Litecoin has implemented the Mimblewimble update, providing some brand new privacy features. Let’s take a brief look today at what Mimblewimble is and what are the implications of its integration for Litecoin.
So, how does it work? At the moment, all the inputs and outputs of the blocks are open and transparent in the Litecoin ledger. The consensus protocol ensures that the number of inputs is always equal to the number of outputs, and each transaction is transparent and traceable.
With Mimblewimble, the MimbleWimble extension block (called MWEB) will run alongside the main Litecoin blockchain. If you decide to accept the update, then you can make your transaction private. Users will have the option to encrypt the amount of coins they send, in addition to obfuscating their address. The private transaction will be placed in MWEB, where all private transactions will be located. All transactions in the MWEB block will be combined into one giant transaction. This new obfuscation feature is called a confidential transaction, whereas the “giant transaction” is called CoinJoin. The MWEB block can still be verified, but only the participating parties can view the transaction data.
Mimblewimble was developed by anonymous programmer Tom Elvis Jedusor on the BTC-IRC channel. Tom Elvis Jedusor is an anagram of the word “je suis Voldemort” (I am Voldemort). Voldemort is the main antagonist of the Harry Potter series.1 There seems to be a touch of idiocy here, but…
The update was prepared for two years, as the project manager Charlie Lee has been dealing with issues of interchangeability and privacy since 2019. By interchangeability, we mean that all coins are equal and interchangeable. At the time, Lee discussed that the Bitcoin and Litecoin currencies could not be completely interchangeable, as they could be used for ulterior motives and therefore could be “corrupted” by bad intentions. “Pure” Litecoin is mined, sold, and used. All this is transparent in the blockchain, and can be tracked. At the end of the line, Litecoin will be listed as “corrupted” if it was previously used for criminal activity. The Mimblewimble update ensures that every Litecoin issued is interchangeable.
Does the update have any downsides? Yes, it is. Because the transaction is private, it contains more data, which reduces the speed of the transaction.
The creator of Litecoin has been dealing with this issue since 2019, as seen in the tweet above. The protocol will make the Litecoin blockchain more private, and is an interesting side step, compared to the original Bitcoin protocol.
While Litecoin has always been called “silver versus Bitcoin gold,” Charlie Lee’s project seems to be moving in a different direction. Since Litecoin’s launch in 2011, it has closely followed Bitcoin’s codebase. While Mimblewimble is still an optional feature, this small discrepancy can be seen as an important step for Litecoin.