Monero vs Bitcoin: Which Is the Better Coin to HODL and Use?
Bitcoin is the first and the most expensive cryptocurrency. It was launched to challenge fiat currencies and bring decentralization to the finance industry.
With time, however, other cryptocurrencies appeared to challenge Bitcoin along with fiat currencies. Many of them didn’t succeed but some, such as Monero, did become Bitcoin’s rivals in matters of anonymity and privacy. Now, both Bitcoin and Monero are among the most popular cryptocurrencies. They share the main features of cryptocurrency:
- They are decentralized
- They provide users with an opportunity to perform anonymous transactions
- They can be mined
- They can be bought and sold on cryptocurrency exchange platforms such as LetsExchange.io.
But these coins have more differences than similarities.
Privacy
Both Monero and Bitcoin claim to enable private transactions. However, the privacy level differs in both cases.
The Privacy of Monero
Monero was created as a coin focused on the 100% privacy of its users. Stealth addresses are one of the features that ensure Monero’s privacy.
Steal-addresses are one-time addresses. They are generated randomly and cannot be linked to either the previous stealth address or the standard address. In other words, if you send multiple transactions over the Monero network, they will appear on the blockchain as completely unrelated transactions coming from different addresses. Also, if somebody sends multiple transactions to your wallet, they will appear as coming from different unrelated wallets.
The transactions are not tracked, too. Only the recipient and the sender know that the funds were sent.
Ring Confidential Transactions or RingCT are another feature that lays the foundation for Monero privacy. RingCT is a combination of ring signatures and confidential transactions - two innovations used to enable the top privacy level of the Monero network.
Ring signatures are used to prove the ownership, just like the private keys in the Bitcoin network, but they also add a security layer. They use completely random funds that are mixed in the same transaction. It makes it extremely difficult if not impossible to find out which funds were actually signed off on and spent.
Confidential transactions rely on a Pedersen Commitment - a special cryptographic algorithm that prevents double-spending and doesn’t allow anybody to learn how many coins were sent or received.
The Privacy of Bitcoin
Bitcoin transactions are not linked to any personal data. But they are linked to a specific wallet. It is difficult to track a wallet to a person. But it is possible to do so by observing transaction patterns, time zones, and other relevant data.
Another drawback is the transparency of the Bitcoin network. When you are sending funds, criminals can see how much money you have in your wallet. If the sum is high, they might try to hack the wallet and steal your BTC. Transparency, while being a benefit overall, poses a risk in specific cases.
For businesses, such transparency means vulnerability. If a business pays with BTC, those who receive the payments can track other parties who receive the funds from the same wallet, determine whether the business has issues with funds, etc.
So, the privacy offered by Bitcoin is initially limited. It doesn’t mean though that Bitcoin hasn’t done anything to boost the privacy level of transactions.
Some Bitcoin wallets offer optional stealth addresses.
Aside from stealth addresses, Bitcoin users can use ZeroLink to boost the privacy level of their transactions. It mixes coins, just like Monero’s ring signatures feature does. Unlike traditional Bitcoin mixers, where users have to rely on third parties, ZeroLink enables users to mix their coins on their own, without involving third-party service providers. However, ZeroLink doesn’t hide transaction amounts. All transactions, addresses involved, and amounts are recorded on the blockchain and available for all blockchain users.
Fungibility
Fungibility means that one money unit can be exchanged for another money unit. While it sounds simple, there are some controversies about the term.
Fungibility Is a Complex Concept
Take USD, for example. Are they fungible? It is common to believe that they are. However, if you dig deeper, you discover that not everything is that simple. While you can exchange 1 USD for another 1 USD banknote without any loss or gain in its value, the banknotes are not identical. They have different serial numbers. So, we cannot say that they are 100% fungible. However, they are still accepted anywhere without questioning their legitimacy.
Is Bitcoin Fungible?
It is different though if you compare two Bitcoins. While their value is the same, and they can be subdivided into multiple fractions (Satoshis) whose value is the same, Bitcoin coins are unique. If somebody pays with BTC, and this somebody was involved in a crime, the BTC can be tracked and blacklisted. Some companies might not want to accept a blacklisted coin. Therefore, we cannot insist that Bitcoin is completely fungible. One blacklisted Bitcoin cannot be deemed equal to one “clean” Bitcoin.
Monero Is Fungible
Monero applies privacy to every single transaction. Coins cannot be tracked, therefore, a specific coin cannot be associated with a specific activity in which it was involved. In other words, XMR coins do not have history. It makes Monero 100% fungible.
Fungibility Can Be Misused
Monero privacy and fungibility were the main reasons why the coin has been widely used by criminals. Unlike Bitcoin, where coins can be tracked and blacklisted, XMR cannot be tracked. XMR used for charity looks the same as XMR used to pay for drugs.
Transaction Speed
Transaction speed is one more factor to consider when choosing a cryptocurrency to invest in. In the Monero network, one transaction confirmation takes around 2 minutes. But before you get your funds unblocked and available for spending, the transaction needs to be confirmed 10 times. So, you’d need to wait 20 minutes to get your funds available for spending.
In the Bitcoin network, one transaction takes approximately 10 minutes. One confirmation is needed to unlock the funds and make them available for spending.
So, while the transaction speed is significantly faster in the Monero network, Bitcoin wins based on the average time needed to get your funds available for spending.
Scalability
When it comes to mass adoption, scalability becomes crucial. Scalability is the ability of a network to process more transactions over a given period of time when such a need arises.
Scalability was one of the main issues for Bitcoin when more users started accessing the cryptocurrency. The crypto-boom in 2017 showed that cryptocurrency was not ready for mass adoption. Both the Monero and Bitcoin networks struggled to process the needed number of transactions.
Bitcoin is now solving the scalability issue. Many scaling solutions are being developed to increase network scalability. The Lightning Network is the most popular Bitcoin scaling solution for now. It allows users to create payment channels that enable instant coin transfers. The Lightning Network is used for micro-payments such as paying for coffee, etc.
Monero block is flexible. It can accommodate when the transaction number changes. While it might be insufficient for the future application and adoption of XMR, Monero doesn’t support off-chain solutions because relying on third-parties scaling solutions would compromise the transactions’ privacy. However, in the future, the application of off-chain scaling solutions is not excluded.
Therefore, when it comes to scalability, Bitcoin is more flexible and thus, more compatible than Monero.
Mining
Both cryptocurrencies utilize the Proof-of-Work algorithm. It means that miners have to solve complex computational puzzles to mine new coins. A miner who solves the puzzle first gets the reward.
Bitcoin Mining
Bitcoin uses the SHA-256 mining algorithm. It runs on devices called application-specific integrated circuits (ASIC). These devices are created specifically to mine Bitcoin and they are very expensive. With it, the entry-level into Bitcoin mining is very high. Mining BTC with GPU or CPU is pointless nowadays because you will be facing competition from ASIC miners.
BTC mining is extremely energy-demanding. That’s why miners tend to flock to places where electricity is cheaper. If you don’t have funds to invest in an ASIC rig (having 1 ASIC isn’t enough to be successful in Bitcoin mining) and if energy cost in your location is high, your mining efforts won’t pay off.
Monero Mining
Monero utilizes a mining algorithm called RandomX. It is ASIC resistant. You can mine Monero with either CPU or GPU. Nowadays, mining Monero with just an ordinary computer is not profitable but by joining a mining pool, you can benefit from XMR mining.
Supply
Bitcoin maximum supply is limited to 21,000,000 which gives BTC scarcity. That’s why BTC is referred to as “crypto gold”. Scarcity makes the coin price grow rapidly if the demand for the coin is high.
Monero is not limited in supply. So, XMR will increase in value slower.
Real-World Use
While Monero beats Bitcoin in matters like anonymity, privacy, and mining, there are many more people using Bitcoin than Monero. Also, Bitcoin is being widely accepted by online vendors and service providers. There are more transactions on a daily basis in the Bitcoin network than in the Monero network.
Bottom Line
While Monero beats Bitcoin in privacy, anonymity, mining, and fungibility, Bitcoin offers its users such benefits as a higher scalability level, faster transactions, more real-world use cases, and the supply limited to 21,000,000 coins.
The choice between Monero and Bitcoin is not easy. We recommend choosing your coin depending on what your priorities are. And you can buy or sell any of them safely, without limitations and issues on LetxExchange.io.
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