A side-by-side comparison of bitcoin and Monero – how do these popular currencies stack up against one another?
Introduced in 2009, bitcoin (BTC) is the largest and most widely recognised cryptocurrency in the world. Privacy cryptocurrency Monero (XMR) may not enjoy the same level of public awareness as bitcoin, but it’s still managed to cement its place in the world’s top 20 cryptos by market cap in 2018.
But what are the similarities and differences between bitcoin and Monero, and how do these two coins compare to one another? Let’s take a closer look.
Bitcoin vs Monero: The essentials to know
Where to buy bitcoin and Monero
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Bitcoin and Monero: A brief history
When the mysterious Satoshi Nakamoto released his 2008 paper outlining a vision for a peer-to-peer electronic currency free of centralised control, few could have predicted the cryptocurrency revolution that would follow. Launched in 2009, bitcoin is a digital currency underpinned by a piece of peer-to-peer technology known as the blockchain, which keeps a public ledger of all transactions.
More than 1,000 cryptocurrencies have followed in bitcoin’s wake, each with its own specific benefits and use cases. Monero was launched in April 2014 by a Bitcointalk forum user under the alias “thankful_for_today”. Originally known as BitMonero, Monero was forked from Bytecoin and is designed to offer secure, private and untraceable transactions.
Prices: Bitcoin vs Monero
How bitcoin works vs how Monero works
Bitcoin is decentralised electronic cash secured by cryptography. It allows holders to transfer BTC to one another through a peer-to-peer network, with all transactions tracked on a public ledger known as the blockchain. The data of every bitcoin transaction ever made is stored in blocks, and once a block is added to the blockchain it cannot be removed or altered in any way.
Unlike traditional fiat currency, where a central bank or authority prints new currency, the rules governing how new BTC are made and how many will ever be produced are programmed into bitcoin’s software. The maximum coin supply is limited to 21 million, but each individual BTC is divisible down to 0.00000001 BTC.
Rather than a central server authorising transactions, volunteers known as miners are responsible for verifying bitcoin transactions and updating the blockchain. They do this by competing to solve complicated mathematical problems using computing power, and the first miner that solves the problem adds the block to the blockchain. This is known as a Proof of Work system, and it sees successful miners rewarded for their efforts with BTC.
Monero was developed to address some of the key issues facing bitcoin, namely a lack of privacy and the issue of mining centralisation. Monero was created by forking Bytecoin, a currency built on CryptoNote, an open-source protocol designed to obfuscate the sender of a transaction.
Specifically, Monero relies on the following privacy-oriented technologies:
- Ring signatures. These obscure the sender’s details by linking several signatures to a transaction.
- Ring confidential transactions. This technique, also known as RingCT, allows a transaction to be confirmed on the blockchain but without the amount sent ever being made public.
- Stealth addresses. These are used to hide the identity of the person receiving the transaction. They allow a sender to create random one-time addresses for every transaction on behalf of the recipient
Just like bitcoin, Monero is also a Proof of Work currency, but it uses the CryptoNight algorithm designed to resist mining centralisation.
Differences between bitcoin and Monero
In mainstream society, bitcoin has a reputation for offering completely anonymous transactions. In reality, this isn’t the case. While it does allow users to send and receive funds without providing their identities, the wallet addresses and the details of all transactions are stored on a public ledger.
As a result, bitcoin is referred to as being “pseudonymous”, and its possible for blockchain analysis firms to de-anonymise bitcoin transactions.
Meanwhile, Monero offers private transactions by default. Anonymity and untraceable transactions are built into the protocol, which is why it’s such a popular choice for anyone who values their privacy.
Fungibility basically means that every individual unit of a currency is interchangeable – you can’t tell the difference between one coin and the next. This isn’t the case with bitcoin, as coins can be tainted if they’re tracked back to a hacked crypto exchange or theft from an online wallet.
However, as Monero is inherently untraceable, it’s not a problem for this privacy-focused crypto.
3. Coin supply
Bitcoin’s maximum supply of coins is capped at 21 million, with approximately 17.1 million BTC (or approximately 81%) circulating at time of writing.
However, there’s no limit from the maximum supply of Monero. Following an initial supply of 18.4 million XMR, there’s a permanent fixed production of 0.3 XMR per minute. This is designed to offset the number of coins lost per year.
4. Mining algorithm
Both bitcoin and Monero are generated by mining, with new bitcoin blocks generated every 10 minutes and new Monero blocks every 2 minutes. Bitcoin’s SHA-256 algorithm has seen it targeted by sophisticated mining methods using Application-Specific Integrated Circuits (ASICs). Expensive and specialised, these ASICs mean that bitcoin mining is now largely centralised, concentrated among a small selection of large mining firms and mining pools.
Monero’s CryptoNight algorithm is specifically designed to suit ordinary CPUs and GPUs, encouraging the wide spread of mining nodes needed for true decentralisation. However, with the advent of Monero ASIC mining, the Monero team implemented a hard fork (as mentioned in more detail below) in April 2018 to prevent high-powered ASIC machines working the network.
5. Hard forks and crypto offshoots
When Bitcoin Cash was formed from an August 2017 hard fork, breaking away from the main bitcoin network to provide faster and cheaper transactions, it started something of a trend. Bitcoin Gold was created in October 2017, Bitcoin Diamond followed in November of the same year, and Bitcoin Private was formed from a merge-fork of bitcoin and Zclassic in February 2018.
When the Monero team implemented its own hard fork in April 2018 to fight mining centralisation, it saw the creation of four new coins – Monero Classic, Monero-Classic, Monero Original and Monero Zero – all of which continued running version 11 of the Monero protocol while Monero moved on to version 12. Another hard fork, Monero V occurred soon afterwards.
Confused yet? While the abundance of similar-sounding names can get complicated, each of these offshoots from bitcoin and Monero claims to offer distinct advantages over its forebear. The legitimacy of several forks has been brought into question, with some seen as little more than cash grabs.
Pros and cons of bitcoin and Monero
Bitcoin vs Monero: the bottom line
While a head-to-head comparison of bitcoin and Monero is an interesting exercise, the truth is that these two cryptocurrencies serve different purposes. As the flagbearer for the crypto community, bitcoin is unmatched (in the world of digital currency) as a store of value over time and introduced electronic cash to the world.
Meanwhile, Monero was created for a different mission and serves those who value anonymity and privacy. It’s neither better nor worse than bitcoin; it just offers different features.
There’s no harm in examining bitcoin and Monero side by side – as long as you know that you’re comparing apples with oranges.
Disclosure: At the time of writing, the author holds ADA, ICX, IOTA and XLM.