Steemit Crypto Academy Season 4 Week 2 | Mimblewimble Protocol
Hello Steemians,
This is my submission for the Steemit Crypto Academy task by professor @fredquantum and this week its about Mimblewimble Protocol. So let's try to understand more about Mimblewimble Protocol and how it has contributed well to make transactions private and scalable in this homework post.
1- In detail, explain your understanding of the Mimblewimble protocol.
Mimblewimble protocol sounds like funny words and its difficult to determine what this protocol is about but when we go in detail then we understand how it has contributed well in the blockchain to make transactions anonymous. Bitcoin has been a revolution from a traditional financial system and it has made digital payments more popular where we don't want any centralized authority to control the transaction. We know that in the traditional financial system banks and financial institutions have control over it and there are certain approvals involved to get the transaction processed. With blockchain, we have got the functionality to send funds without going through cross-border regulations and there is no controlling authority. We can now send the funds to anyone and we just need a wallet address and all these transactions are visible in blockchain.
Blockchain technology has got worldwide attention and its also calls for various innovations.
Blockchain is a peer-to-peer payment system that brings Immutability, Interoperability, and Transparency altogether in the financial system. Mimblewimble is a protocol in the blockchain which is used for private transactions. With this method, we can process transactions anonymously, and send will not be identified. With this protocol, transactions are processed in a highly secure manner and things like amount and wallet address are not revealed. It also helps to remove the redundant transactions from distributed ledger system in the blockchain network.
This Mimblewimble protocol was developed by the developer named Tom Elvis and this name was taken from the Harry Potter books’ famous tongue-tying curse. Mimblewimble has provided a completely new possibility in the crypto space anonymity and scalability. Although it was launched in July 2016 its had got more attention in the year 2018 and since then many chains have adopted wherein Litecoin is one of the leading platforms that has adopted it to bring Privacy and scalability.
2. Discuss in detail how the Mimblewimble blockchain protocol works.
Mimblewimble blockchain protocol is built to process transactions with privacy where information remains anonymous and not open so only people involved can have the complete information. Blockchain has been open since its begging but with Mimblewimble protocol development, we have the option to process the transition privately and keep some information hidden from open space. It uses Elliptic Curve Cryptography which is also known as ECC in short and its the concept of the discrete logarithm to assign private keys to a particular transaction. With this protocol, the sent tokens are encrypted through blinding factor and the person who receives (receiver) needs to validate the transaction and this way transaction is disclosed only with people involved with transitions and we can make it private.
LOG 2 (128)= 7
LOG 2 (256)= 8
For example-
Above is the simple logarithm that shows the multiplication of 2 into 7 times and output is 128 and in the second scenario 2 has been multiplied by 8 times which has resulted in the output of 256.
In general, we can check the transaction information in blockchain explore using hah or wallet address. Usually, we can get the information about the sender, the amount received, etc but with Mimblewimble blockchain protocol it works privately and only the involved parties can see the information. Many times some organizations want to process transactions that are not open to the public and this protocol can help them get it done. This is required for security reasons and this is very helpful in similar scenarios.
Privacy is one of the important factors while doing monetary transactions and with blockchain, this addition of protocol has helped a lot as not everyone is fine to send money in open space. Since blockchain is immutable and open source so tracing the transaction is very easy but with mimblewimble, we can put a layer of privacy on the transactions.
Let's try to understand it a bit more in detail through another example-
Let's suppose - Nia received 3 Litecoin from Dan and John. Dan has sent 1 Litecoin whereas John has sent 2 litecoin to Nia and now Nia holds 3 litecoin in total. These transactions are processed and verified but not available in the public domain so one can access the information. Ony Nia knows about it and when Nia will send these 3 litecoin to Rocky then Rocky gets to know the only transaction that he has received from Nia and this is how Mimblewimble works where the transaction is processed in private.
3. Discuss in detail your understanding of Confidential Transactions (CTs).
As we understand by the name itself that transaction is processed but in an encrypted form that means the entire data will remain confidential. We process many transactions and some transactions are different where we don't want to keep it in the open and public domain and that's where this encryption is required to keep the Transactions Confidential.
Basically, CT is one of the cryptographic protocols which helps to keep the transaction value encrypted. This is different encryption where transactions can be verified but it will not reveal the exact value of the transaction and this is where the Confidential Transactions system plays its role.
When some organizations or govt departments process transactions then they will prefer it to be confidential and this is where this CT is very helpful because transactions will be processed in the same manner encryption will be added so its not possible for anyone to know the transaction value. All this will happen on the public network but with encryption, it will be processed confidentially. This encryption does not affect the way transaction process but it keeps the information confidential in the public domain. It requires a soft fork consensus change to be added to bitcoin, to keep the transaction confidential however this could be added to a sidechain also. We know that bitcoin is an open blockchain network where we can find out transaction information
Encryption is needed to hide the transaction data and in the traditional world we put documents in a safe locker so once locked then we can't use them unless its taken out from the locker. In the same scenario, CT works like safe lockers where transactions are safe but not revealed any information however this can be verified without revealing any particular.
If we input “Decentralised Social media is the best and I like to use 2#43Wr”, it becomes difficult for anyone to guess.
It will be very difficult to guess the blinding factor and also the data. This Blinding factor is very much required as it provides an additional layer of security and makes it, even more, had to guess.
4. How do you think Mimblewimble Protocol can be utilized on the Bitcoin Network to enable anonymity of transactions and improve scalability?
Let's try to understand the difference between both and this way we can figure out how Mimblewimble Protocol can help to make the bitcoin network much anonymous.
Bitcoin is an open blockchain network where all the transactions are available with no encryption and anyone can see the data. Using hash or wallet address we can easily find out the sender or receiver address, amount, date and time, etc and this is available across everyone. There is no need for privileged access to gain this data that means there is no anonymity with the bitcoin network by default.
Mimblewimble Protocol is a protocol that brings an additional layer of security and it also works to remove redundant data. With this protocol, entire data is not publicly available and there is no way to access it in the public domain. It helps us to process the transaction in an anonymous manner where no one can get the sender or receiver information including the value. It also helps ensures the transaction details like transaction amount, wallet addresses, etc, and its revealed between the sender and receiver only which brings an additional layer of security.
Bitcoin is a larger blockchain network that has massive data on the chain which also makes it less scalable. Because of this, it can not be used as a side chain and it has its protocol that can not be altered to make the transaction anonymous. This entire ecosystem is secure and immutable but requires a side-chain like Mimblewimble to enhance the overall experience.
Mimblewimble is a protocol that is developed with the aim to make transactions anonymous and more secure. This can be used as a side chain with the bitcoin network to being enhanced functionality and make it more scalable. With this protocol, we also get the functionality to remove some transactions which can a reason for overload and some sort of reductant data.
Now after going through two aspects of privacy and scalability with Bitcoin and Mimblewimble we figured out the difference between both network and protocols. There is the possibility that we can combine both protocols but it will be a very large task for the transaction execution. With the introduction of a lightning network kind of similar transactions are getting processed on the bitcoin network. Basically, the lightning network in the bitcoin platform can use use in such a way that it helps to remove micro-transactions and keep them anonymous for both the parties (sender and receiver). This Lightning Network maintains its high scalability even when the transaction is getting verified on the node in the off-chain mechanism.
Cut-through
Cut-through is another feature of the Mimblewimble protocol which works by collecting the inputs and outputs in all transactions to come up with smaller blocks. This process utilizes the earlier record to initiate/process the new transactions.
To better explain this, here is an example featuring a transaction with different inputs and outputs. While we know that Mimblewimble protocol is quite secure however with the cut-through it gets added another layer of security and privacy.
5-State the Pros and Cons of the Mimblewimble protocol.
Everything comes with some good and bad points and in the same scenario Mimblewimble protocol is not an exception so it also has some pros and cons and let's try to figure this out-
- It provides an additional layer of security to the blockchain network. Valuable information is not revealed in the public domain that increases security.
- With Mimblewimble protocol, there is no way to track transaction history, and even wallet addresses are not disclosed. It provides anonymity which is difficult to bypass through this MW protocol.
- MW protocol provides greater fungibility compared to Bitcoin and because of this advantage, anyone can exchange any crypto coin on its platform without any risk of losing the funds.
- It provides the option to eliminate reductant transactions which is another plus to have the valid and valuable transactions on the chain.
- MW protocol brings a high level of scalability on and because of this it can be used as a side chain on any blockchain network.
- MW Protocol ensures the highest level of privacy for the transactions on the chain.
Most of the protocols that support highly confidential transaction implementations suffer from lower transaction speed due to their data size. So speed is one of the problems with this protocol.
This Mimblewimble protocol is dependent on digital signatures so it is vulnerable to attacks that are conducted through quantum computers.
6-Discuss in detail at least a Crypto that uses the Mimblewimble protocol.
There are some chains and crypto projects that have adopted MW protocol and some of the names are- Litecoin and Grin which are quite popular. I will discuss the GRIN project here-
Overview of Grin-
The Grin project was officially launched on 19th January 2019 with the full adoption of the MW protocol through the open-source network.
Grin is not controlled by any company, foundation, or individual so we can say that there is a single owner of the project. Grin is dependent on donations to run the oe=peration. The GRIN coin distribution in a fair way possible with the emission rate of 1 GRIN per second. Grin did not through the traditional ICO system and donation is the source to fund the project. Its a privacy-based open source project.
GRIN was designed to solve the issue of scalability and privacy. We lack both functions with leading chain Bitcoin so it was launched with the idea to solve this problem the MW protocol.
In simple words, we can say that GRIN is a privacy-focused and scalable Mimblewimble protocol. Grin is aimed to work like digital cash and can be used to provide electronic transactions to everyone without censorship or restrictions involved.
Grin Operation / Transactions-
As already mentioned that Grin is operated by the community in an open-source network and there is no owner of the chain. Development activities are done out on the project by the voluntary involvements of contributors and donations company or any owner of the project. Since its open-source so anyone can be part of it contribute voluntarily.
The Grin cryptocurrency has a block time of just one minute however reward in this one-minute time is 60 grin coins that mean that a single grin is created per second and this is designed in a way that it will remain the same forever. So the system will make sure that each participant gets fair reward distribution while ensuring the security of the blockchain. In the Grin network, Encryption is used to encrypts all input and output transactions.
Grin Distribution
The grin was not launched through any ICO process like other projects and after the launch of the project, its mining was started which started generating 1 block in a minute that means 60 GRIN in the 1-minute time frame. It has adopted the Linear Emission Scheme which enables it to maintain its status for the entire period during emission.
Grin Listings and Pricing Value
I have checked the prices and overall project value and marketcap. GRIN is listed in some leading exchanges like Kucoin, Gate.io, and Bitforex so it has certainly a good amount of trading volume. Listing on the leading exchange helps to have higher trading volume and its pretty good in the case of GRIN.
Its current price is $0.34 with a market cap of USD 28,633,840 and its rank in the coin market cap is 676 at the time when I am drafting this post.
Coin price value and its rank are solely determined by the community that trade and hold the coin so it keeps on changing and since this is one of the projects that has adopted MW protocol since the beginning so its expected that it will get more attention from crypto investors and users who are looking for the secure and anonymous blockchain network.
7- Conclusion
Mimblewimble protocol is one of the great innovations in the blockchain and crypto space and it brings something that most people would require in the future. Now it may not be a concern for the majority of crypto users but I expect that people will be more focused on the security of their transactions and that's when MW protocol will get more attention.
I never heard about it before but while reading the session and during my research, I found it a great one. Its name might sound funny for many but its use case is vast and highly expected to get more attention. Crypto is a growing segment so we will keep on getting innovative features and services but some of them would be game changes and I believe that Mimblewimble has this potential.
Litecoin is a very well-known and leading crypto coin that has adopted MW already it proves that we are going to see many more projects adopting this useful and needed protocol in the future.
It was such a great experience to learn about Mimblewimbleand thanks to the amazing professor for giving us this opportunity and I enjoyed it thoroughly.
Thanks again to professor @fredquantum for this great lesson.