Monero vs Bitcoin

Monero vs Bitcoin - which one is the better investment? Cryptocurrencies are an intriguing investment opportunity but they can be difficult to price because their intrinsic value isn’t always obvious. What are they really worth? Neither Monero or Bitcoin pay dividends like shares do, and they can’t be used to make anything practical like commonly traded metals either. Outside of the trading environment, it’s perfectly possible to value something like copper thanks to the traditional barometer of supply and demand, because copper has many applications in industry, but with Monero or Bitcoin it’s not so easy. 

Cryptocurrencies derive some of their value from the expectation that people will want to use them to move and store money across borders, and also from the fact that they can sometimes offer advantages over traditional fiat currencies in situations where transfer fees are high or where there are restrictions. But the bulk of Monero or Bitcoin’s value rests purely on what the market thinks they’re worth, so as an asset class, crypto probably resembles the art market more than the commodities market.

A major loss of confidence could make any crypto worthless, but before you panic over how much Monero or Bitcoin you’re currently holding, you shouldn’t worry. As with a Salvador Dali painting, or with the mass adoption of web platforms like Facebook, there is a lot to be said for pedigree. When a near-universal consensus is reached about the value of something over a long period, then it’s a fairly safe bet that this state of affairs is going to continue.

Think about Facebook. It would be worthless if everybody suddenly stopped using it, but that isn’t likely to happen overnight because so many people have become invested in it over time. It doesn’t matter that Facebook or any of the cryptocurrencies can be endlessly cloned. Anyone can create Monero or Bitcoin copies, but because of a phenomenon called the network effect - which states that each additional user of a service increases the value of that service to everyone else in it—users of the original get more from continuing to use it, so people keep using it!

Users stay with Bitcoin instead of migrating en masse to Bitcoin Cash because they know that other users are staying with Bitcoin. Everybody uses eBay and Amazon because they know that everybody uses eBay and Amazon. The fact that these are giants of their industry almost becomes a self-fulfilling prophecy.

When a currency gets going, it becomes more stable as it establishes a track record of purchasing power and expectation about its worth is built.

Monero vs Bitcoin - How Will the Network Effect Affect Them?

The Monero vs Bitcoin question is mirrored in the rise of social networks. Facebook wasn’t the first social network, so it was competing against the network effects of other networks. This didn’t matter in the beginning though, because Facebook came to market with a superior product just as mass adoption of social networks was beginning, so people took to it in droves because of its intrinsic value.

It could be that Monero is currently in the same position as Facebook was. It’s also a superior product, showing up right at the point in time where we could be on the cusp of large-scale cryptocurrency adoption.

Monero or Bitcoin - Which One Will See Greater Adoption?

When you’re thinking about whether to choose Monero or Bitcoin, consider how important privacy is to you. When you want to send and receive Bitcoin you need to share your Bitcoin wallet address. Unfortunately, every time you do this the other person involved in the transaction gets to see how much Bitcoin is in your account. That’s just how it works. Let’s look at how this can be a problem:

1. Say you’re in a place where the threat of violent crime is high. You need to pay for something using Bitcoin, and if the person receiving that payment from you is not very ‘savory’, then you may find them threatening you for the contents of your wallet.
2. If you’re in business and you accept Bitcoin payments from a supplier, you will be revealing your account balance, and if it’s particularly healthy then you might find that your supplier wants to put up their prices in future because they think you can afford it. Not only that, but they will also be able to see how much their competitors are charging you, and they may be able to work out how many customers you have and what you charge them. All of this private business information makes it easier for others to develop a stronger negotiating position with you in future, which is not what you want.
3. If you pay for goods and services online, then you may know that vendors often use price discrimination algorithms to try and calculate the most that they can get away with charging you in future. If they can see what you typically spend and where you spend it then you are handing over information to them which they may use to maximize what they can get from you.
4. Let’s imagine that you sell something and accept Bitcoin for it, and let’s say that the person who previously owned that Bitcoin was someone who broke the law. You could now be implicated in a criminal case because it’s a matter of public record that you were the recipient of those funds. You may also find that people won’t want to touch your ‘compromised’ Bitcoins now.

Monero isn’t prone to any of these privacy issues. It avoids them by applying privacy techniques to all transactions, so you won’t be able to own any ‘compromised’ Monero. All of its coins are individually interchangeable, an important trait for which economists have come up with the delightful term, ‘fungible’.

There have been some attempts within the Bitcoin community to circumvent privacy problems with ‘mixing’ features, but these have been problematic at best.

Monero automatically makes every transaction private. That’s an advantage over other coins which only make them optional. When the default setting for conducting any transaction is privacy, that means that you can trust the currency every time you use it without having to think about it. There’s never any room for doubt because Monero always has you covered.

Four More Reasons To Choose Monero Over Bitcoin

1. Monero’s better mining algorithm

Cryptocurrency transactions need to be verified and processed by computers when they’re announced to the worldwide network. This process is called mining, and Bitcoin’s choice of mining algorithm runs a great deal quicker on dedicated mining systems called ASICs. Standard retail PCs and laptops have no hope of keeping up with them, which effectively excludes ordinary people from the process. Instead, the majority of miners are big-money professional outfits concentrated in countries with lower electricity prices. Monero’s algorithm was created in such a way that using ASICs do not offer any advantage.

The upshot of this is that ordinary people will have more of an incentive to put their computers to work mining Monero. There’s no need to invest huge amounts of money in custom-made ASIC mining hardware and cooling equipment because they aren’t required. It’s a much more democratic way of producing and verifying cryptocurrency when ordinary people can download a Monero wallet and start mining.

It’s predicted that many more people will join the Monero mining community compared to those joining Bitcoin because they will know that doing so is a relatively easy way of getting paid. Even small amounts of income are welcome, and even small amounts of income are more than what they are likely to make trying to mine Bitcoin. This has tremendous marketing implications because it means that Monero would be distributed more widely, and as we’ve already said, the network effect is important for mass adoption.

2. Monero vs Bitcoin Block Size Limits

The Monero v Bitcoin question could come down to the issue of block size limits. When a transaction is sent to the Bitcoin or Monero network, it shows up as part of a ‘block’. It takes about two minutes to produce a Monero block, and 10 minutes to produce a bitcoin block. Bitcoin blocks have a hard limit which means that when there’s no room left for a transaction to be added it gets held up, which could be very inconvenient. It is possible to speed processing time up in such instances but it costs extra.
In contrast, Monero’s block size limit can adapt automatically, so if transaction volume goes up significantly in future then the system will be able to take them in its stride.

3. I2P - More Privacy for Monero or Bitcoin

Monero or Bitcoin could both receive a boost to privacy with the advent of I2P (the short name for the Invisible Internet Project) which holds the promise of privacy protection from passive network monitoring, rendering payments untraceable, and stopping network snoopers from knowing what users are doing.

4. Monero’s R&D Team Has Some Very Interesting Design Goals.

The Monero project features 180 contributors who are constantly working to improve it.

The Monero v Bitcoin debate is likely to continue, but Monero seems like the better candidate for mass adoption as a practical private currency. There is much to look forward to with Monero, but with that said, do keep in mind that cryptocurrencies can be prone to volatility which can make investing in them risky, so as you would do with any other high-risk asset, only consider investing what you can afford to lose, and only allow volatile assets to make up a small percentage of your portfolio.