasing something illegal – here, it may be the fact that you’re worried about your activities being monitored.

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 may be used to finance terrorism, launder money, or evade taxes. Monero’s decentralised nature means that it can be difficult to uncover these illicit transactions. In 2020, America’s Internal Revenue Service announced that it was offering a $625,000 bounty to anyone who had the wherewithal to crack XMR’s code.

If the IRS is successful, this 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 cost to plunge. We’ve already seen how much of an impact that regulatory activity can have on the value of an altcoin, with XRP crashing by more than 50 per cent when the SEC announced it was pursuing a lawsuit against Ripple.

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 be able to invest in Bitcoin with considerable ease.

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 this year, research from Chainalysis suggested that BTC remains the cryptocurrency of choice – primarily because it is easier to use. However, in recent years, there has been a marked rise in the number of darknet markets that do accept XMR, and this has been something of a concern for governments.

And 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.

The advantages and disadvantages

Beyond the age-old debate of privacy, there are some pros and cons associated with both of these digital assets.

Generally, transactions on the XMR blockchain can take as much as 20 minutes – meaning that 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, this does amount to a sizeable improvement.

One way that XMR redeems itself is through transaction fees, which are substantially cheaper than the world’s biggest cryptocurrency. Generally, Monero can be sent for a couple of cents. Depending on levels of congestion, Bitcoin can be 20 times more.

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