Litecoin has long been one of my favorite projects in the cryptocurrency space. I found Bitcoin in 2009 and immediately read Satoshi’s white paper. After reading the white paper and grasping a bit about cryptocurrency and Bitcoin I got involved. Then, in 2011 I found Litecoin and was interested in it as a faster and lighter medium of exchange. Litecoin has been tried and tested nearly as long as Bitcoin but lately hasn’t innovated much with the project. However, now, Litecoin is working on a mimblewimble add-on as a privacy option to their project. Since, I’ve been writing the Epic Private Internet Cash blog since before launch and been a part of the project, I wanted to take this opportunity to compare and contrast two of my favorite projects over my time in the cryptocurrency space and the differences in each project’s approach to privacy while endorsing the same privacy protocol.
What is Mimblewimble?
Mimblewimble is a protocol that makes use of much of the most integral work in privacy and blockchain tech over the last decade and rolls them into one codebase. Although being a fairly new concept yet, MW is gaining popularity among true crypto cypherpunks and longtime blockchain enthusiasts. The MW blockchain protocol that first launched with Grin and then Beam was first introduced pseudonymously in a Bitcoin IRC chat in 2016.
The mimblewimble code aims to improve on Bitcoin’s UTXO model by cutting out various information for privacy that equates to confidential transactions. The sender address, amount transacted, and recipient address are all excluded from mimblewimble’s protocol. By shielding this information confidentiality is achieved and there’s no way to de-anonymize users through chain-analysis. Advanced cryptography in comparison to the Bitcoin codebase is how MW developers got around this early blockchain dilemma.
Mimblewimble utilizes CoinJoin that combines multiple payments from multiple spenders into a single transaction. Through CoinJoin, it makes it nearly impossible for prying eyes to determine who is sending and receiving coins. This is something that Bitcoin lacks, privacy. In the last few weeks, fifty of the earliest mined Bitcoin were moved and this sparked fear, uncertainty, and doubt, which can affect price and confidence in any network not utilizing privacy features.
As noted, the MW protocol replaces Bitcoin’s transparent UTXO model and replaces it with confidential transactions. Inputs and outputs are combined and blinding factors are used by encrypting these variables.Then the geniuses that created MW also used high level math to ensure that no new coins can be created and monetary emissions are on par with each project’s white paper and emission schedule.
How do Epic Cash and Litecoin differ in implementation of MW?
Another major advantage by utilizing MW is a reduction in the blockchain’s size. Since MW takes advantage of the cut-through process, blocks are optimized and the blocks don’t fill quickly. Cut through discards inputs and spent outputs, dramatically reducing the size of the blockchain. The result of a smaller chain is the ability for more full nodes to be run, on cheaper equipment. An important question to ask about implementing MW as an add-on and not from the onset of the chain like Epic Cash: Will the LTC chain truly scale more efficiently than it has before or will LTC users be scared or too confused to bounce back and forth between the main and side-chain privacy option? All additional steps to achieving privacy are likely to cause some degree of confusion and a dearth of understanding amongst the users of the network.
Furthermore, more full nodes running across the world equal the potential for more network security. Smaller chains will also lend themselves to the future of blockchain — mobile computing, where everyone is running their own full node on their smartphone at all times. Will LTC be able to achieve a more efficient chain like Epic has and will moving forward?
Thus far, mimblewimble has been a product of base layer blockchain innovation. Starting at the base of the protocol provides a stable and secure network to build atop and little doubt of privacy encroachments. Litecoin is the most popular project that’s decided to implement mimblewimble outside of the base layer and execute a layered scaling approach. The most prominent example of second layer scaling today in the blockchain space is Bitcoin’s Lightning Network.
The Lightning Network has had mixed reviews on its success but we’ll stick to LN as a reference to layered scaling and not its particular success as a project. Personally, I believe the fact that Litecoin has decided to introduce mimblewimble is great for the cryptocurrency space. The cryptocurrency space deserves a privacy coin in the Top Ten of Coin Market Cap rankings and the competition is always welcome to create the best money goods.
Bitcoin Early Days, Litecoin, & Epic Cash as Better Mediums of Exchange
Bitcoin launched and for quite some time in the early years, many thought Bitcoin was private. This encourages myself as a person that’s studied economics and believes in freedom; furthermore, that mimblewimble can again introduce the importance of privacy and fungibility to users that once believed they had it with BTC.
Litecoin will gain a major leg up on Bitcoin as a medium of exchange if they can execute mimblewimble as an add-on. The add-on is being executed as a soft fork in the network as an extension block. So, users will have to move their coins from the main chain to the mimblewimble extension block to gain privacy. If users want to bring the coins back to the main chain they can eventually, according to Charlie Lee, Litecoin’s creator.
That being said, in comparison to a project like Epic Cash, Litecoin will not be as private. Litecoin has a 9+ year history of transactions that will not just disappear. This will be the ultimate challenge for Litecoin and I’m curious which potential problems will arise from a pre-existing record of almost a decade of on-chain transactions.
Epic Private Internet Cash has 1/4 the Litecoin total final supply of 84 million, the same exact monetary supply model as Bitcoin’s 21 million and will reach singularity with Bitcoin’s emissions later this decade. Epic Cash already is one of the leading mimblewimble projects in the space and has aggregated the most important aspects of sound money. A major advantage of Epic comes from starting with mimblewimble from the onset of the chain. Since chain analysis is almost impossible, any insights into who might hold a lot of wealth in Epic are void. Epic is a borderless reserve currency that is especially useful during times of economic turmoil.
The main benefit from privacy and the obvious implications of freedom that privacy enables should be afforded to every cryptocurrency user. Privacy also solves one of the most important characteristics of money, fungibility. Fungible money must have identical units, meaning each unit must be indistinguishable from the next. Without a privacy protocol, fungibility in cryptocurrency doesn’t hold up. Over time it’s possible for users to get tainted coins. Tainted coins are coins that may have been used in some sort of undesirable activity prior to a user receiving them. With cash or fiat money, there’s no way to know who held the paper dollars prior to a user holding them. That’s truly the beauty and idea behind privacy coins, to create that same sort of confidence and security in one’s money.
Privacy is a spectrum and where a project finds itself on that spectrum increases or decreases the characteristics and soundness of that project’s cryptocurrency. The main relation to privacy and sound money is the characteristic of achieving fungible units of equal measure. Achieving this digitally is done through privacy based protocols and confidential transactions. The story of privacy coins is just now being written. Over the coming decade more will unfold but the competition of project’s to bring users the best money is what will drive the innovation we all desire. Through private, scarce, fungible units of sound currency, wealth creation will follow soon thereafter from freer markets and human actors pursuing their own interests.