Monero: The Perfect Tax Shelter?

For those of us who spent last weekend working on taxes, wishing we had done better planning, take heart.  There is still more than eight months left in 2018 to find ways to shelter income. With the new tax regulations you could seek out the advice of experts.  Of course, this will cost you some bitcoin cash or lots of Ripple.

Once you have finished with that, Monero has a better solution for sheltering income.  Caution: this won’t work for just anyone. But if you are a 1099 type worker or if you just like to be paid in cash, it can work.  Simply have your boss pay you in XMR, which is the coin of the Monero blockchain.

Why Monero

Monero is a cryptocurrency like so many others.  While virtually all purveyors of crypto talk about privacy and security, Monero’s pitch is all about these two features.  Ethereum and its imitators are well suited for enterprise applications. Ripple is emerging as the go-to name to replace the global banking industry’s dependency on money transfers using the Swift network.  

Monero is ideally targeted for those where privacy is paramount.  Without getting into all the techno-gymnastics, here is what makes them super private. Monero offers an improvement on existing technology by obscuring all elements including the identity of the sender, recipient and amount of every transaction.

Compare this with cryptocurrencies like bitcoin, where the public-ledger provides addresses. The difference gives Monero the advantage when it comes to protecting the privacy of its users.

Is all this privacy a good thing?  I think you can see where all this is going.  Back in 2013 when Monero came into existence the idea of privacy was hip and slick in the crypto world with little warning that global regulators would mount a war on private monetary transactions.  

The other flaw in the system is that with complete confidentiality makes it impossible to create a blacklist of scamsters and other bad actors.

Those of us who are long time followers of Monero will recall the boom year of 2016. That was the time transactions skyrocketed from just 468 per day, according to BitInfoCharts, to over 4,000.  That was the time when AlphaBay (darknet market) adopted Monero. From that point until last July Monero had a nice gig going.

It was then that AlphaBay, with its 200,000 users and 40,000 vendors, was shut down by the U.S. Justice Department, which also arrested the platform’s founder.

Monero Is Resilient  

While Monero was not implicated in the darknet activities of AlphaBay, it is only natural to assume it put a legal target on their back.  Even so, the loss of AlphaBay has not stopped the flow of traffic. The evidence shows Monero has been especially resilient.

Since the day following the AlphaBay announcement, Monero transaction volumes have nearly doubled.  By the December peak, the market capitalization had increased nearly 15 times to $6.8 billion. Though Monero gave back almost 60% of this value in the price collapse, that was less than bitcoin, Ethereum or Ripple.

Where To From Here

Financial technology is a ginormous opportunity, there is no question.  Is Monero a mainstream player or is its primary appeal to users seeking absolute privacy?  There is much to be said for privacy but when Monero’s biggest selling point could turn out to be a conspicuous liability, it casts a cloud.

At this time, government regulation is non-discriminatory. The are targeting all crypto. That is bound to change over time. That could favor others such as Ethereum or Ripple, for example.  For the sake of objectivity, Ethereum and Ripple are far from the only cryptos that have a lower exposure to regulatory risk.

And then there is the question of user value to absolute privacy.  Monero may have created a more private mousetrap than bitcoin, but it does not appear to be a whole lot faster and certainly not cheaper. At last December’s peak, complaints were loud and long how bitcoin fees reached the $20 level.  At the time, bitcoin’s average size was nearly a million and transaction time about 8 seconds.

Monero was far faster during this period but at a similar fee of $20.  This is not a level that will encourage mass adoption. Only bad actors and those in need of hiding their identities will be interested in paying.  In the final analysis the ones who benefit most from this is the profitability of Monero miners. In the end, the miners could have the best tax shelter of all. For the rest of us, happy tax day.

Featured image courtesy of Shutterstock. 

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