Mastering Monero: Chapter 1 Summary

Monero is a private-by-default cryptocurrency and Mastering Monero is a new book that talks about the cryptocurrency in-depth. I will be going over each of the chapters in the book and providing a quick overview of each chapter.

Chapter 1 of the book is a gentle introduction into the cryptocurrency space. The book starts off by defining the need for cryptocurrencies. It makes the argument that centralized banking systems require a trust between the user and the banking system to keep centralized ledgers up-to-date. This is a problem because if this ledger of account balances ever falls out of sync due to negligence, financial issues, malice and corruption, and/or hostile 3rd parties, then that shakes the very foundation of trust established between banks and their clients.

The chapter then goes on to talk about public blockchains (i.e. Bitcoin) that have a distributed ledger. Cryptocurrency ledgers are distributed in that anyone can download them and validate them whereas for the banking example above, you have to trust that the bank is keeping their ledger in sync and there is no way for you to verify it. The book lists the following benefits for blockchain:

1. Simplicity and Speed - Transactions occur very quickly because instead of relying on two separate banks to keep their individual ledgers in sync, you're just updating the distributed ledger.
2. No 3rd Party Risks - Nobody can "hack" the ledger and you don't have to place money into anyone's hands.
3. Pseudo-anonymity - For the most part, your name is not tied to a specific address, although there are services out there that can break that anonymity.

Some of the issues public blockchains bring about are that they allow for blockchain analysis, so some entity can track your address history and view how much you're worth, where you spend your money, and so on. This allows organizations to get a better understanding of your spending habits and data mine you further.

Enter Monero. Monero allows parties to transact without revealing the sender, recipient, or transaction amounts. This privacy feature is not optional, it happens by default and there is no way to "turn it off". Monero does share the same underlying principle of having a distributed ledger, but the account balances are hidden through cryptographic means so you have financial security and financial privacy.

The book also discusses some use cases of Monero and why it is useful to have privacy over public ledgers like Bitcoin.

1. Price Manipulation - A store can charge you one price for your first visit, and then look at how much Bitcoin you own and then charge you a higher price on the next visit. That can't be done with Monero.
2. Supply Chain Privacy - A business could snoop on the Bitcoin addresses of its competitors and see to who and how much money they are sending to their clients and try to offer a better rate.

There are more use cases described in the book and these are just to name a few. Monero is open-source and created in 2014.