What is Monero: The Best Privacy-Focused Choice for Untraceable Transactions in Crypto

Introduction

Every cryptocurrency that operates on a public blockchain can be tracked down to the individual user if government authorities want to.

But why do people say that cryptocurrency provides anonymity when doing financial transactions? The answer is cryptocurrencies do not provide anonymity but pseudonymity.

Pseudonymity in crypto means your name is not directly linked to financial transactions made on the blockchain, instead you are given a public address by the wallet software or by an exchange to do your crypto transactions.

However, transactions are still recorded on a public ledger, and with sufficient analysis, they can potentially be traced back to individuals.

In 2013, when the FBI shut down Silk Road – the dark market where Bitcoin was the go-to payment method – a lot of people thought Bitcoin kept their transactions anonymous and untraceable. 

But that was far from the truth. All Bitcoin transactions are visible to anyone, and with the right tools like Chainalysis etc and some effort, it’s not hard to track those transactions back to IP addresses and, eventually, to individual identities.

How Monero Solves the Traceability Problem

Monero uses several mechanisms to offer privacy for user transactions. They are

✅Stealth Addresses

✅Ring Signatures

✅Ring Confidential Transactions (Ring CT)

✅Dandelion ++ - Hiding IP addresses

Stealth Addresses

Imagine you want to receive an item but don’t want to share your home address for privacy reasons. Instead, you provide a public drop-off location where the sender can leave the package. The sender only knows this temporary drop-off point, not your real home address. It’s then up to you to pick up the package.

Monero stealth addresses work in the same way.  A Stealth address is a one-time address generated for each transaction, ensuring the recipient's real public address remains private.

When someone sends you XMR, your private Monero wallet generates a unique, one-time stealth address linked to your real public address. The sender only sees this stealth address, not your actual public address.

However, you can still access the funds because your wallet knows how to scan the blockchain and detect which stealth addresses belong to you. 

Remember that stealth addresses are only used to receive Monero and for each transaction, a new brand-new stealth address is created. 

Ring Signatures

Imagine a group of friends agrees to leave an item at a public park for you to pick up, but they don’t want you to know which one of them dropped it off. When you go to pick it up, you know it came from one of the friends, but you can’t tell who actually left it.

This is how ring signatures work in Monero. The transaction is mixed with others, so while you know the transaction came from someone in the group, you can’t figure out who exactly sent it. 

Monero’s ring signature feature obscures the sender’s identity by mixing the sender’s transaction with several other possible transactions, making it impossible to determine which one actually initiated the transfer.

Let's see how a normal XMR transaction work with Ring Signature feature

Scenario: You buy something from an online store called Gizmorg using XMR

Step 1️⃣: You create a transaction to send 10 XMR to Gizmorg. 

Step 2️⃣: Your wallet mixes decoys by adding 10 other random Transactions (UTXOs) from the blockchain, forming a ring of 11 possible senders.

Step 3️⃣: A ring signature is created, proving that one of these 11 Transactions (UTXOs) is real without revealing which one.

Step 4️⃣: A unique key image is generated, ensuring that the real Transaction is spent only once while keeping its identity hidden.

Step 5️⃣: The transaction is broadcasted to the Monero network, where nodes validate the ring signature and key image without identifying the real spender.

Step 6️⃣: Gizmorg's wallet scans the blockchain and detects the payment using its private view key, allowing it to access the 10 XMR.

✅ Result: The transaction is confirmed, but no one—not even Monero nodes—can tell which Transaction was spent or who sent it.

Ring Confidential Transactions (RingCT) (Privacy for the Amount)

RingCT is a feature in Monero that hides the transaction amount. When you send XMR, the amount is masked and not visible on the Monero blockchain. 

It’s important to note that RingCT only hides the amounts on the Monero blockchain. The amounts are visible only to the sender and receiver, ensuring privacy while keeping the transaction valid.

Dandelion ++ - Hiding IP addresses (Node Level Protection)

If you run a Monero node, this feature helps protect your anonymity by ensuring that your node’s IP address is not easily linked to a transaction. When you send a transaction, Dandelion++ ensures it goes through a random series of nodes before being fully broadcasted to the rest of the network. 

This means that even if someone is trying to track the source of the transaction, they can't easily determine which node (and therefore which IP address) started it. 

Entities such as governments, ISPs, or even large-scale corporations might be interested in tracking cryptocurrency transactions, Dandellion++ minimze this risk making it harder to identify the source of the transaction.

Summary

📌The purpose of the Monero Stealth address feature is to protect the privacy of the receiver. 

📌The purpose of Ring signatures in Monero is to protect the privacy of the sender.

📌The purpose of RingCT is to hide the transaction amount appearing in the Monero blockchain, so that no third party can know except the sender and the receiver.

📌Dandellion++ feature provides node level anonymity making it harder for a third party to know which node initiated the transaction in the Monero network.

Advantages of using Monero

🌟Unmatched Privacy

Monero provides exceptional privacy services by hiding the sender, receiver, the amount and also the IP addresses of nodes that initiated the transactions. This makes Monero transactions very difficult to trace. 

In addition, if you use VPNs like Mullvad VPN, IVPN, etc. then privacy can be enhanced even further making it almost impossible to trace transactions.  

🌟Decentralization

Monero is a decentralized privacy focused cryptocurrency with no central authority controlling it. This makes it resistant to censorship and interference.

🌟Community Support

Monero started as a grassroots community movement and has grown into a passionate, decentralized network of contributors who fund, develop, and promote its privacy-focused technology, ensuring continuous innovation and resistance to censorship

🌟Wide Acceptance

Monero is widely accepted by many merchants making it a practical choice of payments with full privacy.

Disadvantages of Monero

⚠️Regulatory scrutiny

Monero’s strong privacy features are likely to attract criminals, therefore this also attracts regulators. Some countries have banned or restricted its use. Some exchanges may not support Monero.

⚠️Learning curve

It's not easy to use Monero if you are privacy focused. If you want to use Monero, then you need to learn how to use it effectively.

⚠️Higher Transaction Fees

Monero transactions are larger in size due to its privacy focused features like ring signatures, stealth addresses and RingCT, therefore the transaction fees are high.

How to get Monero?

📌You can buy Monero through centralized exchanges like Binance and Kraken; however, you should have to provide KYC to create an account. 

📌If you do not want to provide KYC, then you can use decentralized exchanges such as Bisq and Hodle Hodle. If these exchanges do not support Monero directly, you can buy Bitcoin or other crypto and later swap it to Monero using Swap services like ChangeNOW and SwapSpace. 

📌Another way to get Monero is through mining. You could use your computer’s processing power to secure the network and in return you can earn Monero.

Where to store your Monero?

📌For maximum security you can store Monero in hardware wallets, hardware wallets like Ledger Nano (S, S Plus, and X) and Trezor (Model T, Safe 3) all support Monero.

📌You could also use free desktop Monero wallets like Monero GUI wallet and Monero CLI Wallet.

📌If you prefer mobile wallets, then cake Wallet,  Monerujo and stack wallet are good options.

💡Tip: Always download desktop software wallets from Monero official website and double check the mobile wallets you download are official ones.

Final Thoughts

If you want your financial transactions to remain private to a significant extent, Monero is the best choice. While untraceable transactions may attract individuals looking to evade taxes or engage in illicit activities, it is the responsibility of regulatory bodies to address these concerns with appropriate measures—without violating people’s right to privacy.

Financial privacy is a fundamental human right. History has shown that when authorities gain unchecked access to personal data, it can lead to political suppression, discrimination, and the silencing of dissent.

Don't fall for the idea that "if we have nothing to hide, we have nothing to fear." This statement is completely false. Would you hand over your phone, banking details, or medical history to a complete stranger just because you have nothing to hide? Of course not!

Privacy isn’t about secrecy; it’s about maintaining control over our own information so that no one can misuse it against us.

The real question isn’t "What do we have to hide?" but rather "Why should anyone have the right to watch us?"

Disclaimer: The contents of this article are for informational purposes only and are not financial advice. The views here are just the author’s opinions. The crypto market is volatile, so be sure to do your own research before investing.