Mimblewimble Protocol - Crypto Academy / S4W2 - Homework Post for @fredquantum
Good day everyone. Thanks to @fredquantum for such a wonderful lecture on Mimblewimble Protocol. I will be doing the homework from the lecture, so sit back and look for somewhere quite quiet and comfortable as you read through this amazing article I created just for you(😉). Let's get started!!!
Question 1: Explain your understanding of the Mimblewimble protocol.
One of the numerous benefits of the introduction of Blockchain technology, is because of it's level of privacy. Our financial transactions should be private and shouldn't be known by the public. Although, blockchain networks such as BTC network, still hasn't done complete justice to our financial privacy, as our transactions details such as the amount, sender's address and receiver's address can easily be seen by the public.
As a result of this weakness which is been faced in the blockchain, the Mimblewimble Protocol was launched in the year 2016, with the aim of improving the level of privacy in the blockchain. Mimblewimble Protocol will ensure that users of it's blockchain can make transactions without their transactions been tracked and monitored. One of the reason why Mimblewible Protocol, gained some kind of quick adoption in the world of blockchain, was because of the malicious cyber hack of a whopping sum of $72million in the year 2016 and later that year, Mimblewimble Protocol was created and people adopted to it.
Apart from Mimblewimble Protocol amazing privacy and security level, the protocol is also known to be very scalable when compared with Bitcoin network, hence, transaction on the Mimblewimble Protocol are by far, faster than the Bitcoin network, as it makes use of little data storage. People and Projects who value privacy and high level of scalability are opting to the Mimblewimble Protocol.
Question 2: Discuss in detail how the Mimblewimble blockchain protocol works.
To under how Mimblewimble Protocol works, let's see why it is different from Bitcoin. Bitcoin exposes 3 transactions details which are receiver's address, sender's address and amount. Hence, anyone can easily see details which are meant to be private.
Whereas Mimblewimble Protocol(MP) doesn't not make use of addresses, meaning, no receiver's address and sender's address. Transactions are not recorded individually but rather in single large groups, which will make it quite difficult for individuals' details to be revealed when transactions are been verified and validated.
The parties involved in the transaction will be able to view the details of the transaction, whereas third-parties won't be, as they would be seeing a group and random set of data. The Mimblewimble Protocol doesn't record users address and amount of the transaction, and by doing this, the network will be saving data storage, which will make the network highly scalable.
Mimblewimble Protocol makes use of Pedersen Scheme, as this amazing scheme ensures that miners won't be able to have access to the transaction details as they verifies and validates transactions.
Mimblewimble Protocol also makes use of Elliptic Curve Cryptography(ECC) and they are 3 in number, which are;
- CoinJoin
- Dandelion
- Confidential Transactions (CT)
As you can see from the image above, ECC ensures improvement in scalability as it uses less data storage.
Question 3: Discuss in detail your understanding of Confidential Transactions (CTs).
Confidential Transaction is a cryptographic protocols which ensures that the type of asset, addresses and amount of the asset transacted are not visible by the public, but only between the two parties involved in the transaction. For instance, Person A sent 0.5 Sol to Person B. The public won't know that, the asset which was transacted was Sol, they won't also know that the amount was 0.5 Sol and lastly, they won't know the transaction was between Person A and Person B.
From the image above, you can clearly see how Bitcoin network works, which is regarded as Normal, transaction details can be visible and tracked by the public. Whereas the Confidential transactions, showed no transaction details of it's users.
But how does Confidential Transactions work and gets verified by miners of blockchain? Confidential transaction makes use of Pedersen commitment scheme, which is a homomorphic encryption process. This type of encryption process ensures that miners can be able to verify and validate an encrypted data, hence, the details of the transaction remains private and unknown to the miners.
Question 4: How do you think Mimblewimble Protocol can be utilized on the Bitcoin Network to enable anonymity of transactions and improve scalability.
More and more people are getting more privacy conscious and Bitcoin network seems not to be improving it's privacy features as users transactions are open to the public to view and track, which isn't great for the future of Bitcoin network. And also, the scalability of Bitcoin network, is quite not fast when compared to other blockchain network such as BSC, SOL, FTM, and others.
Bitcoin can easily enable anonymity of transactions and also improve it's scalability by simply utilizing Mimblewimble Protocol, but how?
As we already know, Mimblewimble Protocol, enables transactions by users of it's network to be invisible by the general public, as it makes use of both Pedersen Commitment Scheme and Elliptic Curve Cryptography to hide transactions details such as the type of assets transacted, the amount transacted and the address of both the receiver and the sender. Hence, if Bitcoin network could integrate both the Pedersen Commitment Scheme and Elliptic Curve Cryptography to it's network, privacy and security worries by users will be greatly satisfied.
How can Bitcoin network improve it's scalability through utilizing Mimblewimble protocol? Since Mimblewimble Protocol doesn't record user's transaction data such as the address of the receiver and sender, the type of asset transacted and the amount involved, it's network is saving more data storage, which will help improve the network's scalability. Hence, if Bitcoin network could adopt this approach, it's scalability will be greatly improved.
Question 5: State the Pros and Cons of the Mimblewimble protocol.
The Mimblewimble Protocol have it's Pros and Cons, which I will be letting you in on below, as we start with it's Pros.
Pros Of Mimblewimble Protocol
- Privacy: The Mimblewimble protocol promotes and ensures anonymity of transactions in networks, as transactions details are hidden from the public.
- Scalability: The Mimblewimble protocol is highly scalable as it doesn't record transaction details in it's network, hence, saves data storage, which leads to faster transaction speed.
- Fungibility: The Mimblewimble protocol ensures increased fungibility. Fungibility means the ease for assets to exchanged between users. This is because users can't know the source of assets i.e track the assets.
Cons Of Mimblewimble Protocol
- Security: The overdependence of digital signatures in the Mimblewimble protocol, might result to malicious attacks from quantum computers.
- Fungibility: This can be Pro and also a Con to the Mimblewimble Protocol. Many users who should be blacklisted(Malicious hackers), hence, wouldn't have been able to exchange their assets between users, can be able to, on Mimblewimble protocol, as assets and addresses can't be tracked nor traced.
Question 6: Discuss in detail at least a Crypto that uses the Mimblewimble protocol.
BEAM Token
Beam is a privacy coin that utilizes both the MimbleWimble and LelantusMW protocols in order to explore the world of Confidential Decentralized Finance. Beam was launched in March, 2018, as it seeks to provide privacy utility coin that will serve as a medium of exchange with complete anonymity and serve as a confidential store of value.
The Beam blockchain makes use of the Proof-of-Work(PoW) to reach it's network consensus. BEAM uses the MimbleWimble protocol to help provide high level of privacy and fungibility with the blockchain. Users' don't have addresses on the blockchain, as transaction are private by default. Users make use of Pedersen Commitment inputs which will be known by both the receiver and sender to make transaction privately and by doing such, coins transacted in Beam blockchain can not be tracked nor traced, hereby enhancing the fungibility of the blockchain.
Beam is currently ranked 482, with a market capitalization of about $67.7 million, according to Coinmarketcap. It's current market price is $0.69 and it's all time high was $3.21 which was achieved on Jan 29, 2019. The max supply of Beam tokens is 262,800,000 while it's current circulating supply is 96,878,320 Beam tokens.
Conclusion
Privacy in the blockchain world is becoming more popular everyday and gaining more adoption, as people are seeking for privacy when making transactions. The Mimblewimble protocol is very superb as it goes a long way in making transactions more private and hidden from the public, it is highly scalable and also enhances fungibility in the blockchain world. The MimbleWimble protocol is really and truly a welcomed introduction into the blockchain world and I feel many projects will adopt this unique protocol in the future.
Special thanks to you, @fredquantum, for organizing this amazing class and giving this nice assignment, as it has helped me in the understanding of Mimblewimble Protocol.