The Case for Monero being used as cash

A — near perfect — peer to peer electronic cash system?

I would like to thank the Monero community on Reddit, Twitter and Telegram for the support, insights, feedback and comments they have provided so far. Establishing great, friendly, collaborative communities like Monero’s is half the work on the path to success. It is collaboration not toxicity and hostility that is moving mountains.


Privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system. An anonymous transaction system is not a secret transaction system. An anonymous system empowers individuals to reveal their identity when desired and only when desired; this is the essence of privacy. Eric Hughes, A Cypherpunk’s Manifesto, 1993

The aim of this article is to examine the potential of Monero as a peer to peer electronic cash system and the reasons why it is probably the best candidate for this title today.

We will examine the importance of privacy when transacting on public permissionless blockchains (such as Bitcoin or Ethereum).

We will examine the main shortcomings of traditional cryptocurrencies, and the strengths of Monero vs public permissionless distributed ledgers like Bitcoin and Ethereum pointing out to why it is better as a peer to peer electronic cash system.

This article does not get technical though. In the last section there are links to resources for readers who require to take a deeper dive into Monero.

Please Note: Opinions expressed in this article are the author’s opinions and by no means constitute financial advice.

I. Privacy is a fundamental Human Right

Privacy is a fundamental human right recognised in the UN Declaration of Human Rights of 1948, the International Convenant on Civil and Political Rights of 1966 and in many other international and regional treaties.

Generally speaking, privacy is the right to be free from interference or intrusion.

Information privacy (more specifically) addresses the right to have control over how our personal information is collected and used.

It is important to draw this distinction so that we better understand what it means to transact on a blockchain, in particular:

  • why is privacy important on public permissionless distributed ledgers (blockchains)?
  • how do public permissionless blockchains evade privacy by default/design? and
  • how does Monero attempt to fix this major flaw.

Why do we need privacy?

Privacy underpins human dignity and key values such as the freedom of association and the freedom of speech. It has become one of the most important human rights issues of the modern age.

Information Privacy is equally important because — among others — :

Privacy protects information that we do not want shared publicly (such as health, personal finances).

Privacy may protect our physical safety (provided e.g. that our real time location data remains private, or that a malevolent actor does not know how much money we have/own, where we live etc.).

There are endless examples of why privacy is important and there is a growing importance, diversity and complexity of this fundamental right in the light of big data, IoT, AI & DLT (blockchains).

Why do we need privacy on Blockchains and how do public permissionless blockchains evade our privacy?

Misconceptions about our right to privacy: There are various misconceptions about our fundamental right to privacy, some times (perhaps) due to a lack of understanding how fundamental a value it is to human societies. Some claim that since they have got nothing to hide, they are OK with surrendering their privacy rights to AI, big data companies or the government. Some claim that protecting our privacy on each device we interact with, is impossible. Others go on to claim that encryption gives wrong-doers or terrorists an invisibility cloak.

Let us now pause for a second and think. Is it really worthy sacrificing a fundamental human right over the above misconceptions and concerns?

All of the misconceptions mentioned above, seem to ignore the scope of legitimate uses where the protection of our privacy is quintessential to our happiness and well being.

Misconceptions about public permissionless blockchains — A cautionary note: Apart from our misconceptions on our right to privacy and why privacy is important to us, there are also misconceptions about the effect of public permissionless blockchains on our privacy in particular.

Users seem to deify blockchain and the evident revolution that started by Satoshi Nakamoto and Bitcoin back in 2008.

Distributed ledgers/Crypto/CBDCs (coming soon), do not only enable freedoms; they could (at the other end of the scope) become an Orwellian dystopia coming true, whereby important aspects of our personal and economic lives are being perpetually tracked (by the government or better say — in the case of Bitcoin — everyone). The state of euphoria this revolution has brought to blockchain fanatics, could suddenly turn to a state of perpetual unhappiness/misery as blockchain offers the perfect tool for (financial at least) surveillance to the hands of everyone, not just governments.

Public permissionless blockchains offer free (as in free beer) surveillance by design.

An avid rights’ activist and inspiring legal scholar, Lawrence Lessig, has argued that we will need to define what are the proper ways in which data can be used and what are the improper ways in which data can be used and, in turn, develop the infrastructure for this conversation.

In the light of blockchain technology and public, permissionless blockchains (distributed ledgers) in particular, there is no switch between proper and improper uses, data is accessible by everyone. Whereas you can argue that you — at least — remain pseudonymous, de-anonymising your BTC address may be easier than you think.

Which in turn creates the imminent need for technologies and blockchains like Monero to step in. It is an encouraging thought that there are networks like Monero, already providing the infrastructure that attempts to reclaim privacy while interacting, transacting on Public Permissionless Distributed Ledgers.

Public permissionless blockchains fail to protect privacy by default, by design i.e. through an architectural “flaw”. On public permissionless blockchains like Bitcoin and Ethereum you are not anonymous, you are at best pseudonymous and everyone can still track your activities. That pseudo-anonymity can also be compromised.

This constitutes a paradox, as unprecedented surveillance could be effected through the implementation of a technology (blockchain and cryptocurrencies in particular) that was originally understood to enhance (not limit) freedoms. In this sense, it appears public blockchains suffer from a severe, fundamental flaw. For example, public addresses on public blockchains can be tracked by everyone and there is no such notion as the right to be forgotten years down the road. All your activities are publicly accessible perpetually through the immutable ledger.

Cryptocurrencies could enable unprecedented freedoms but they could, at the same time, be tools of surveillance and totalitarian control.

Think of this in real world terms: How would you feel if anyone could see when you visited the video store and bought porn, when you went to the coffee shop, when you dined at X restaurant, which organisations you subscribe to (and your corresponding political beliefs) or your balances in the bank at any point in time etc? The architectural design of public permissionless blockchains exacerbates the above, so anyone with your public address could see and track your activity perpetually.

How does Monero fix the flaws inherent in Bitcoin and Ethereum?

For blockchain technology (not just crypto) to achieve global adoption and thrive, users need control over how their data is used — they can’t and shouldn’t expose it to everyone. This is an important feature for both companies/entities and individuals.

In turn, for any cryptocurrency to be as good as peer to peer electronic cash there should be two elements as explored by Nicolas van Saberhagen in his CryptoNote v 2.0 White Paper in 2013:

Privacy (Untraceability): for each incoming transaction all possible senders are equiprobable.

Unlinkability: for any two outgoing transactions it is impossible to prove they were sent to the same person.

I will add Fungibility (which is related to both of the above) following developments in recent years, subsequent to Saberhagen’s White Paper.

Monero offers all three of the above properties as it will become evident in the passages that follow.

Furthermore, there are two more features that are quintessential for any peer to peer electronic payment system to succeed: speed and low transactional costs. Monero meets the requirements for these two features too, as we will see in the passages that follow.

II. Why do we need a Peer to Peer Electronic Cash system that actually works? Why Monero?

In the first sub-section we will explore how Bitcoin fails to hold true to its original vision as a peer to peer electronic cash system, followed by an analysis on how Monero fixes: a. the flaws inherent in Bitcoin’s design and b. Bitcoin’s subsequent failures.

How Bitcoin (SO FAR) fails to be a peer to peer electronic cash system

Bitcoin was originally designed to be a fast, cost effective, peer to peer electronic cash system. Satoshi was clear about his intention on both the white paper and subsequent communications with Bitcoin developers and community that are publicly available. His intention was also for Bitcoin to scale on chain without trusted third parties or L2 solutions.

For a more thorough analysis on what Satoshi originally intended for Bitcoin (supported by evidence on posts and responses by Satoshi himself) see the following article that offers some important views on the scaling debate:

The following section describes how Bitcoin fails to hold true to its creator’s vision and why it was never a peer to peer electronic cash system.

a. It is now expensive and slow to transact with $BTC

It should be evident that since Saberhagen’s white paper was published (2013) whereby some qualities of Bitcoin such as speed and low cost transactions were still present and praised by him, a lot has changed, as the Bitcoin Core dev team followed a path that many deem as one deviating from the original White Paper.

Today, Bitcoin is near useless for everyday electronic payments and cash transactions which — in real space — amount to trillions of dollars per year. The reason is simple: Bitcoin transaction fees are prohibitive. You cannot buy a hat, bread, a coffee, a bus ticket, a pair of shoes without incurring average fees between 5 USD and up to 60 USD on days that there is congestion on the network (based on data from the last three months).

1MB blocks (limit of 7 transactions per second) will never allow Bitcoin to scale and compete as a peer to peer electronic payments system.

In order to deal with this issue, Bitcoin Core dev team have been promoting L2 solutions like the controversial Lightning Network whereby you have to transact off chain in order to achieve lower fees and high speeds; problem is there are still bugs, costs related to opening and closing channels, routing fees etc. Lightning Network is still evolving, it is far from perfect and — most importantly — it does not allow Bitcoin to scale on chain like Satoshi envisioned or be used as peer to peer electronic payments system TODAY.

Below is a list of problems/issues related to the usability of the Lightning Network (article is dated and Lightning Network’s development is ongoing so the below may change):

Bitcoin transactions are not only expensive but — so far — painfully slow when transacting on chain and the network is congested.

Nowadays, in the light of the failure of $BTC to scale on chain or be used as an effective peer to peer electronic payments system, Bitcoin personae are pushing the narrative of digital gold or digital property deviating from the very core idea of the Bitcoin white paper which envisioned Bitcoin as a peer to peer electronic cash system.

b. $BTC has — to this date — failed to be a real substitute for cash, even when fees were low and transactions fast

Whereas some may argue that the Bitcoin Core dev team hindered the potential of Bitcoin to scale on chain and become the standard in peer to peer electronic payments (by being fast and cost effective, enabling transactions for everyone (like it once did) not just wealthy individuals of the developed world), Bitcoin has always failed to be peer to peer electronic cash.

Even hard forks of Bitcoin like $BCH (that can theoretically scale on chain and enable cheap, fast peer to peer electronic transactions for all types of purchases of goods or services) even these iterations cannot offer privacy by default thus they cannot be deemed as cash payments as they fail to meet the criteria set out in Nicolas van Saberhagen’s White Paper above, namely:

a. Privacy (Untraceability) b. Unlinkability.

These two properties were first explored by Okamoto T. and Ohta K. in their work entitled Universal Electronic Cash in 1991. They set out 6 conditions for the ideal cash system namely:



Privacy (untraceability)




Especially in respect to privacy they pointed out:

“The privacy of the user must be protected. That is, the relationship between the user and his purchases must be untraceable by anyone.”

De-anonymising a Bitcoin address (remember here also that everyone can search an address in the immutable ledger via a chain explorer) that in turn exposes their identity, home addresses etc. is a disturbing scenario yet it is possible. This is a major flaw of open, permissionless, transparent ledgers like Bitcoin, Ethereum and the likes.

1984 revisited: Another example is this: If Mr X transacts with Ms Y e.g. sells goods to her, then both of them will be able to track balances, transactional histories, transacting patterns of one another for the past, present and future. Now there is something fundamentally flawed about this.

Privacy, thus, is not a feature desired by criminals only, as the narrative goes, privacy by default is an important feature for legitimate users and hard working law-abiding individuals alike, who want to protect their freedoms, sanity and safety.

c. Fungibility a-la-carte

Bitcoin community takes pride in that 1 Bitcoin equals 1 bitcoin, 1 sat equals 1 sat etc. Well, these statements are fancy but distort reality. Fungible is an asset whose units are indistinguishable.

Now try and send a bitcoin or sats that have been used (before you got hold of them) in Silk Road or other similar sites to Coinbase and you will see why not all bitcoins are equal.

Although this is a highly controversial topic, the following passage is indicative of the fungibility problem inherent in public, permissionless, transparent blockchains like Bitcoin:

To preserve privacy, Bitcoin utilises numerical addresses. Thus, in theory, it is relatively difficult to ascertain the real-world identity of those behind the transactions. Satoshi Nakamoto believed this would be enough to preserve the privacy and fungibility of Bitcoin.

He explained in the Bitcoin whitepaper: “The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous.”

Unfortunately, the reality today is Bitcoin is not fungible. The rise of advanced blockchain analysis tools and chain-analysis firms means that it is now possible to trace the transaction history of bitcoins and other cryptocurrencies, and the individuals who use them.

The fungibility of the Bitcoin network began to be questioned as early as 2015 when a blockchain firm began to provide brand new bitcoins to its customers at a premium. Referred to as virgin bitcoin, these units of bitcoin are acquired directly from the miner and fetch a pretty penny as they are sold at a premium above current market prices. By buying freshly mined bitcoin, an investor can be assured that the bitcoin in question has no history as a payment on the dark web, or in a ransomware case, for example.

How does Monero fix all of the above?

Speed and cost of transactions — The Anatomy of a Monero Transaction

Monero transactions go through the following steps according to the following article offering an example of a transaction with a merchant of goods:
  1. Purchase — After adding up the customers purchase in local fiat and applying sales tax if needed, you simply need to calculate the corresponding amount in XMR.
  2. Payment — The customer scans your QR code to pay you in XMR. The Monero transaction fee is paid by the sender and calculated as the time of transaction.
  3. Transaction Pool — Within a second, the transaction is announced to the Monero network and placed in the transaction pool, also called the mempool. You can check for the existence of your transaction in the mempool, an example mempool can be seen here:
  4. Confirmation — Within 4 minutes, the transaction will usually be in a block on the blockchain and you can have confidence that it is valid. The payment will now appear in your wallet as locked funds. Your transaction will be confirmed by 9 more blocks before being unlocked and virtually impossible to reverse.

For smaller transactions, merchants can enable a sales tracker and verify/approve with their client (buying goods) an incoming transaction while in the mempool thus enabling fast, instant transactions. For larger transactions it may be worthy waiting 2–4 minutes for the transaction to enter in a block on the blockchain.

The cost for a transaction on Monero Network is approximately $0.0040!!

Privacy and untraceability

As member of the Monero community SerHack and the Monero Community point out in Mastering Monero:

Monero uses powerful cryptographic techniques to create a network that allows parties to interact without revealing the sender, recipient, or transaction amounts. Like other cryptocurrencies, Monero has a decentralised ledger that all participants can download and verify for themselves.

However, a series of mathematical tricks are used to conceal all of the sensitive details and stymie any blockchain tracking. Monero’s privacy features allow the network to assess the validity of a transaction and determine whether or not the sender has a sufficient account balance, without the actually knowing the transaction amount or account balances! Nobody can view others’ account balances, and transactions do not reveal the source of the funds being transferred.

As they point out:

Monero users reap all the benefits of a decentralised trustless financial system, without risking the security and privacy downsides of a transparent blockchain.

This is how a transaction looks like on the Monero Network:


Fungibility & Monero

In the case of Monero, its fungibility is a feature of its sophisticated architectural design whereby privacy is enabled by default.

The obfuscated transaction record obscures the transactional history of all Monero. If you lend 1 Monero to a friend, they could return any 1 Monero to you, since they are indistinguishable. This particular quality may seem like one of minor importance, however, in the light of the above analysis, fungibility should be a quintessential feature of any peer to peer electronic cash system. Traditional open, permissionless blockchains with trackable records of addresses, balances, transaction histories, cannot qualify as substitutes for cash, Bitcoin included.

It is the privacy that in turn enables/ensures fungibility that make Monero the number one substitute for cash. Bitcoin, Bitcoin Cash etc can qualify as money, they can be used for peer to peer electronic payments at varying degrees of success (Bitcoin Cash being far more effective at the moment with a high adoption rate too), but Monero possesses some unique qualities that make it a true substitute for cash.

III. More About Monero

The above are not the only reasons why Monero is by some users preferred to Bitcoin. The following two infographics give an idea:

IV. The Challenges for Monero

No matter how sound money it may be deemed by its users, the road to adoption for Monero is not a bed of roses. On the contrary.

Governments are fighting privacy-protecting cryptocurrencies, yet — on the bright side — Monero adoption has continued to grow globally with a reported 950 merchants accepting Monero today.

One should also add that the IRS has placed a bounty of $ 625,000 for breaking Monero’s code without anyone having broken it to this day.

Several exchanges have also delisted Monero in fear of regulators but despite this, transactions on Monero network are on the rise! From April 2020 to April 2021 they grew from 10,000tx per day to 23,000tx per day.

Companies from the private sector have also attempted to de-anonymise Monero transactions again without any success.

Scalability concerns: Like with Bitcoin failing so far to scale on chain, Monero may be presented with the same challenge down the road i.e. when Monero reaches bitcoin’s current scale of transactions. The use of ring signatures for example significantly increases the size of the blockchain. The dev team at Monero introduced Bulletproofs which is reported to have improved scalability by up to 80%.

There is an ongoing discussion about exploring options for — among others — scaling the network; like with any PoW chain scaling is a puzzle and an ongoing process.

On the bright side, fees and block size related issues are not concerning on Monero as, according to an article by Monero Outreach:

Instead of believing transaction fees will keep the network alive long term, Monero uses ‘tail-emission’ to incentivise miners and keep transaction fees low, indefinitely. The supply inflation rate of Monero’s tail-emission is on par with the annual rate of new gold mined globally.

Also, the scenario of the chain splitting (hard forking), like it happened with Bitcoin and Bitcoin Cash will most likely not happen with Monero, due to its scalable ‘dynamic block size’, which enables the block size to automatically increase or decrease depending on the amount of transactions happening on the network.

Illegality concerns: Another concern is the legality of using cryptocurrencies like Monero and particularly relevant to regulated entities using Monero. The best answer comes from the law firm Perkins Coie:

Privacy-enabling cryptocurrencies, commonly known as privacy coins, are enhanced versions of early cryptocurrencies that were developed to protect the financial privacy of individuals and businesses alike. Each privacy coin leverages innovative mechanisms that provide privacy, encryption, and security to its users. Alongside their positive effects, however, these mechanisms have raised an important compliance question:

Is it possible for regulated entities to comply with anti-money laundering (AML) obligations when supporting privacy coins?

The answer, in our view, is yes.

Not only do privacy coins provide public benefits that substantially outweigh their risks, existing AML regulations properly and sufficiently cover those risks, providing a proven framework for combatting money laundering and related crimes.

V. Closing Remarks

Monero is a misunderstood technology and one cannot stress enough the legitimate reasons for which one may desire transactional privacy and be inclined to use Monero as cash, as explained in this article.

So far, Monero has proved that it is the most notable (if not the only) cryptocurrency enabling transactional privacy by default (not through Layer 2 solutions, mixers etc.) while meeting all criteria for a near perfect peer to peer electronic cash system as explored in the passages above.

In a world where surveillance of all aspects of our lives thrives, Monero is anticipated to play an important role as a line of resistance against this ever expanding surveillance by providing public benefits to Monero Network’s users, that is, by protecting public goods such as the right to privacy.

In the following section there are links to resources for users that require to take a deeper dive into Monero.

VI. Resources/Bibliography



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