Bitcoin gave the world digital money. The ability to transact in large quantities around the world without the need to obtain permits or use intermediaries is truly innovative.
But for all its advantages over local currencies, Bitcoin now seems to be used only for certain transactions:
- it is not private;
- transactions are usually slow and are constantly getting more expensive;
- it becomes more and more difficult to update and add new functions to the protocol, which prevents the introduction of innovations and advanced technologies.
Then came Monero – private by default with untracked transactions. It has an adaptive block size, has its own codebase, and is not just another Bitcoin clone. Even its developers are mostly anonymous. Monero is accepted by many crypto services and organizations. Is this all too good to be true? Is it possible to transfer bitcoin to monero?
Why Bitcoin has low privacy and how Monero dealt with this problem
Bitcoin operates on a pseudonym basis, which means that users can perform transactions without providing their data. Instead of using personal information like banks, Bitcoin provides addresses to which coins can be sent. The problem is that addresses, along with transaction information, are stored in a public registry.
Although users can make transfers without providing information about themselves, we now know that the Bitcoin blockchain is openly viewed by analyst companies. These organizations are capable of de-anonymizing transactions with a high degree of accuracy.
Unlike Bitcoin, where you have to do something to ensure anonymity, Monero has set privacy by default. Untracked transactions and anonymity are logged.
An additional benefit of anonymous and untracked transactions is the interchangeability of Monero. This means that you cannot tell one coin from another. Bitcoins can be corrupted.
For example, if an exchange has been hacked and money is stolen, such coins are tracked and blacklisted by exchanges or sellers. Trading with such Bitcoins is unprofitable, which creates great inconvenience for users. Monero’s untraceable nature solves this problem.
How Monero Seeks Privacy
Monero uses three privacy methods:
- Ring Signatures;
- Ring Confidential Transactions;
- Hidden Addresses.
Ring signatures hide information about the sender. The essence of the technology is as follows: the transaction is signed by a group of users, which allows you to hide who the real sender was.
It then uses a technology known as RingCT or Ring Confidential Transactions. For example, Alice can send Monero to Bob, and the only people who will ever know the amount sent will be Alice and Bob. Despite the fact that the transaction is visible on the blockchain, it is impossible to determine the amount of the transfer.
Finally, Monero uses hidden addresses to ensure the privacy of the recipient of the transaction. Hidden addresses work with “send keys” that make the recipient’s address invisible. The sender must create a send key address for the recipient and send Monero to it. To view their transactions, the recipient must use a “view key”. This technology makes it possible to ensure that, although the transaction is recorded on the blockchain, only the sender and recipient can know where the payment was sent.