Hard forks have become an increasingly common occurrence in the cryptocurrency world and the latest one making waves is the MoneroV hard fork. What is it and why is it important?
Hard fork. There are few other words in the English language that can cause cryptocurrency enthusiasts the world over to experience an involuntary twitch. Hard forks have become an increasingly common and controversial fact of life in the cryptocurrency world. The most high-profile recent example was the acrimonious Bitcoin and Bitcoin Cash split and now it looks like Monero may be the next cryptocurrency to experience this turbulent event.
The MoneroV hard fork is set to receive its first airdrop on the 14th of March. This is expected to provide a short-term boost to the value of Monero (XMR) but many believe that the MoneroV hardfork could cause long term harm to Monero and even compromise the anonymity of its users.
What is MoneroV?
MoneroV is a hard fork of the wildly popular Monero cryptocurrency. Monero has gained user support thanks to its advanced privacy features and ease of use. MoneroV hopes to build on the privacy features offered by Monero and provide users with a better class of privacy coin.
Monero is considered one of the best privacy coins out there and has already seen widespread use but the team behind MoneroV believes there are major problems. While the MoneroV team will continue to use the base code for Monero they plan to take some radical steps in order to resolve the perceived problems with the Monero coin
- Hard cap on coin supply – Monero currently has an infinite supply of coins. The MoneroV team believe that this will lead to uncontrolled inflation and prevent Monero from ever truly competing with Bitcoin. As such they made the decision to to cap the maximum supply of XMV at 256 million
- Specialized funds for developers – The MoneroV team believe that Monero’s community led donation funding system has held the cryptocurrency back. They intend to solve this by posting “developer bounties” for features that need to be implemented, taking advantage of third party knowledge. To pay for this the MoneroV team will take 5.89% of all XMV minted and use 66% of that to fund future development.
- Scalability problems – The founders of MoneroV believe that Monero is incapable of scaling enough to prevent transaction times and fees becoming unreasonably high. In order to resolve this they want to integrate the MimbleWimble protocol that will bind transaction size to the number of users not the number of transactions being made. This should theoretically reduce the cost and time of transactions.
The initial coins will be delivered via an “airdrop” of XMV on the 14th of April. Every user who provides a private Monero key will receive XMV as well as access to the MoneroV blockchain. This method of releasing the initial coins have proven to be particularly contentious for reasons we will discuss in a moment.
If you are a holder of $XMR at block 1529810, you will be automatically credited with 10x $XMV, extractable anytime in the future. There is no rush or time frame to claim your #MoneroV coins – there is no time limit!#blockchain #altcoin #altcoins #crypto
— MoneroV (@monero_v) February 25, 2018
These changes are a pretty major overhaul of the Monero system and so the MoneroV developers opted for a hard fork. A hard fork essentially breaks consensus in the blockchain and then two new “branches” continue. They are generally very controversial and most developers would prefer to avoid them. The MoneroV hardfork is no different.
Why Are People Angry About The MoneroV Hardfork?
Hardforks generally cause a great deal of turbulence and their use is highly controversial in the cryptocurrency world. They are generally considered a vehicle of last resort and in cases like the Monero and MoneroV hard fork they often attract a lot of negative responses. Many members of the Monero community, including the developer, have raised very real questions surrounding the legitimacy of the MoneroV project, with some going as far as calling it an outright attack on the Monero network.
The primary reason for all of this mistrust focuses around the planned airdrop. Yes the planned airdrop has helped to push up the value of XMR in recent days as users prepare to receive but there is a darker side. In order to acquire their XMV users will have to hand over their private keys. This alone should be raising a red flag and unfortunately it doesn’t get much better.
The wallet used by MoneroV is closed-source. This is an absolutely huge problem, as the creators of the MyMonero wallet explain. Users should never be using a closed source wallet, if you cannot verify the underlying code of the wallet you have absolutely no idea that it is safe. Secondly, by revealing your private keys you open yourself to an unreasonable level of risk. It could allow the MoneroV team to not only steal the funds of users handing over their private keys but also give them a lot of information about the Monero blockchain. In the defense of the MoneroV team they have stated they will be releasing the source code of the wallet but only after the airdrop is complete.
A particularly troubling accusation leveled against MoneroV is that it represents an attack on the integrity of the Monero network. When a blockchain undergoes a hard fork it copies every transaction that preceded the breaking block. This means that two identical copies of the blockchain run simultaneously. This poses a huge problem for one of Monero’s flagship privacy tools, the Ring Signature.
The Ring Signature is a clever feature that takes the users private keys and mixes them with a number of public keys. This scrambled the origin of any transactions and essentially makes it impossible for anybody to trade the source of a transaction on the Monero blockchain. By using an existing private key for transactions someone can easily identify your private wallet address and thus trace every transaction you have ever made on the Monero blockchain. It also means the privacy of other users has been jeopardized as the public addresses used in the ring signature are now compromised.
PSA: We are not affiliated with nor do we endorse MoneroV. Furthermore, we strongly discourage Monero users to reuse their keys to claim their MoneroV: https://t.co/ylZMfyE5Dy
— Monero || #xmr (@monerocurrency) February 16, 2018
This led to the Monero developers very publicly stating that they are not affiliated with MoneroV. Even going so far as to state that any hard fork asking users to re-use their keys is likely an attack on the Monero blockchain. The Monero team also asked users to ensure that if they want to take part in airdrops that they should make new, fresh keys, so as not to compromise themselves or others.
This problem is actually even bigger for MoneroV users. Any adopters of the MoneroV platform will have to accept that their private keys are likely already compromised, undermining an important part of Monero’s privacy suite.
What Does MoneroV Mean For Monero?
MoneroV represents a very real threat to the Monero eco-system and should be ringing alarm bells among users and investors. The sad fact is that the whole MoneroV project raises red flags across the board.
Their whitepaper is littered with errors and does not contain enough of the necessary information to understand what it is that MoneroV actually wants to achieve. Despite claiming to be open source their wallet will remain closed source until after the airdrop is completed. To make matters worse the team is anonymous so it is impossible to even verify who they are and whether they have the necessary experience to undertake a project of this magnitude. Even if we assume that the development team has good intentions the fact remains that MoneroV has the potential to completely undermine one of the key tools that Monero uses to maintain the privacy of its users.
In terms of how the hard fork will affect Monero’s price we can draw some conclusions from previous hard forks. Many users are attracted by the prospect of “free currency” so are likely to provide private keys in order to receive some XMV when the drop goes live on March 14th. These users will receive 100 XMV for every XMR token they hold. This will lead to an increase in Monero’s overall value as we approach the airdrop. There will likely then be a dump of both XMR and XMV as some users attempt to cash out as quickly possible, leading to a fairly heavy price drop.
The long term impact of the hard fork remains to be seen. If users heed the warnings of the Monero development team and create new private keys for the hard fork then the impact may be minimal. If they do not then we could see the privacy of the Monero blockchain become severely compromised, which will then impact its price.
We don’t normally make direct recommendations but in this case we would advise against purchasing or attempting to acquire XMV. The fact that they have failed to discourage users from using their existing Monero private keys in order to receive XMV is deeply suspect. Furthermore the information provided by the anonymous development team in their white paper leaves a great deal to be desired.
If you are set upon attempting to claim some XMV in the airdrop there are some steps you can take in order to protect yourself. The first is to generate a fresh key with which to register, although keep in mind that if you transfer Monero you currently own to the new wallet you will still risk the original transfer being traced back to you. In order to truly protect yourself you should purchase fresh XMR.
We hope that we are mistaken but given the currently available information the XMV project looks misguided at best and malicious at worst, potentially putting the security of the whole Monero ecosystem at risk.
This does not constitute investment advice, please always conduct your own due diligence before investing, remember that cryptocurrency is a particularly volatile commodity and that your capital is at risk