Cryptocurrencies generally have different characteristics from each other. Because every cryptocurrency project is different. In this article, we will compare the similarities and differences between Monero and Bitcoin. As cryptocurrencies, Monero and Bitcoin have some similarities. But in reality, both have many peculiarities of their own.
Exchangeability (Fungibility)
Fungibility is the source of great controversy in the Bitcoin world. It means that a product can be used as a substitute for a similar type of product. Gold, for example, is considered exchangeable because you can trade one gram of your gold for a friend’s gram and the two still remain functionally identical. The same goes for cash – you can replace the ten dollar bill with another ten dollar bill. In contrast, a unique piece of art like the Mona Lisa is not exchangeable because there is no other unit like it.
For many digital currencies, determining exchangeability is a bit more challenging. Units in Bitcoin are exchangeable at the protocol level because the software does not differentiate between different BTC units. But things get a little more ambiguous at the social and political levels. Some argue that Bitcoin is not exchangeable because each output is unique, while others argue that it does not matter.
Bitcoin’s blockchain is transparent; Transaction information such as amounts and accounts sent can be tracked. Suppose you buy a five-dollar bill for change at a convenience store. This banknote may have been used in a criminal transaction ten transactions ago and this history will have no effect on the current usability of the banknote.
There have been several instances in Bitcoin where coins have been rejected or confiscated due to their “questionable” history. Even if users are not aware of past transactions, those watching the chain can blacklist coins and affect their use as currency. This is why some people think that Bitcoin is a non-tradable asset.
In some circles, these practices are considered to remove some of the features that make public ledger cryptocurrencies attractive. Freshly mined (hence no history) “clean” coins can be seen as more valuable than old and “dirtier” coins.
Those opposed to coin profiling believe that unreliable and subjective techniques are used for analysis. Indeed, more and more coin mixing and CoinJoin tools are available to end users, which hide the source of funds.
Monero avoids these problems right from the start. Given that observers cannot identify where funds are coming from or going to, Monero has a greater resemblance to cash than other non-hidden coins. Even in companies with in-depth analysis policies, XMRs from suspicious transactions can be exchanged without any problems.
But the privacy that Monero offers comes at a price. Transactions are much larger, which means that his system has to overcome some major issues before it can scale to large audiences.
Interestingly, Monero’s strong exchangeability has given this cryptocurrency a bad reputation, surpassing Bitcoin as the currency of choice for cryptojackers, ransomware, and dark web criminals.
Blocks and mining
Like Bitcoin, Monero uses Proof of Work to add transaction blocks to the blockchain. However, like all CryptoNote-based protocols, it is designed to be ASIC resistant. The underlying purpose is to prevent mining pools using specialized, high-performance mining hardware from dominating.
Monero’s Proof of Work algorithm (recently changed from CryptoNight to RandomX) attempts to make the system fairer by supporting CPU mining and weakening the efficiency of GPUs. The rationale behind this is that mining will be better distributed as consumer-level PCs remain competitive. Despite this, the hashing power is relatively concentrated in the hands of a few mining pools.
In terms of block sizes, Monero has no fixed upper limit, unlike Bitcoin’s 4 million unit block weight limit. Instead, Monero has a dynamic block size, meaning that blocks can be expanded to respond to increasing demand. Conversely, if demand falls, the allowable size will also decrease. Block size is calculated by looking at the median of the size of the previous hundred blocks (blocks are mined on average every two minutes). Miners can generate blocks that exceed the limit, but are penalized with a reduction in their rewards in return.
It is also important to note that the supply is not limited as in Bitcoin. Monero has a decreasing block reward structure, but the rewards don’t tend to go to zero over time. Instead, the block allowance will remain fixed at a certain level to continue to encourage participants to mine blocks.
Hard forks
You can come across another interesting difference between Bitcoin and Monero at the administrative level. Bitcoin is so anti-fork that even simple upgrades will be discussed for long periods before they are implemented. But there is a reason for this. Bitcoin developers sometimes need to take a conservative approach to keep the system stable, secure and decentralized.
Of course, forks are just protocol upgrade mechanisms. Often times, forks are needed to fix major software vulnerabilities and add new features. But in Bitcoin, users try to avoid bifurcations that can cause splits and pose a risk to decentralization. Usually, hard forks in Bitcoin occur when a group wants to create a new cryptocurrency from the existing network. Apart from that, Bitcoin prefers to release patches for urgent security vulnerabilities.
But in Monero, frequent hard forks are actually part of the roadmap. This approach allows the software to quickly adapt to changes and release security upgrades. While some may view “forced” protocol updates as a weakness, Monero hard forks do not have a negative connotation like some other cryptocurrencies. However, this approach does not mean that forks are completely safe – frequent hard forks increase the risk of vulnerabilities being overlooked and can cause non-upgrade users to leave the network.
Development of Monero
As with Bitcoin, the development of Monero is open to everyone. Anyone can contribute source code and documentation. The community decides which features are added, removed, and changed. As of the date of publication of this article, more than 500 people have contributed to the project. The core development team consists of Riccardo Spagni (also known as FluffyPony), Francisco Cabañas (ArticMine), and pseudonymous developers NoodleDoodle, othe, and binaryFate.
Alongside sponsorships, the Community Fundraising System (CCS) is used to fund developments. Users can submit their ideas and if these ideas are accepted by the community, the community funding period will begin. When key milestones are reached in the implementation of the project, the funds are paid to the responsible persons.
final thoughts<0h3>
Monero (XMR) has been the cryptocurrency of choice for people who want a guarantee of privacy for years. It has a community of developers dedicated to enhancing the privacy of its users’ transactions. New upgrades (like the Kovri integration) aim to further the mission of bringing non-connectivity and untraceability features to cryptocurrencies.
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