Wes Levitt

September 12, 2017

Monero (XMR)

Summary
Monero is a privacy-focused cryptocurrency based on the
CryptoNote protocol. Since introduction in 2014 as a variant of
the Bytecoin currency, it has developed a reputation as one of
the most secure cruptocurrencies, particularly after Monero
support was added to leading darknet market AlphaBay in August
2016.

Development Team
Monero is an open-source cryptocurrency with the majority of its core team being pseudo-anonymous, making
an analysis of the development teams prior experience difficult. That said, the community and core team
appear to function well and have not displayed the conflict and indecisiveness that characterizes Bitcoins
development team. Major improvements to Monero, such as the addition of ring confidential transactions in
January 2017, have been rolled out successfully and with minimal drama. Per GitHub, the Monero development
community is the third-most active among cryptocurrencies after those of Bitcoin and Litecoin.

Technical Specifications
Monero has no hardcoded blocksize limit (blocksize can increase naturally, subject to a small block reward
penalty if block size increases too suddenly), which allows for a gradual increase in blocksize without developer
consensus for each increase. Moneros supply in circulation increases as new coins are mined until reaching
approximately 18.4M, at which a fixed 0.3 XMR will be released each minute, an inflation rate of >1% that
decreases annually.

Price and Volume

XMR has seen its price increase
significantly in both fiat and BTC
terms since the 8/21/17
announcement that it would be
added to the Korean exchange
Bithumb, the worlds largest
cryptocurrency exchange by
volume. XMRs has shown a 7-day
return of 16.9% and 30-day return
of 121.4%.

Unsurprisingly, trade volume has also skyrocketed since that time,

though it has trended downward after the initial surge in interest.
Traders on Bithumb have eagerly adopted XMR, trading daily volumes
nearly as high as the next three exchanges combined. It remains to be
seen whether this volume will be sustained, or if Moneros increased
trading volumes will fade once a new cryptocurrency makes its debut.
Key Statistics and Peer Comparison (Past 30 days)

Monero exhibits moderate to high correlations with other major

cryptocurrencies, an effect that is magnified greatly during crypto-
wide pullbacks; the selected assets approached a correlation of 1 after
the announcement of Chinese ICO regulation, for example.

While XMRs coefficient of variation of daily prices appears highest

among the group, implying significant daily price volatility, this metric
is skewed by the recent Bithumb announcement. Should XMRs prices
over the past 30 days be split into two regimes before and after
August 25th, the two periods prices show a COV of 0.06 and 0.09,
respectively.

Strengths
Proven use case: Due its highly anonymized protocol, Monero is currently the leading cryptocurrency
used on darknet markets.
International adoption: Moneros recent success being traded on Korean exchange Bithumb speaks to
its appeal to investors in multiple regions.

Weaknesses
Limits to market size: The typical cryptocurrency (Bitcoin, Litecoin, etc.) provides sufficient anonymity to
the average user. Moneros level of anonymity is arguably only necessary for those seeking to evade the
scrutiny of law enforcement.
Development difficulty: Compared to other cryptocurrencies, Monero has a reputation of being difficult
to develop for. One practical example is the lack of available wallets that support Monero, especially on
mobile devices.

Opportunities
Scalability: Moneros ability to increase blocksize naturally could allow it to avoid the pitfalls Bitcoin and
Ethereum have experienced if/when transaction volume grows to their levels.
Privacy key to consumer adoption: Security and privacy will be key issues in the crypto space as
mainstream adoption grows. Moneros reputation for security may help assuage the security and
privacy concerns of new users.

Threats
Reputational effects: Monero risks becoming (and perhaps already is) known as the de facto
cryptocurrency for illegal online transactions, posing a threat to mainstream consumer and corporate
adoption.
Loss of status as the most secure cryptocurrency: Other privacy-focused cryptocurrencies such as
Zcash, PIVX, and ZCoin threaten to dethrone Monero as the most secure cryptocurrency, both from a
technical standpoint and in the minds of cryptocurrency users and investors.

Conclusion
Moneros current position is strong as the most secure among major cryptocurrencies. Aided by its capable
development community, Monero has the potential to enter the mainstream with the reputation of being the
most secure cryptocurrency. However, threats abound from rival privacy cryptocurrencies and it needs to prove
it has a use case it excels in beyond illegal trade. Momentum is currently on XMRs side, but investors should
keep a close on eye on ZEC, PIVX, and XZC as potential rivals.