The first cryptocurrency to employ the long-awaited privacy protocol Mimblewimble has launched under the name of Beam. The team behind the project explains that people will be able to determine by themselves “which information will be available and to which parties, having complete control over his personal data in accordance to his will and applicable laws,” which is considered a massive step away from Bitcoin’s pseudonymity and into true anonymity, if so desired.
“In Beam confidential transactions do not cause bloating of the blockchain, avoiding excessive computational overhead or penalty on performance or scalability while completely concealing the transaction value,” the team explained on the project’s GitHub landing page.
This is a recurring problem in other privacy coins, especially those that claim to offer a choice in the amount of data shown. One example is Zcash (ZEC), where transactions are not private by default (meaning users have to turn privacy ON if they do not want it to be public), and creating a shielded transaction is very computationally heavy.
Mimblewimble is a protocol first put forward in 2016 by an anonymous cryptographer who refers to himself as Tom Elvis Jedusor (the French name of fictional Harry Potter character, Tom Marvolo Riddle, or Voldemort). Mimblewimble itself is the name of a spell used to tongue-tie victims in Harry Potter. The protocol derives from another type of transaction known as confidential transactions, which allow senders to encrypt the amount of bitcoins they want to send by using what are known as blinding factors – a random value used to encrypt bitcoin amounts in a transaction, chosen by the sender of a transaction.
In a confidential transaction, only the two parties involved know the amount of crypto being transacted, while 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 considered valid. Such a procedure ensures that no coins have been created from nothing and is key in preserving the integrity of the system.
Mimblewimble transactions function in a similar way: the recipient of a transaction randomly selects a range of blinding factors provided by the sender. This blinding factor is then used as proof of ownership by the receiver, thus permitting them to spend the coins.
Mimblewimble adds yet another factor into the privacy game: CoinJoin, a mechanism by which payments from multiple spenders are combined to form a single transaction, thus making it difficult for an outside party to determine which payment was intended for which recipient. The protocol also prunes old data, no longer relevant to new transactions, in order to improve scalability.
Watch Andreas M. Antonopoulos, a technologist and serial entrepreneur, explaining MimbleWimble and Grin.
Alexander Zaidelson, the CEO of Beam, said in an interview with BlockTelegraph, “We created Beam because we believe that unless these two concerns [privacy and scalability] are addressed, the cryptoverse will have a limited future. Do we really believe a business or an individual could use a non-scalable and non-private crypto currency? Who would like their financial history to be public? It’s unthinkable. Beam solves this issue by providing a truly private environment based, and, not less importantly, an option for compliance that will be developed in a later stage.”
Although Beam is the first implementation of Mimblewimble, another long-expected one is Grin, to be released on January 15th. There are several differences between the two, although the most obvious one is that Beam is being run by a startup with the intention of eventually handing over operations to a dedicated non-profit foundation, whereas Grin development has been entirely community funded through donations. This is why Grin often appeals to the community on principle.
Neither of the two cryptocurrencies will hold an initial coin offering (ICO), instead encouraging their potential users to mine the coins. If you’re not a miner but would like to get your hands on the coins, you will have to wait until an exchange lists trading pairs with the cryptocurrency.
The total supply is 262,800,000 Beam coins, while in the first five years of existence, Beam coin emission is split between Miner rewards and the Treasury (additional coins are emitted into the Treasury for every mined block.)