Current governments have established a financial system they fully control (through monitoring of cash transactions, monitoring bank accounts, etc.). Cryptocurrencies have the ability to affect financial systems by providing the technology to achieve financial freedom. The introduction of Bitcoin started a new era in financial history, yet governments are already trying to monitor the cryptocurrencies. The European Commission wants to initiate a directive preventing the use of the financial system by “terrorists” and the main principle of cryptocurrencies is therefore lost thanks to the fight against suspicious transactions. In order to counter terrorism, states want to improve security by sacrificing fundamental rights, including economic freedom and data protection.
In 1988, Timothy C. May called terrorists, drug dealers, pedophiles, and organized crime the Four Horsemen of the Infocalypse, which drive government officials to erode the digital privacy of citizens. Government intervention presents an opportunity for nefarious meddling, open-ended and without limitations, so an anonymous economic system is an important way to protect the people and their business. An approach of “I have nothing to hide…” is sick because privacy and anonymity in monetary transactions are part of the personal freedom of all people. Let’s take a closer look at this technological discovery; it is technically so near perfect that it is practically unbreakable or unhackable. Decentralization makes it a truly significant technological invention because no outside power can distort it.
Do you know where the cash in your wallet came from?
Do you know how many people have a particular bill in their hands and what was its purpose? Monero (XMR) is an open-source cryptocurrency created in 2014 and its slogan is “secure, private, untraceable.” The word “monero” in Esperanto means “coin” and practical, it is an electronic cash with the same features as the cash in your wallet — nobody knows the history of your coins.
Privacy and untraceability
Monero is based on the CryptoNote protocol, which was introduced a few years after Bitcoin in 2012. This makes for a more secure and anonymous way to operate with an economy, which Bitcoin does not have. Thanks to CryptoNote protocol, Monero provides the sophisticated scheme for privacy and anonymization of transactions including ring signatures and blockchain obfuscation. The end result of this process of anonymization is a decentralized mixing based on heavily-tested algorithms. Every transaction is cryptographically secured by using a distributed peer-to-peer consensus network..
Both of the people in a transaction know when it is completed, what is the time of transaction, how much money, or where. That is a big difference from Bitcoin, which keeps all of its transactions in the blockchain transparently. Bitcoin was not designed for full anonymity— despite the fact that it is still possible to make a transaction without personal information, the currency does not have full anonymity. The Bitcoin blockchain is transparent, and therefore all of the transactions can be traced.
Monero creates total anonymity in the sense that when you spend money, there is no trace of where it came from or where it’s going. That ensures that your purchases, receipts, and transfers remain absolutely private. Nobody needs to know how much money a user has, where it comes from, and what is done with it. People behave differently when they know they might be watched, so anonymity when shopping is one of the most important advantages of (digital) freedom.
Decentralization of power
Decentralization is a persistent theme that has surfaced again and again in the cryptocurrency community. The lack of central sensitive points sustains a difficulty to attack or manipulate a system. It means the dispersion of power, people, or things away from a central location or authority.
Surprisingly, not all of the cryptocurrencies satisfy the conception of decentralization. Monero’s ring signatures were developed to remove the centralization point of a group manager. The transactions are not only untraceable, but have a measure of ambiguity that ensures transactions cannot easily be tied back to an individual user. Monero development is completely based on donations and is community driven with a strong focus on decentralization and scalability.
One of the common problems with cryptocurrencies is scalability. The average block time for Bitcoin is ten minutes, but for Monero it is currently only two minutes. Scalability or expandability—the ability to handle sudden changes—is a desirable system feature of a system, network, or process. Most cryptocurrencies are derived from the Bitcoin codebase and thus have a “block size limit”. Monero has no block size limit as its developers created dynamic block size as opposed to a fixed size like Bitcoin. With Bitcoin, block capacity is quite limited and restrictive for users. Monero‘s dynamic block size is adaptable and created for preferences of the global market.
Cryptocurrency vs. financial system
Governments have started to pass laws and regulations in using cryptocurrencies. In March 2014, the Internal Revenue Service (IRS) stated that all virtual currencies would be taxed as property as well as currency. In 2017, digital currencies are now part of ‘Priority 7 , put in place by The European Parliament and An european commission of justice and fundamental rights based on mutual trust’ under the area of ‘Fighting terrorism.’ It included digital currencies for the first time as part of the Commission’s anti-money laundering efforts, which is a priority the Commission hopes to deliver by the end of 2017. “The issues addressed include safeguards for financial flows from high-risk third countries, EU financial intelligence units’ powers, centralized national bank and payment account registers, and risks linked to virtual currencies and anonymous pre-paid cards.” Monero, as a truly anonymous currency, is a target of government officials. The FBI and the state financial authorities mention Monero at their conferences in the context of cyber-crime, and it is just a matter of time before they will consider banning it completely.
Why will the anonymous currencies interfere with the current financial system?
The government has many reasons to halt the spread of cryptocurrencies:
- Suspicious transactions. A means fight against terrorism, pedophilia, or drugs restricts economic freedom to stop illegal activity. “Security Theater” makes the government appear proactive and effective without actually improving the safety of its citizens. This is introduced by the government in the fight against terrorism: presenting the prevention of anonymous, but benign, transactions as suspicious.
- Loss of control over taxpayers – Despite the fact that the taking of evidence of tax evasion, the government will hire larger and larger teams of officials, through peer-to-peer technologies and currencies as Monero is technically impossible to track down and prove the transactions. Virtual “citizenship”, virtual communities and no interest in government elections.
- Loss of purchase data – In the Czech Republic, the EET (electronic registration of sales) brings to the government an enormous amount of data about all transaction and sales in the country. With anonymous systems, they will lose it.
- More free markets and fewer taxes – Anonymous cryptocurrency will allow a voluntary business between many of people who were afraid of business – bureaucracy. Cryptomarkets allow people to trade on a voluntary basis with practically anything.
A new decentralized system competes with the current banking system as a whole. Decentralized banking, where we control our money ourselves and wrap rules around how we spend it, means a money without central banks. Satoshi Nakamoto created Bitcoin with the motivation to solve the problems of centralized payment systems. Decentralization and anonymity are important in the financial world because of the inevitable conflicts of interest between any centralization authority and users. The people will go ahead confidently to use these new technologies. We are starting a new era of bank and financial system. And these features are for the people with zero-knowledge of cryptographic background of cryptocurrencies as well, because it is for them safe and cost-effective.
Disclaimer: This article contains an opinion for informational purposes only and does not constitute investment advice. Invest in Monero at your own risk.
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