Monero has been in development since 2014. It utilizes the CryptoNote protocol, which was created in response to the inherent weaknesses of Bitcoin. Here we take a look at the Monero project to determine its strengths, weaknesses, opportunities, and threats (SWOT).

Strengths

  • Strong development. Third highest code contributor count (547+ all time developers), led only by Bitcoin and Ethereum. Utilizes bug bounties. Has been attacked multiple times, making it stronger each time. Sound and battle tested CryptoNote codebase.
  • Privacy. Obfuscating every layer of the transaction (sender, receiver, and amount), Monero seeks to find the right balance between absolute privacy and usability.
  • Highly researched and peer-review focused. Uses proven encryption protocols to maintain privacy for the network and its users. Also has its own independent Monero Research Lab which sends new developments through formal third party auditing before implementing into Monero code.
  • Active community. 23 repositories in the Monero Ecosystem. 340 repositories on the Monero topic. 200+ active contributors to the Monero code. Workgroups ranging from general community organization, research, translations/localization, outreach, hardware wallets, and event planning. Fixes problems quickly and effectively establishes consensus on important decisions.
  • Fixed supply and stable emission curve schedule of 0.3 XMR per minute, so a rise in demand could see appreciation for the long term and it incentivizes miners to secure the network indefinitely. Is a great alternative to blockchains that will depend on fees to secure their network longterm. Also creates stable, predictable inflation which supports good economics.
  • ASIC resistant proof of work consensus algorithms acknowledge the centralization issues inherent in a small group of companies manufacturing most of the world’s ASICs. The Monero community has established consensus to resist ASIC mining until ASICs are commoditized and accessibility problems improve. This currently makes mining Monero something that is accessible to anyone with a CPU.
  • Great communication with exchanges, wallet providers, community, investors, miners and the public via Reddit, Twitter, GitHub, and their mailing list. Communicating network upgrade requirements and critical updates and notices. Additionally, they provide full logs of development meetings going back as far as 2016.
  • Usability. Desktop GUI wallets are available and relatively easy to use for Windows, MacOS, and Linux. User friendly mobile wallets are available on Android and iOS. Hardware wallet support on the popular Ledger and Trezor wallets. Monero community has also funded development of an open-source hardware wallet.
  • Governance of the Monero project is decentralized The core developers are all individuals spread throughout the globe, rather than being part of a single entity. They communicate transparently and attempt to find consensus among the community before major decisions are made. So far they have not abused their powers and have not given any reason to believe they would. Critics have argued it’s not decentralized enough, but compared to other major cryptocurrencies it is among the best.
  • Auditable by choice. Unlike Bitcoin that has a transparent blockchain and can be audited by anyone at anytime, Monero can be audited only by choosing to share its private view keys, allowing auditors to confirm an individual’s amount of Monero and giving individuals and businesses the power to control when they choose to share their private financial information.
  • Accessible and acceptable through dozens of exchanges and a number of payment gateways. Accepted by a long and respectable list of merchants. See official website and Project Coral Reef for examples.
  • Public. The lead maintainer, Riccardo Spagni, is not afraid to show his face in public. This is also true of many of the most active community members.
  • Business Oriented. Many developers and community members have built and are building businesses around Monero to enhance the ecosystem.
  • Scalable. Dynamic block size limit depending on network demand allows for automatic scalability.
  • Decentralized and Global. The Monero community and its developers are made of individuals from around the planet and has an incredibly active Localization/Translation system that produces Monero content and services for a wide range of languages around the world.
  • Future Oriented. Monero’s community has donated to fund development of decentralized network-traffic hiding tools that will allow users to hide their location and IP address. The Monero Transmissions Lab also aims to brainstorm solutions for future off-grid or off-main-net Monero transactions, using open-sourced protocols and infrastructure for satellite and mobile ad hoc mesh communications.
  • Savvy and Dedicated Community. Monero’s online community is known for its no-frills attitude and has consistently demonstrated the depth and breadth of its knowledge-base by contributing to online forums, research, lectures, and other cryptocurrency related developments.
  • Funding Model. The large number of donors is evidence that a systemic funding channel like a mining tax or premine was never essential for Monero’s technical progress. However, some critics also view the funding model as a weakness. See below.
  • Talent Magnet. Monero has attracted several talented individuals who contribute to its code and ecosystem. A notable example is Howard Chu, Founder and Chief Architect of Symas Corp. and former technician and consultant of NASA’s Jet Propulsion Laboratory who supported Shuttle missions as a lead software engineer.

Weaknesses

  • Liquidity. Due to the relative complexity of Monero’s code (compared to Bitcoin or ERC20 based cryptocurrencies) it is more challenging to integrate Monero on cryptocurrency exchanges, services, and markets, thus making liquidity a bigger challenge.
  • Semi-annual Network Upgrades (Hard forks). While currently a strength because it patches bugs and enhances the performance, efficiency, and usability of Monero, it is not a good long-term strategy. It also has the potential to introduce new bugs each time it occurs. Creates more opportunities for scam forks to arise, which can create confusion and decrease network privacy if users share secret keys with forked coins.
  • Scalability. Monero solves the fungibility and privacy issues of bitcoin at the expense of additional technical complexity through privacy layers. It also means the scaling issues of bitcoin are magnified to some extent with Monero. Monero’s dynamic blocksize helps, but these other issues must be addressed.
  • Slightly centralized development team and social media channels that so far has been benevolent, but does make some people concerned about centralization.
  • Community Discussion is found primarily on IRC, Reddit, and GitHub. For some critics, this is not decentralized enough.
  • Complex and highly technical. While this is not a weakness in and of itself, the encryption protocols, hashing algorithms, and various features like Payment ID, Subaddresses, Ring CT, and others can create confusion and uncertainty among less technical users and community members. It has also shown to be a barrier to adoption because it creates challenges for exchanges, merchants, and others to integrate Monero into their ecosystems.
  • Large blockchain size which must be synced to show balance and transact with wallets. Steps are being taken to mitigate this, but it is still a challenge for easy usability and scalability. However, seven eighths of prunable blockchain data will soon be pruned.
  • Funding Model is based on donations. Potential donors are incentivized to “free ride”, and see if someone else will donate instead. It also makes it hard to raise funds for other important things like quality control, customer support, and documentation. This puts pressure on those who own a lot of Monero and can lead to slower development in general.
  • The code and especially APIs could be cleaner for developers to help improve adoption and integration with business and services.
  • Network privacy threats. There are a variety of theoretical attacks to the network’s privacy that could occur. See threats for more details.
  • Transaction size. The enhanced privacy layers of Monero make for a larger transaction size than bitcoin. Bulletproofs made a significant improvement for Monero transactions, but more needs to be done to ensure scalability to and beyond the level of daily bitcoin transactions.

Opportunities

  • Market Cap. Monero has the opportunity to remain the highest-ranked privacy-based cryptocurrency.
  • Bitcoin hedge. As the inherent issues with Bitcoin and its lack of privacy at the protocol level become more realized by the public, Monero has an opportunity to significantly increase by market cap as well as adoption and liquidity.
  • Global markets. Monero could become listed on more global markets and thus increase liquidity.
  • Regulated exchanges. If technical challenges are overcome, Monero could be listed on regulated exchanges, also increasing liquidity and market cap.
  • Economic empowerment and human rights. Monero’s privacy features and community ethos are aligned with human rights values and could become more widely recognized and used in countries that are experiencing political or economic oppression.
  • Private Wealth. Monero’s privacy features make it attractive to high-net-worth individuals and institutions that want to participate in the nascent cryptocurrency economy while keeping their finances private.
  • New developers. Being the number three cryptocurrency in terms of developers, Monero has an opportunity to attract new talent and surpass the amount of developers as Bitcoin or Ethereum, the only two current leaders over Monero by number of developers.
  • Open Source Community. The free and open source ethos of Monero are very strong, which make it a candidate to be adopted by the ever expanding global open source community. Continued adoption can lead to an even stronger ecosystem and increased liquidity.
  • Artists. Artists of various genres have begun to integrate Monero payments, a trend that may continue and thus, support the use case of Monero.

Threats

  • Regulation. Monero faces a threat of being removed from exchanges in the future if regulation around exchanges continues. The privacy focus of Monero also makes it a potential target of KYC/AML regulation. Although the ability to share private view keys for auditing Monero will curb this threat substantially, it could create near-term challenges until regulators are educated.
  • Market share. Monero could lose market share to other privacy coins.
  • Hidden inflation. While this risk has been asserted to be provably irrational many times by prominent and trusted community members and developers, it is still a theoretical risk.
  • Blockchain analysis. Various blockchain analysis risks exist, including timing attacks, poisoned outputs, clearnet usage (unobfuscated IP address), and honeypots. Fortunately the community of developers discuss these regularly and are actively working to address the risks. Monero’s workgroups also develop videos, articles, and best practice PSAs to help new users learn these threats and how to remain as safe as possible.
  • Network Attacks. A variety of attacks on the Monero network are theoretically possible and have been explored in depth by the Breaking Monero series.
  • Misinformation and censorship. Coordinated misinformation campaigns could potentially lead to attempts to ban Monero in certain jurisdictions or decrease its popularity in general. While Monero cannot technically be censored, this theoretical threat could hurt its adoption and decrease liquidity in certain jurisdictions.