Mimblewimble Protocol - Crypto Academy / S4W2 - Homework Post for @fredquantum

Hello everyone
I am sure you all are enjoying session 4 of the crypto academy. Here I am submitting my assignment and hope ot will be up to the required standard.

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1. In detail, explain your understanding of the Mimblewimble protocol.

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The interesting thing about the name of the protocol is that the word Minblewimble is derived from the famous Harry Potter Novel by pseudonymous Tom Elvis Jedusor. The original concept of the protocol was later improved by Andrew Poelstra, a Blockstream researcher. Then Poelstra released the white paper of Mimblewimble in the year 2016.

What is Mimblewimble?

Mimblewimble is a blockchain protocol and by applying it to the blockchain, transactions remain completely anonymous hens no identifiable or reusable addresses are involved in the transactions done through this protocol. Other than this the protocol provides an excellent framework for a blockchain that has good scalability and fungibility. The protocol was developed by some anonymous

The protocol is different from others in such a way that unlike other blockchain transactions stores transactions in a block and the receiver need to claim his amount from that pool thus it is impossible to track who transferred money to whom?

Mimblewimble protocol uses the technology in which it eliminates unnecessary transactions information, thus block size is reduced. Inputs and output transactions are aggregated using this cut-through technology.

The main feature of Mimblewimble is its encrypted public key and this key-encryption technique is based on elliptic curve theory that allows creating smaller, quicker and more efficient cryptographic keys. Unlike the traditional method of generation of cryptographic keys, ECC generates keys through the properties of the elliptic curve equation. It is also found that the 164-bit key generated using ECC provides the same security level as the 1,024-bit key generated through another method.

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2. Discuss in detail how the Mimblewimble blockchain protocol works.

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The transaction pattern of Mimblewimble is completely different from the traditional blockchain transactions. In MW protocol there is no concept of recognizable or reusable addresses. only the party who is involved in the transaction can check the detail of the transaction and for any external person, it is just like random data.

Unlike other blockchains data in the block is stored as a single deal rather than the collection of different transactions. Here also blocks are verified like any other blockchain but details of the transactions are not available to the public. There is no way to find the link between input and output data. This can be understood with an easy example

Assume that A, B and C send 5, 7 and 9 coins to D. In total D receive 21 coins. Now D sends 21 coins to E. In such a case, E is not able to know that from where D received coins, he will only be able to know that D sent 21 coins to him. Similarly, A will only know that he sent 5 coins to D but could not know that how many coins B and C were sent to D.

Transaction on Mimblewimble protocol required to exchange the verification information between sender and receiver.

Varification process

The verification process is based on the concept that multiplication is easy but factorising is not, let's understand with the following example.

If we see the following equation it is easy to solve with pen and paper or with a calculator.

Now let's look at another equation, it is not simple to solve. But if the creator of the equation tells the missing numbers the problem will be solved quickly and the owner will be verified.

The example given above is of very small numbers but in the case of multi-squillion numbers, it is very hard to find the correct numbers as there would be so many options. It is not only hard to guess them but also to calculate them. The easiest and quick solution is to know them in advance.

How transaction amount is hidden?

The transaction amount is hidden by multiplying it with big secret numbers.

In Mimblevimble protocol, both sender and receiver are involved in the transactions and come up with a number like this

It contains both an amount-part (hidden) and a private-key-part. It is called Pedersen commitment and the sender and the recipient exchange their Pedersen commitments.

How to prove inputs equal to output?

Here the transactions also consist of two Pedersen commitments like this -

If the amount sent and received is the same it comes like the equation below and the transaction kernel is divisible by the private keys.

If the amount sent is not equal to the amount received then the condition will be like this-

Here transaction kernel will not be divisible by the private keys and the transaction will be rejected. In small numbers, there might be some exceptions but in multi-squillion numbers that computers use, the chances of this coincidence are almost zero.

3. Discuss in detail your understanding of Confidential Transactions (CTs).

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The confidential transaction is the USP of the Mimblevimble protocol. It replaced the UTXO model with the multi-signature model. The protocol becomes more efficient by removing inputs and outputs.

The CTs use the Pedersen Commitment scheme in which no public address is required. Instead of public address here sender and receiver share a secret number or a ‘blinding factor.’ with each other. This blinding factor is used to encrypt the inputs and outputs of the transaction. As there is no public address involved and the blinding factor is shared between sender and receiver no third party can know the details of the transaction. This makes the privacy of the transaction very high.

CTs is verified with the equations as discussed in the previous task. Let's assume that Input is 7 coins and output is also 7 coins then the equation will be as follows -

(Amount sent x secret number) + (Amount received x secret number)

(7 x 10) + (-7 x 10)

= 70-70

= 0

It shows the net balance is 0 and the amount sent is equal to the amount received.

Here secret nos are the private and public keys that not only validate the transaction but also verify the ownership.

4. How do you think Mimblewimble Protocol can be utilized on the Bitcoin Network to enable anonymity of transactions and improve scalability?

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Mimblewimble can be integrated with the Bitcoin network as a side or parrel chain to improve the scalability and privacy of the Bitcoin transactions. To perform a secure Bitcoin transaction to hide the transaction details using MW protocol, Bitcoin first needs to move on the Mimblewimble chain. Here on this parallel chain transactions can be made without revealing the details as long as the user want until the new user wants to move back to the Bitcoin network.

In this entire transaction, only input and output transactions will be recorded on the Bitcoin blockchain, all other transactions done on the Mimblewimble will be private. The sidechain transaction is identified as a single block transaction by the Bitcoin blockchain.

As the transaction is performed on the sidechain, it becomes fast and low cost also. Other than privacy it saves time, energy and money also.

The difference between Bitcoin transactions and Mimblewimble transactions is clearly can be seen in the blockchain explorer.

Bitcoin block

In the above screenshot of the BTC block, there are various transactions and all are traceable by giving the address and the amount.

Mimblewimble block

Unlike BTC block there is no address of sender and receiver and the transaction amount. The transaction is completely private. confidential and untraceable.

5. State the Pros and Cons of the Mimblewimble protocol.

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Pros

• Transaction on the Bitcoin blockchain is linked to previous all transactions so all the transactions should be verified by the node but in the case of Mimblewimble, it works as a side chain and no node confirmation is required. Thus it becomes faster and helps to improve scalability.
• Data is compressed in the Mimblewimble which reduces the blockchain size and make it lighter. Comparatively, reduced blockchain size improved transaction speed and overall consumes fewer resources.
• Privacy is the key feature of Mimblewimble where transactions are untraceable.
• MW blockchain is considered as a fungible

Cons

• Mimblewimble protocol is not resistant to advance and powerful quantum computers because it depends on the relatively simple properties of digital signatures.
• Blockchain uses secret transactions, have privacy but the transaction per second is decreased. But the still compact size of the blockchain helps to improve the transaction rate.

6. Discuss in detail at least a Crypto that uses the Mimblewimble protocol.

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Beam cryptocurrency

BEAM is a native token of confidential decentralized finance (Defi) platform BEAM. It runs on two protocols and one of them is Mimblewimble

BEAM was founded by Alexander Zaidelson, Alex Romanov and Amir Aaronson in March 2018.

Some features that make BEAM unique are like it never revel the address to any third parties. The only user decides who can see the address. It can handle about 17 transactions per second, which is higher than the Bitcoin transactions with its privacy feature.

BEAM uses the Equihash PoW mining algorithm and can handle a large amount of data. Unlike Bitcoin mining which requires higher processing power, it needs a large amount of memory.

It is listed on major cryptocurrency exchanges like Binance, Hotbit etc.

BEAM is a deflationary cryptocurrency as it has a limited supply. Its primary use case is a store of value rather than day-to-day payments.

Its block time is about 1 minute and each block will contain about 1000 transactions. Unlike Bitcoin BEAM blockchain doesn't store full transaction history rather it records only the current UTXO state.

Statistics of BEAM

Parameter	figure
Current Market price	$0.69
Market Cap	$66,932,547.01
Total supply	96,872,920
Maximum supply	262,800,000
Market Rank	481

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Conclusion

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Bitcoin is a pioneer of cryptocurrency which comes with various advantages, over traditional systems, like highly secure transactions, immutability and transparency. But at the same time, it has some limitations like all transactions details are available to the public, slow transaction speed and difficulty to scale up.

The Mimblewimble protocol is the reply to the limitations of the blockchain technology particularly of Bitcoin and some other blockchains. If MW is integrated with Bitcoin blockchain it works as a side chain and helps to solve the privacy, speed and scalability issue to some extent.

There are various blockchain and cryptocurrencies are based on Mimblewimble protocol like BEAM, Grin. There are private coins with high privacy.

Thank you, prof. @fredquantum for delivering such an informative and interesting lecture.