It’s ironic that a protocol named after Harry Potter’s tongue-binding curse is the talk of the crypto space at the moment.

But Mimblewimble has certainly set tongues wagging as the new decentralised kid on the proof-of-work block, with promises of privacy and unprecedented scalability.

Is there a new challenger to Bitcoin’s throne?

This article is taken from 21CRYPTOS Magazine – read the full 100 page monthly magazine HERE.

What is Mimblewimble?

Firstly, it’s important to understand that if Bitcoin, the currency, is to be toppled, it won’t be by Mimblewimble (MW) itself. MW is not actually a currency, it is a protocol upon which other currencies can be built. So, whilst Bitcoin may one day indeed be usurped by a MW-based coin, you won’t be paying for your groceries with a ‘Mimblewimble’ any time soon.

The similarities with Bitcoin though, are many. Firstly, MW began as a whitepaper (https://scalingbitcoin.org/papers/mimblewimble.txt ) posted by an anonymous Bitcoin chatroom user. This time, it wasn’t Satoshi Nakamoto, but one ‘Tom Elvis Jedusor (the French name for Voldemort – a fictional Harry Potter character) doing the posting. As well as having an anonymous creator, like Bitcoin, the MW protocol is permissionless, decentralised and uses a proof-of-work consensus algorithm.

What is all the fuss about?

There are two fundamental ways in which MW differs from the Bitcoin protocol introduced by Satoshi Nakamoto.

Firstly, MW is said to offer far greater privacy. In Satoshi’s whitepaper, he says “the only way to confirm the absence of a transaction is to be aware of all transactions.” To that end, all Bitcoin transactions are recorded on a public ledger, viewable by anybody. This mechanism prevents any Bitcoin from being double-spent as the whole network can see where a coin came from and where it ended up.

Because Bitcoins are sent to addresses, visible on the network, the transactions are not private. If you know who owns the address, you know who has the Bitcoin. With MW however, there are no public addresses. Transaction amounts are also merged in blocks, so it can be nearly impossible for outsiders to see how much was sent where.

The second advantage MW is said to have over Bitcoin, is scalability. While the Bitcoin public ledger stores the details of every single transaction on its network, MW only holds inputs, outputs and signature details within each block.  Or, to put it another way, the MW blockchain only holds proof that transactions were valid, and maintains a record of where all the funds sit at any one time.

The scalability implications of this are huge. While the Bitcoin network is currently around 200gb in size, MW’s blockchain could in theory handle the same number of transactions but with a chain between one third, and one tenth of the size of Bitcoin’s. Aside from being more user friendly, this would also mean MW nodes could be run on far smaller devices, maybe even smartphones. A more portable, user-friendly blockchain would mean more potential active participants and thus a more secure network.

A beginner’s guide to Mimblewimble

Rather than a blockchain containing all the transactions that have ever taken place on the network, Mimblewimble’s effectively contains a record of Unspent Transaction Outputs (UTXO).

Think of each UTXO as a locked box containing a user’s money. Users can have multiple boxes, and they hold the keys to each one.  The boxes themselves all appear identical, publicly at least, so nobody outside of the transactions can tell who owns what box, or how much money the boxes contain. If Bob has 100 coins in his box, and he wants to send 20 to Alice, he will create two new boxes. One containing his remaining 80 coins, and one with 20 for Alice. Bob would then send all the boxes that make up the transaction to Alice together with the key to her box. Alice then changes the key, so that only she can access her new box and both Bob and Alice sign the transaction and send it to the blockchain for validation.

Another major difference here between MW and the Bitcoin Blockchain is in the way the transactions are verified. Unlike with Bitcoin,  the MW network doesn’t need to know how many coins Bob sent to Alice, just that the amount of coins in Bob’s box at the start of the transaction (the input) equals the total number of coins in the new boxes at the end (the output). The MW network also needs to check that the transactions were all for positive amounts. For example, if Bob started with 100 coins, and put 120 in a box for Alice, but put -20 in a box for himself, the total would still be 100, but the transaction would be invalid.

This way, MW transactions are totally confidential, but the network can verify that no coins were double spent, or burned by Bob. A transaction ‘cut-through’ mechanism helps to increase the anonymity of the transactions by organising blocks in such a way that effectively removes some ‘middle’ transactions. In basic terms, if Bob sends Alice 20 coins, and Alice sends Jane 20 coins afterwards, the public ledger block could be organised in such a way that only shows Bob sending some coins to Jane. Alice’s transaction would effectively be removed, and the ledger would still balance.

Of course, this protects Bob too, as it would not be possible for an outsider to prove he sent coins to Jane, just that the block had been arranged in such a way that made it look like he had.

Are there any drawbacks?

With MW, both parties in any transaction have to be active at the same time in order to sign it.  While this wouldn’t be a problem for Point of Sale (POS) terminals or in-person transactions, it is the kind of flaw that will force people to choose banks over crypto for their transactions when they wish to send money instantly. It’s an inconvenience that will need to be resolved by projects building on MW if they are to usurp Bitcoin as the King of the cryptocurrency hill.

Also, the cut-through privacy feature requires miners to organise the transaction inputs and outputs in particular ways in order to hide transactions. Therefore, it’s not outside the realms of possibility that a record of these inputs and outputs could be kept and used to paint a full picture of transactions.

Who are the major players?

There are currently two major implementations of MW that are available to buy on cryptocurrency exchanges – Grin and Beam. While both currencies’ code is open-source, Grin takes a more community-based approach with no pre-mine or ICO and mainly volunteer-based development. Beam on the other hand, is an Israel-based start-up with a part VC-funded full-time team of developers. Litecoin creator Charlie Lee also recently announced on Twitter that his team had discussions with Beam on the possibility of bringing MW technology to Litecoin.

This article is taken from 21CRYPTOS Magazine – read the full 100 page monthly magazine HERE.