BTC is the most popular cryptocurrency, and XMR is only a few clicks behind. The two carry many unique strengths and weaknesses over each other and are constantly intertraded.
In this post, we will show you the essential things you need to know as you swap BTC to XMR, including the coins’ characteristics, privacy and security, tax obligations, and more. Just keep reading!
BTC to XMR: Understanding the Crypto
Bitcoin was the first to enter the market. Subsequent cryptocurrencies try to address its shortcomings — like volatility, speed, and privacy. For instance, XMR provides faster transaction speeds and uses various cryptographic techniques to hide users’ data. Unlike BTC vs BCH, BTC and XMR are not that similar, so let’s look closer at their features.
What Is BTC?
BTC is the first blockchain-powered cryptocurrency to gain worldwide adoption. It aims to replace go-betweens such as central banks and governments. Some of Bitcoin’s key attributes include:
- Limited supply: Only 21 million coins will be produced up to 2140. That means BTC is a deflationary currency with increasing purchasing power over time.
- Increased security: Cryptographic hashing and the distributed nature of the ledger enhance its security.
- Transparency and immutability: The blockchain network is public and distributed. Anyone on the network can access and verify it, ensuring transparency and accountability. Moreover, the ledger is immutable, so verified transactions cannot change.
- Significant anonymity: You don’t need to provide any identifying information to use Bitcoin. However, all addresses and transactions are public records. You can lose anonymity if someone ties your address to your real-world identity.
What About XMR?
Monero is an open-source community project that relies on volunteers and community-funded contributors. XMR focuses mainly on the principles of genuine privacy and confidentiality. Its most prominent attributes include:
- Anonymity of users: XMR provides more anonymity through its stealth addresses (more later).
- Dynamic scalability: Monero’s dynamic scalability allows the network to handle more transactions without lag.
- Multiple keys: Unlike BTC and ETH, XMR uses multiple keys for accessing the account and spending the funds. This feature builds onto its privacy and anonymity.
- Lower transaction costs: XMR takes less power to mine and verify transactions compared to BTC.
Speaking About Privacy and Security
As you have already understood, XMR affords you more privacy than BTC. Let’s see just how private it gets.
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XMR Privacy Features
Monero addresses privacy concerns through ring signatures and stealth addresses. Ring signatures are anonymous digital signatures that authenticate your transaction while hiding your identity from other network users.
Stealth addresses are one-off addresses that don’t link back to your wallet. When you send to a Monero address, the coins are broken down into several segments. These chunks go through different stealth Monero addresses before reaching their final destination.
The transaction is confidential, so the funds cannot be linked to the sender or receiver. Only the two of you know the wallet where the XMR came from or went to. Even then, the identity of the sender remains confidential.
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Security Risks for Safe Exchange
Blockchain is significantly secure and resistant to attacks. Still, your cryptocurrency could be vulnerable where there are flaws in the exchange, your wallet, or the transaction process.
Digital wallets are especially susceptible to phishing scams and other hacking attempts. Moreover, it is difficult to recover stolen coins due to the immutable nature of cryptocurrencies.
Ensure you store your crypto in a trusted wallet and avoid fraudulent services. It would also help to avoid exchanges that require too much personal information and KYC. Remember, no one can access your personal information if it is not out there.
What About Taxes?
The anonymity of cryptocurrencies makes it harder for regulatory authorities to track your profits. Still, regulatory authorities are closing in on crypto traders globally. Consider the tax implications of trading in your country.
The catch is when you transfer your coins back to fiat currency. That’s where your local tax body can access your bank records. Be sure to investigate your regional laws if you plan to withdraw your cryptocurrency as fiat money or make tangible investments with it.
BTC to XMR: Are There More Challenges?
You now know that XMR offers more privacy than BTC. We have also seen that vulnerabilities may exist in a wallet, transaction process, or exchange. Moreover, anonymous exchanges are more secure because you don’t give any personal details.
The only other risks when swapping BTC to XMR are price volatility and counterparty risks. Cryptocurrencies are notoriously volatile, so you want an exchange that provides for rate locking.