How Anonymous is Monero?

The rise of digital currencies over the past decades means that everything you do is on the blockchain. And the blockchain is immutable, meaning that it cannot be altered.

Additionally, privacy concerns have become a hot topic after leaks that the NSA is spying on everyone and the well-known fact that tech companies like Google and Facebook collect all data.

This has led to a big demand for a digital cryptocurrency that cannot be tracked. Fortunately, there are some solutions that offer both privacy/anonymity along with digital use. The most popular of these private cryptocurrencies (privacy coins) is Monero.

Monero bills itself as an anonymous cryptocurrency. However, just how anonymous is Monero?

This article will offer a conclusive answer on the privacy of Monero. In addition to that, we will explain why the leading cryptocurrency is not actually all that private as well as offer some reasons that so many people use Monero.

Is Monero (XMR) Really Anonymous?

As mentioned previously, Monero bills itself as an anonymous privacy coin with untraceable transactions, but is this true?

Yes, Monero is mostly untraceable at the moment. Could it be traceable and that is not public knowledge?

Sure, that’s possible. But all the evidence points to Monero being untraceable, so that is the most logical answer. With that said, Monero is probably not as private as you think, at least without taking proper precautions. The next section will cover some of the measures to take to ensure that you stay anonymous while using Monero.

Ensuring Anonymity With Monero

Here are some simple steps you can take to ensure your identity stays private while using Monero. It’s important to note that you will most likely stay anonymous without using these steps. However, following these basic guidelines will increase the odds that your identity stays private.

Use Tor, I2P, or a VPN with Monero

The most important step you can take to ensure your privacy with Monero is to use a tool that hides your IP address. Tor, I2P, or simply using a VPN will all work for this.

The key is that you do not want your IP address public because nodes can see your IP address. Subsequently, the IP address can be linked to a transaction with concerted effort. The good news is that it’s unlikely that will actually happen to you.

Even better good news is that Tor and I2P are both free to use. Those are also both the best options for maintaining security as well.

Send Monero To A Few Different Wallets

Another important process to ensure anonymity on Monero is to send Monero to a few different wallets. This is especially important if you have received Monero directly from an exchange or are sending Monero to an exchange that has your KYC information.

This step is necessary because the anonymity of Monero increases the more you send it to different wallets. Again, it’s not necessary to do this step as Monero is already fairly secure.

With that out of the way, the trackability of coins will greatly decrease if you send Monero to a few different wallets that you control.

Can Monero Transactions be Tracked (Hypothetically)?

Yes, Monero likely has some flaws in it that have not been discovered. This is obviously not a problem at the moment.

However, it becomes a bigger problem because the blockchain is immutable. This means that it cannot be altered. It also exists forever, which means that once the technology exists to track it, it can be used to track every transaction on the blockchain.

That said, it is not something to particularly worry about as there is nothing you can do to prevent something that can happen in the future. The best advice is to follow the guidelines mentioned earlier to ensure privacy and hope that privacy holds up if the blockchain can ever be tracked.

Now, this brings us to the next point.

US Treasury Attempting to Deanonymize Monero

Yes, the US Treasury awarded two $625,000 contracts to two blockchain analysis firms in September 2020 (InvestoTrend). The purpose of the contract?

To develop a software can identify the identity of wallets on privacy coin blockchains like Monero. Specifically, the software should allow an agent to type in an address and subsequently tie an identity to the address.

This software is ostensibly meant to track hackers that use ransomware. However, it will likely be used for more purposes than just ransomware. So, what’s the good news with this software?

The government is just starting to look for a solution to the problem. This means that they most likely do not have a way to track Monero at the moment. Furthermore, this gives Monero developers enough time to figure out a solution that makes the tracking software irrelevant.

Another positive is that $625,000 seems like a rather low amount of money for a software company to develop a solution that can track something as complicated as Monero.

To summarize, the government is looking for a way to crack Monero. This means that:

  • Monero is untraceable at the moment hence the need for the solution.
  • Monero might not be untraceable in the future.

Why use Monero?

The main draw of Monero is that it’s untraceable by default. Sure, Bitcoin is untraceable with a lot of work using tumblers and faucets.

Monero, on the other hand, uses all these features, and more, by default. It is leagues ahead of Bitcoin when it comes to traceability.

In fact, Bitcoin is not really that anonymous because wallet transactions, transaction amounts, and wallet addresses are all public. A determined analyst could pretty easily track bitcoin through the blockchain until it hits an interaction with an exchange that can tie an identity to the bitcoin.

Closing Thoughts

That covers it for the anonymity and traceability of Monero. Yes, Monero is anonymous and untraceable at the moment. It is obviously not 100%, but it is about as close to 100% as a privacy coin can get.

The anonymity can be increased by always using TOR and sending Monero to a few different wallets that you control.

Danna James

Danna is a journalist and technical writer with six years of experience researching and creating crypto articles, reviews, and how-to guides for different online media outlets, and academic journals.

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