The importance of privacy in our current technological world
Technology in general, is the main driving force behind our constantly improving quality of life. The better the technology available to us, the better our lives are going to be. This happens because technology always provides us with tools that make everything easier, allowing everyone to improve their individual productivity, and hence, the volume of general wealth increases as a result.
This is why it is fair to say that technology, at least for the most part, is something extremely positive for our lives and for our civilization. But this doesn’t mean there are no exceptions. It is very well known the fact that a lot of our modern devices and digital platforms can be used as a tool to spy on people and violate their privacy, in fact, this is one of the reasons why blockchain technology in general is being used to develop all sort of new applications and platforms, that can guarantee a proper protection of people’s privacy.
The reason why privacy is so important, especially in our current context where technology is all around us, and our integration with it is only going to deepen, is because privacy is the most important layer of protection individuals can have when it comes to dealing with big entities such as global corporations and big governments, the more private information these type of entities have about individuals, the more control they could enforce over them, therefore, there is an extremely important need to have access to a new generation of digital platforms where no one is at risk of suffering from privacy violations.
Money, privacy & blockchain
One of the advantages of living in the digital era when it comes to handling our money, is how easy it is to make financial transactions and being able to exchange value without any problem and at any given moment, it is clear that having economic freedom and approaching any economic interaction in a voluntary way is something most people take for granted, and is certainly a key aspect for any prosperous country.
However, there have been cases where the government leverages the control they have over the financial system of a particular country, and uses this control to oppress the people by forbidding them to do certain types of financial transactions, a current example is Venezuela, where people aren’t allowed to make international purchases without having previously received official approval from the government, which means, a financial system that is under the control of one entity can be used against the interest of the users.
Thankfully, blockchain technology and cryptocurrencies are capable of creating a new way to make financial transactions that aren’t under the control of any government, mostly thanks to their decentralized nature, allowing for direct peer-to-peer transactions to be possible. Nevertheless, even though cryptocurrencies are clearly an extremely important development for the opportunities they provide, not all of them offer a proper level of privacy to their users.
Privacy & scalability issues in some blockchain solutions
In most cryptocurrencies, it is possible to have access to the information about each individual wallet, like its holdings and of course, all of the transaction history, meaning it is possible to track every single movement a particular address has done, and observe how those tokens are being moved.
This shouldn’t be any problem, because those addresses obviously don’t include any private information about the person in charge of said address, however, no system is flawless, and when people with crypto holdings are doing financial transactions with entities such as exchanges, stores, and pretty much every place where FIAT money and traditional goods and services are involved, then there is always the possibility of the other party having data leaks that could jeopardize the privacy of the person using cryptocurrencies Source, this shouldn’t happen but the risk will always be present.
Regarding scalability issues, in the case of bitcoin in order to verify each new transaction, the complete blockchain needs to be stored by the miner verifying the new transaction, and a complex cryptographic process is also applied which can make things difficult when it comes to scaling the capabilities of the blockchain for broader use, because that process is very resource intensive.
These 2 aspects, complete privacy, and a better scalability, are the ones Beam is capable of solving, mostly thanks to the protocol called Mimblewimble.
What is Beam and how are they planning to bring a new solution to the blockchain industry?
Beam is an entirely new blockchain project, capable of offering its users a new platform that is completely private and easily scalable. The entire platform is based on the Mimblewimble protocol which basically consists in a new decentralized way to verify transactions without losing any security whatsoever, and simultaneously, facilitating the scalability of the blockchain thanks to the fewer resources required to verify those transactions.
Unlike traditional cryptocurrencies such as bitcoin, where all the information about holdings and transactions is publicly available, in this case, none of it is stored in the blockchain, and when making a transaction, only the people involved in it know the specific details of said transaction, this makes risks such as suffering from data leaks completely irrelevant because there wouldn’t be any information stored in the blockchain to leak in the first place. This type of transaction is called “Confidential transactions” and it consists in the following:
In a confidential transaction, only the two parties involved are cognisant of the amount of Bitcoins being transacted, onlookers cannot know. However, onlookers can still ensure that the transaction is valid by comparing the number of inputs and outputs; if both are the same, then the transaction will be valid. | Source
This way of doing transactions is capable of allowing users to have complete and total privacy, without endangering the integrity of the blockchain, making everything more efficient and therefore, easily scalable, besides, users will now have the possibility of deciding the level of privacy for their transactions according to their particular needs, this is very important because there could be cases when it is the best to have the transaction data publicly available for real life audit purposes or other similar control procedures, especially in big entities.
On the other hand, people who are extremely concerned for their privacy will have more peace of mind knowing that no one is going to be able to figure out their private identities, this project will make them feel much more secure when storing value using cryptocurrencies and blockchain platforms.
It is extremely important for there to be blockchain projects providing complete protection to people’s private information because, privacy and freedom go hand in hand, once one of them starts to decrease, it is just a matter of time for the other one to also begin to deteriorate, securing our privacy is basically the same as protecting our freedom, and as mentioned before, in this modern era with so much technology, it is important to have platforms we can use for our digital transactions without putting our private data at risk.
Improvements regarding efficiency
Efficiency will be higher because the process of verifying transactions will require less computational resources, this can be done thanks to a sophisticated approach in the Mimblewimble protocol that changes the method of validating new transactions.
… if we have two identical transactions: from A to B, and then from B to C, we can cut through the intermediate transaction, resulting in a merged transaction from A to C, which is a valid transaction in the system… allowing us to “cut through” i.e merge all intermediate outputs both within a single block as well as across multiple blocks in the blockchain | Source
In simple words, the quote from above means that every transaction can be simplified and instead of requiring the complete history of previous transactions, it only keeps the essential parts and doesn’t require information considered as unnecessary and redundant, effectively using a kind of summary of the entire blockchain which is just as secure but much more efficient, this feature is known as “Transaction Cut – Through” and it makes the blocks lighter, resulting in a faster and more scalable blockchain.
Below we can see a graphical representation of the entire process:
Beam general features
- Confidentiality Source: thanks to the Mimblewimble protocol, anyone using the Beam platform will have the chance of having absolutely privacy regarding any type of transaction. This means transferring value in an anonymous way through digital means is now possible.
- Versatility Source: when changing the method in which transactions are verified, advanced features need to be redesigned in order to work under the new protocol. Thanks to Scriptless Script technology, alternative types of transactions such as “atomic swapping, escrow, and time-locked transactions” Source can be implemented in Beam
- Scalability Source: by requiring less data to verify the transactions, the computational resources required by Beam are much lower than in other blockchain, this makes scalation much more affordable for the long term growth of the platform.
- Sustainability Source: with the goal of continuing and encouraging the development and general improvement of this platform, “20% of block mining rewards goes to the Beam Growth Pool to incentivize development and promotion of BEAM.” Source
- Usability Source: users will have their wallets designed to work in desktop or mobile and the “built-in dashboard makes budget management easy, featuring actionable spend and earning insights”. Source
- Compatibility Source: miners will have all the information and explanation they need so they can do a good job supporting this blockchain, besides, "an industry-proven Equihash algorithm was selected to ensure broad adoption by existing GPU miners". Source
There are, however, other similar projects that also provide a high level of privacy to its users, below we can see some differences between them and Beam:
Use cases and applications
Use case #1: a person concerned about his privacy
Tom is a total blockchain enthusiast, and he has been using bitcoin for several years, he is very excited about all the possible disruptions blockchain technology can cause in several industries, and he believes decentralized platforms are the future, mostly due to their inherent immutability and the superior security for the users. He takes very seriously everything regarding his privacy and that’s why he tries to always use decentralized applications instead of centralized ones.
However, he recently realized there is the possibility of some hacker accessing data leaks coming from places he makes business with using cryptocurrencies, which could allow this hacker to track down the transactions and identify the particular address of Tom, leaving him completely exposed with no privacy whatsoever.
Luckily, while he is researching about this privacy issue, he discovers the Mimblewimble protocol and the Beam implementation of it, he is more fascinated than ever knowing there is a new method to verify transactions that doesn’t have the risk of storing in the blockchain information that could be linked to his identity.
Now, Tom will use Beam for his crypto activities enjoying the increased level of security Beam can provide.
Use case #2: a big company requiring both private and public transactions
There is a big company called CryptoWhale, and a key part of their business is making transactions using cryptocurrencies, sometimes they need complete privacy for confidential reasons, and other times they prefer to do transactions with all the information available because it helps when reporting information to a third party tasked with auditing the company.
The directors of this company were very frustrated with the current solutions in the blockchain industry that could be adapted to their needs, and one day, one of those directors finds out about the new blockchain called Beam.
The team does an extensive research about this new blockchain, and they come to the conclusion that Beam can perfectly offer the features they need the most, especially the one allowing them to have completely private transactions. Now with Beam, they have everything they need to continue with their activities using the best tools available.
Use case #3: a store requiring faster transactions
A store called CryptoProducts is known for selling all sort of products and accepting bitcoin as a payment method, due to several reasons the transactions are taking too much time and it is affecting their sales while also frustrating the people working in the store.
The team was getting very annoyed by all the speed issues and they decide they are going to implement a new blockchain that can scale much better than bitcoin. Eventually, after a researching process, the decision is taken and they will now start to use the Beam blockchain, at the beginning they were worried about the possibility of losing escrow services, but as they researched further they discovered that Beam, thanks to the Scriptless Script technology is compatible with escrow transactions.
Note: a escrow transaction is defined as “...a legal concept where a financial instrument or an asset is held by a third party on behalf of two other parties that are in the process of completing a transaction. In other words, when you use an escrow, a third party acts as a guarantor”. Source
Most blockchains are prone to suffer from scalability issues, and since the information about the wallets and the transactions are kept public, the risk of some party suffering from data leaks and exposing the private information of a wallet’s owner is certainly real.
Beam is offering a solution to both of those problems by implementing the Mimblewimble protocol, under this platform no private information is going to be stored on the blockchain, and when verifying transactions, the blocks are going to be lighter due to a new sophisticated method of ensuring transactions without needing to analyze the entire blockchain, as bitcoin does, basically this platform will be capable of summarizing the necessary information and provide the same level of immutability and integrity, while also making everything easier so the blockchain activities can scale without congesting the network.
More information can be found in the following links:
- Beam Website
- Beam Position Paper
- Mimblewimble Paper
- Beam YouTube
- Beam Telegram
- Beam Facebook
- Beam Github
- Beam Bitcointalk
- Beam Medium
- Beam Twitter
Here is a video I made sharing my thoughts about this platform.