Bitcoin or Monero: Which Should You Invest in and Why?
The cryptocurrency industry has fast-tracked its way to fame due to its secure and private nature as a digital payment method. Unlike cash, cryptocurrencies do not have check clearing fees or holding periods, allowing fast and inexpensive payments to be made anywhere in the world.
While a lot of cryptocurrencies have been developed over the past few years, Bitcoin undoubtedly remains the most popular choice, but Monero is quickly gaining pace because it offers a level of anonymity like no other. This article will talk about the key differences between Bitcoin and Monero.
Launched in 2009, Bitcoin is the first and largest cryptocurrency to date. It was first released as an open-source software by a programmer known as Satoshi Nakamoto. Bitcoin has a fixed supply of 21 million tokens, and as of writing, more than 18.8 million tokens have been released in the market.
Monero was launched in April 2014. It is a donation-based and community-driven cryptocurrency that quickly gained interest among cryptocurrency enthusiasts because of its highly private and secure network that makes transactions untraceable. Unlike Bitcoin, Monero does not have a fixed number of tokens that can be mined. Monero can be stored in a variety of Monero wallet platforms.
Privacy is a major concern in cryptocurrency. Bitcoin transaction records are publicly available, traceable, and permanently stored in Bitcoin networks. Bitcoin addresses can be used to determine who made a payment and where the payment was sent. Once an address is used, they also become linked with the history of all the other addresses they transact with, which means that the identity of the Bitcoin user can be gathered with a bit of research.
Monero (XMR), on the other hand, uses what is called “ring signatures,” a cryptographic tool that helps protect the anonymity of Monero users by using past transaction outputs from the blockchain to serve as decoys. These outputs make up the inputs of a transaction, and all outputs are equally likely to be the input being used for a particular transaction. As a result, this affords anonymity for both the sender and the receiver of the transaction. Ring signatures make it virtually impossible to trace the identity of a user.
Bitcoin and Monero use different mining algorithms. Bitcoin networks use Secure Hashing Algorithm-256, or simply known as SHA-256. It is a cryptographic hash function that outputs 250 bits-long values and is a tool used by encryption protocols such as SSL, TLS, and operating systems such as Linux. Bitcoin uses SHA-256 for the creation and use of Bitcoin addresses and for transaction verifications. It is extremely safe and secure because its mechanism is not known in the public domain.
In fact, the US government uses SHA-256 to safeguard classified information. SHA-256 uses digital signature, which means that it can verify data without disclosing it. This is also why SHA-256 is popularly used as a password verification tool. The downside of using this algorithm in Bitcoin is that it can only be run by computers that have Application Specific Integrated Circuits or ASICs, a custom-made mining chip not found on most computers. On the other hand, Monero’s algorithm can be processed even by a standard CPU.
Monero uses a mining algorithm called RandomX, a Proof-of-Work mining algorithm that, unlike SHA-256, is ASIC-resistant. RandomX, as its name implies, uses random code execution and high memory consumption that prevents specialized mining hardware from taking over Monero’s network. RandomX is a CPU-only mining algorithm, which means that it is optimized for use in standard CPUs and has a high resistance to other types of mining. This makes Monero accessible to more people than Bitcoin, making the network more decentralized and allowing more users to participate in the mining process.
In late 2018, Monero decided to adopt bulletproofs, a new technology that allows for a substantially low transaction size and, consequently, more transactions in one Monero block. This basically means that the more transactions, the less the competition, and the lower the transaction fees. With bulletproofs, Monero’s transaction fees dramatically decreased by 97%, averaging 2 cents at present. In contrast, Bitcoin’s transaction fees average 39 cents.
Block size limit
Block size limit pertains to the number of transactions one block can accommodate at a given period of time. Bitcoin has a limited block size, which means that transaction delays can occur when the maximum capacity is reached. Monero, on the other hand, has an adaptive block size limit. Monero blocks are able to expand automatically as more transactions come in, and transaction delays are unlikely to happen.
While Bitcoin remains to be the undisputed frontrunner in the industry of cryptocurrency, Monero looks to be a formidable competition. With its robust privacy technology, cheaper transaction fees, an expandable block size limit, and a decentralized mining network, Monero is definitely changing the landscape of cryptocurrency.