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What is a Privacy Coin? Monero vs. Governments

Everywhere you go you see everyone, both young and old with one gadget or another. There is nothing that you cannot get done without making use of technology. We have meetings online, we take classes online, trade online, and do every other thing you can imagine.

The world of technology has grown so big that it is beginning to overtake the analog world. There are now digital and virtual currencies that people use to trade, and they are getting more and more recognition as time passes. Companies are beginning to sell their goods and services in return for these virtual or digital currencies. It is as much as a big deal that if you do not already have an investment in these virtual currencies, then you are sitting on a gold mine.

These virtual or digital currencies we keep talking about are popularly known as cryptocurrency. There are different types of cryptocurrency, and each has its uses and advantages. They are decentralized virtual currencies and are not controlled by any central system or government; this is a major reason why some governments frown against them. There is no central bank that controls how these currencies are traded, or charges are removed on such digital currencies. They are also known to run on virtual ledgers known as blockchains, which can be accessed by anyone on the network.

The oldest and most thriving cryptocurrency is Bitcoin. Bitcoin was created to replace the whole financial system of having money kept in central banks and regulated by the government. As mentioned above, the blockchain is a public network, and anyone with enough resources and chain analysis the identity of any user on the network can be reduced. One of the downsides to cryptocurrency, however, is that it lacks exclusive private features.

One of the disadvantages of using this technology is that without intentionally putting up and enhancing privacy features, almost everyone can see what you do with the internet. It can run as deep as third parties finding ways to get have access to transactions you make online, things you post on your social media, and so on.

We all know that technology always improves as time goes on, and there is someone somewhere trying to develop better technology. Because of the flaw of Bitcoin and other cryptos with little or no provision for exclusive privacy, some developers have developed coins known as privacy coins whose primary focus is privacy for their users. They are designed in such a way that users can make transactions without being identified. As of today, numerous privacy coins have been developed. As anticipated or expected, because of the privacy of these coins, a lot of crimes are being committed with the use of these coins. It is very important to be careful when transacting or purchasing these privacy coins.

This article will help you understand everything about privacy coins, with a focus on one of the privacy coins called “Monero.” We will look at their characteristics, the advantages and disadvantages these coins have, and also the position of governments towards them.

What Is A Privacy Coin?

Privacy coins are cryptocurrencies that are privacy-oriented, and they have privacy features built into them. These privacy features are targeted at ensuring that the identities and activities carried out by their users are not exposed. These forms of cryptocurrency run blockchains that are private and anonymous; they block out the source of the cryptocurrency transaction and also the destination. For cryptocurrencies like Bitcoins and others, users are able to see who makes a transaction by the use of the blockchain and they can also trace the transactions that are carried out; this is so that there can be a certain level of transparency and to minimize the cryptocurrency from being used for fraudulent activities. The privacy coin allows for anonymity and non-traceability of transactions carried out by the users of the cryptocurrency.

What Are the Methods Deployed by Privacy Coins?

Some methods and strategies have been put in place by the developers of these privacy coins, to ensure that no third party can have access to the identity of those carrying out the transactions or even trace the transactions. Of these different methods and strategies, there are three that are popularly used:

1. One is the use of non-public addresses called stealth addresses to block public access to the transaction made by the parties. It operates in such a way that it allows the users to use one address per transaction; that is, they cannot use the same address more than once. This is to prevent any third party from tracing the address to a specific user. For instance, one of the coins, Monero, uses a stealth address called, dual-key stealth address protocol (DKSAP).

2. There is also the use of cryptographic proof called Zk-SNARK; it allows a party to acknowledge that a

Transaction is valid but does not divulge or reveal information about that transaction. The full meaning of Zk-SNARK is Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.

3. Lastly, there is the use of a process called CoinJoin to make transactions anonymous. What happens is that all parties to the transaction agree and mix their coins, which in the process also causes the addresses to be mixed up and become untraceable.

What are the Differences between Monero and Bitcoin?

We cannot talk about Monero without talking about Bitcoin. Although Bitcoin, which is one of the oldest and most popularly transacted cryptocurrencies, was built in such a way as to be out of government control and regulation, it is not as anonymous and untraceable as many believe. Transactions made with Bitcoins are traceable through the public ledger it uses called blockchains. Transaction history and addresses of users are easily traceable once the blockchain is accessed.

You can describe Monero as the updated and better version of Bitcoin when it comes to privacy and anonymity; the developers of Monero simply worked on the flaw of the bitcoin as regards the aspect of privacy and ended up creating Monero. What differentiates bitcoins from Monero is the cryptography called ring signatures that are used by Monero for transactions, just to make sure that they are untraceable.

According to the crypto intelligence firm, Chainalysis, Bitcoins are easier to transact and that’s why they still top the cryptocurrency market. However, it seems that Monero is fast becoming in high demand recently, especially by the dark net which is causing governments to worry. The use of the feature called coin mix or coin join is making it even more difficult for them to trace the address of these illegally used coins.

What is Monero?

If you have been following us from the beginning of the article, you can already guess or already have an idea of what Monero is about. Monero is recognized as one of the largest cryptocurrencies in the world. Although it has almost the same features as other popular cryptocurrencies, it is quite different because it is programmed to ensure the privacy and anonymity of its users. Monero is privacy-focused cryptocurrency that was launched in April 2014. It has greatly improved over time; for example, it is more flexible and more efficient. F, a Ring CT was implemented in the coin to the amounts been transacted. We also should not forget to add that Monero is also decentralized. Through the use of an ASIC-resistant and CPU-friendly POW algorithm called RandomX, it decentralizes the security of its network and the development of its code.

Monero is fast becoming popular because of how it has been built to protect any data that is sensitive or private by deleting or encrypting any personal information that can be linked to the transaction. This whole process is called “Data Anonymization.” It is built to protect the private activities carried out by the user and at the same time, prove the honesty of the data that is gathered and shared. Monero’s blockchain was designed intentionally to be non-transparent, so that all information regarding a transaction such as the amount of spent in every transaction, and the identities of senders and recipients are unknown by hiding the addresses used by the users.

One interesting thing about Monero is the fact that it uses the egalitarian principle for its mining process. It treats all of its users as equals and believes that every user is the same and everyone should have the same opportunities. Because of this principle, the developers of Monero did not take any part of the coin as their possession; they instead rely on crowdfunding and support from the Monero community to improve and further develop the currency.

The market capitalization of Monero as of January 2022 was $3.53B, and the price of one Monero was $195. Monero has a different way of conducting its transactions. It divides any amount sent into different amounts and treats each of these divided amounts as separate transactions. A one-time address is created for each of the divided amounts and then further mixed with other transactions that have also been split. At the end of the day, it makes it impossible for anyone to be able to trace the address of any of the transactions. Depending on the choice of each user, Monero has what is called the view key and the spend Key. A user can decide to share his view key with another person that he personally selects. Such a person would be able to gain access into the user’s account and would be able to see the account balance and everything about the account, but won’t be able to make any transactions with such an account. The spend key takes it to another level; with the spend key, a person can not only access a user’s account but also spends and make transactions with that account. The view key and the spend key are 64 characters long and are a mix of both numbers and alphabets.

Monero is popularly called MXR. It is a good cryptocurrency to invest in; you do not need to break the bank to start it. You can mine your own Monero from the comfort of your room, all you have to do is plug in your computer and make use of your CPU. You don’t need any special hardware and it works with all major operating systems.

Monero vs Governments

Bitcoins, although created to be secure and to a large extent private, cannot be compared to Monero. Monero is the better version of Bitcoins when it comes to privacy and anonymity. Some governments already frown at the use of cryptocurrencies, to begin with, despite the fact they can be traced using their blockchains. Now imagine privacy coins that are mined just to make sure that the addresses of both the sender and receiver cannot be traced. Can you imagine the frustration? Not only can’t they control it, but they can also can’t track or connect anyone with the activities that go on with transacting the coins. Because of the nature of these coins, a lot of them are used to carry out illegal and criminal activities.

The most recent news is that the U.S. government awarded a contract of about $1.25 million through its Internal Revenue Service (IRS) to a Crypto intelligence firm called, Chainalysis and a data forensics company called, Integra FEC, to trace unclear wallet addresses and transactions made with Monero. The firms are expected to develop tools that can do the tracing. The chief executive officer of Chainalysis, Michael Gronager, has warned in a statement that privacy tokens have a limited future.

In recent times, it seems that a lot of governments around the world have taken even more interest in cryptocurrencies. A lot of them are concerned about the illegal activities that the non-regulation of these cryptos is causing. It is said that a lot of criminal syndicates make use of privacy coins like Monero because not only is it non-regulated, it is also non-traceable. Some of these governments acknowledge the value and utility of cryptocurrencies, but they are trying to ensure that the transactions are transparent to curb or reduce the criminal activities that are funded by them. If the governments have their way with regulating cryptocurrencies, especially privacy coins like Monero, then it would defeat the whole purpose for which the coin was created. The regulations that the governments want to put in place or are already starting to put in place are centered on making cryptocurrencies accountable and transparent in their transactions.

Monero is not as susceptible to government regulations, policies, and the payment of taxes through the introduction of tax codes, unlike other cryptocurrencies, because of the way it’s built. For instance, because of its use of ring signatures, it is almost impossible to locate or track the owner or user of a Monero token.

There as been a lot of report of crypto jacking by certain untraceable individuals through the use of Monero. Research was carried out by the global threat intelligence team of Palo Alto Networks called Unit 42; the research was carried out between September 2020 and February 2021. In that research, it was made known that a lot of hackers were and still are illicitly mining the privacy coin Monero. There was another report by the Consumer News and Business Channel (CNBC), which stated that some hackers have created harmful software that has infected many computers and used it to mine Monero, after which they sent the newly mined privacy coin to North Korea.

The truth is that because of all these factors, governments and regulators have put a red light on Monero. A lot of countries across the world are worried that the privacy coin is being used to finance terrorism, money laundering, and also tax evasion.


The fact remains that when it comes to the use of anything, there are always pros and cons. Also, when it comes to financial transactions and businesses, there will always be those who seek to use them for illegal and criminal purposes. There will also always be risks attached to whatever investment or financial decisions that one takes. This is the case with the privacy coin Monero, and all other privacy coins. There are the pros which we have discussed and there are also the cons which we have also examined in this article. The only advice is that you need to draw your own conclusions before investing in any of these privacy coins. Also, despite the pressure from the governments of different countries about the regulation of the privacy coin, it is interesting to know that the coin is still thriving, and its popularity keeps growing in the world of cryptocurrencies.

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