Mimblewimble Protocol- Crypto Academy / S4W2 - Homework Post for [fredquantum]
We are in season 4 , week 2 and i am glad to learn new things. Today i am attending homework task for professor @fredquantum which is about MimbleWimble Protocol.
In detail, explain your understanding of the Mimblewimble protocol.
Introduction of digital currencies like Bitcoin was a landmark decision in the world of decentralized finance. The inherent features of DeFi and blockchain like transparency , auditability, accountability, anonymity and non-repudiation sound soothing to the ears because these features were need of hour back than. But than nothing is absolute. As the saying goes "The more we have , the more we want". Incorporation of distributed ledger technology to run the DeFi fostered the element of transparency that is appreciable. But than availability of records to everyone even to those who are not part of transaction begin to be seen as pseudoanonymity . Moreover the Bitcoin protocol although much faster than traditional system of finance but with the launch of Altcoins that provided better scalability, BTC was pushed one step back . One such protocol which was able to address the issue of anonymity and scalability was introduced by the name of Mimblewimble.
Just like Bitcoin, founder of memblewimble is also anonymous Tom Elvis Jedusor. Scalability and privacy of Mimblewimble (MW) was claimed to be better by Jedusor. The first cryptocurrency application of Mimblewimble Grin was launched in 2018 and people were so obsessed with this new protocol that, the price of Grin skyrocketed after its launch in 2018.
Discuss in detail how the Mimblewimble blockchain protocol works.
The working sanctity of MW is based on two core features and they are "Confidential Transactions" And "Coinjoin Transactions" with the help of which it is able to achieve better scalability and anonymity. Concept of confidential transactions shall be explained in the subsequent section but just for the sake of completion, let me mention that confidential translation in Mimblewimble protocol involves no addresses of the sender and receiver along with hiding of transaction amounts with some unknown number known as blinding factors. The nodes are supposed to verify that no new coins are created during the transaction and also verify the ownership of sender and receiver
CoinJoin developed by Gregory Maxwell involves combining of transaction details from various users so as to hide details of individual transactions from any third party. CoinJoin also established the concept of compact blockchain . Unlike BTC where every detail of transaction is stored, MW only stores inputs/ outputs and blinded amounts.
Discuss in detail your understanding of Confidential Transactions (CTs).
The concept of confidential transactions was introduced by Dr. Adam Back and was soon adopted by some well known cryptocurrencies like Monero , Beam, Grin etc. Concept of CTs highlights the area where Mimblewimble truly outpaced BTCs multiple input/output UTXO model. It follows concept of one multi-signature model for all inputs and outputs.
We know that BTC involves distributed public ledger system that allows verification of public addresses and amount involved in transaction by anyone . Confidential transactions involve no address and hides the amount along with public and private keys of sender and receiver by some unknown value (blinding factors) added to both input and output following Elliptic curves cryptography and Pederson commitment. The blinding factor is derrived from public and private key and choosen by sender and is shared only between the two parties that are involved in the transaction, thus excluding interference by third parties or access to third party to the transaction details and thereby provides a system with significant security. Let me explain it, with the help of example :
ECC is a difficult concept to understand but to understand MW in relation to ECC, we need not go deep into calculations. Let me mention what we need.
We know that mathematically , curve is a combination of points joined together. Let's depict curve by C and it has property that these points when added or multiplied , the resultant is also a point on curve C. Applying same concept to Mimblewimble CTs, we come up with blinding factors. Suppose we perform any transaction with Input I and output O. We presume that I is a point on EC which can be replaced by any two points say A and B so that A*B=I.
Similarly O can be replaced by other points like C and D, so that CD= O. In MW transaction, input and output won't be written as I and O but as AB = C*D which is indirectly equal to I=O. So malicious third parties won't be able to guess the amount of transaction. In addition, there are no addresses shown.
How do you think Mimblewimble Protocol can be utilized on the Bitcoin Network to enable anonymity of transactions and improve scalability?
As of now Bitcoin transactions are claimed to be anonymous because it's not possible to track back the user from the user address and other detailed transaction amount and time etc. But Mimblewimble goes one step further into anonymity. Delineation of data to third parties makes some people to label BTC as pseudo anonymous . MW would make BTC anonymous in a sense that there are no addresses and transaction details are accessible to only two parties involved in transaction. So adoption of MW would make BTC more anonymous.
Scalability of BTC is a major problem that has given birth to scores of ALTCOINS into the cryptosphere as they have been able to deliver better services in terms of transaction processing speed. MW too has been able to offer better scalability than BTC because MW removes redundant transactions from the network and therby reduce blockchain size. Therefore MW is effective than BTC as for computational resources utilization is concerned.
Let's see block details of BTC and MW for better understanding.
From the screenshot above , it is clear that MW blockchain displays very little information about blocks as compared BTC. Therefore, MW adoption by BTC would strengthen anonymity.
State the Pros and Cons of the Mimblewimble protocol.
Pros of Mimblewimble protocol
MW allows better level of anonymity by not allowing access of 3rd parties to transaction details.
MW protocol offers better security because transaction addresses and amount is not visible to third parties.
MW is known for its scalability because of filtering out of transaction details and keeping only imput/output and blinding factor details.
Mw coins are fungible as they can't be traced back to their origin.
Cons of Mimblewimble protocol
- As MW uses elliptical curve cryptography to secure transaction, it is vulnerable to quantum computing attacks.
As MW protocol has removed scripting, it has reduced its functionality.
Reduced transaction throughput has been linked with networks following confidential transactions.
Discuss in detail at least a Crypto that uses the Mimblewimble protocol.
Mimblewimble protocol has been adopted by some cryptos like Monero, Beam, Grin and Mimblewimble. The crypto that we are going to discuss today is "" Grin**.
Grin was officially launched in 2019 as an open, private, simple and scalable cryptocurrency. Grin claims to have not been developed by some single company so no one can claim to have centralised rights over it. No ICO launch event marked its inaugural into cryptosphere but was marked by donation. Grin has emission rate of 1 per second. Having adopted MW protocol completely Grin transactions have no address and amount details but these are blinded and is therefore highly private and fungible coin. We know that scalability lies at heart of MW protocol, so Grin is scalable.
The concept of Elliptic curve cryptography is not something that was launched by MW or Grin. It exists since decades and moreover the obsession of privacy and scalability was reflected by its widespread adoption and price immediately after its launch.
As for working of Grin is concerned, it maintains the sanctity of the MW protocol by following confidential transactions ECC and pedersen commitment primitives along with coinjoin transactions.
Being open source developers all over can take part is enhacing the working of Grin project by well structured administrative feedback provision protocol via timely meetings.
Conclusion
Mimblewimbe is a protocol which came into being to offer betrer scalability and privacy. It was soon adopted by some cryptocurrencies with the hope of being betrer in the said parameters than the parent coin BTC and Altcooins. There are varying opinion about its adoption by Bitcoin network. I believe it has been able to serve the purpose of its creation to a large extent but is yet to widely adopted.
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