15 Jan 2025

MimbleWimble: Litecoin’s spell for privacy

MimbleWimble: Litecoin’s spell for privacy

Ever heard of MimbleWimble? If not, you might need to dive into a Harry Potter book or two. It’s a term used by wizards who want to prevent their enemy from casting a spell correctly.

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MimbleWimble also stands for the privacy protocol that was deployed on the Litecoin network in the spring of 2022. Interestingly, it was developed by an anonymous developer who goes by the name of Tom Elvis Jedusor (the French name for Tom Marvolo Riddle). At least we could surmise now that the creator of the update is a Frenchman.

This protocol was created back in 2016 and adopted by two minor cryptocurrencies, Beam and Grin. However, it gained mainstream attention only after being integrated into the Litecoin network.

The primary goal of MimbleWimble is to ensure the confidentiality of payments.

 Proof-of-Work blockchains are transparent by default, revealing the sender and receiver addresses, as well as the amount of coins being transferred. This has been a problem for potential LTC buyers for a long time.

MimbleWimble in a nutshell

MimbleWimble is an extension for the main ledger, which could be conceptualized as a parallel chain of blocks. However, the way it is technically implemented appears to be separate extension blocks set up in each block of the main chain. It enables users to move their LTCs within those complementary extension blocks in order to conceal the transaction data. 

If we had to explain Mimblewimble in layman's terms, we would draw a big stage with a small, dark dressing room. Before stepping into the spotlight, where anyone can recognize you, you can put on a wig and mask in the dressing room to remain incognito for the audience. And after the performance, you can go back through the dark room. You can do this many times, constantly changing your appearance.

Whenever a transaction is conducted within these blocks, the addresses and amounts will be hidden from all but those involved therein. Then, users can move their ‘disguised' coins from the expansion blocks into the main chain to conduct public transactions. 

Crucially, the use of the extension blocks is optional for users. They can choose whether their transfers will be public or private. The vast bulk of Litecoin activity so far remains on a public ledger. A mere 0.001% of LTC's circulating supply is hidden in extension blocks at press time. But we expect this volume to increase once crypto platforms and wallet creators start supporting this feature.

For now, the new capabilities of Litecoin have sparked debates on whether Litecoin can now be considered a privacy coin like Monero or Zcash. 

As a result, the Asian exchanges which banned XMR also decided to delist LTC just to be on the safe side, in compliance with local regulations. Among those are Upbit, Bithumb, Coinone, and Korbit. 

How are coins transferred inside and out of extension blocks?

Moving funds into the HogEx (short for “Hogwarts Express”) extension block is called a pegging-in transaction, while removing them back to the main chain is called a pegging-out transaction.

To send coins to the extension blocks, users need to peg them out to the special MimbleWimble address (MWEB), which is prefixed with ltcmeb1. There, all the coins received from different users are mixed together using the CoinJoin mixer, and processed by the validators. These blocks conceal the transaction participants, using one-time addresses that cannot be seen in the main registry without a special view key.

To put funds back into the public chain, the user initiates a pegging-out transaction that transfers funds to an open Litecoin address. Such transactions are also processed in HogEx. 

MimbleWimble employs the three technologies to provide anonymity:

  1. Private transactions render the amount visible only to those involved therein, while simultaneously providing a cryptographic guarantee that no more coins are transferred beyond those in the sender's balance.
  2. CoinJoin acts as a mixer to conceal the sender by merging multiple inputs from different participants into a single transaction.
  3. The hidden addresses conceal the recipient of the transaction by using one-time addresses that cannot be seen in the public blockchain. 

Currently, there are debates within the crypto community on whether MimbleWimble can be implemented as a soft fork of the Bitcoin blockchain. Some experts believe that incorporating such a protocol into Bitcoin would be too complicated. Others claim that MimbleWimble could serve as a sidechain for BTC, and if Litecoin managed to successfully implement such an upgrade, so would Bitcoin. 

The content on The Coinomist is for informational purposes only and should not be interpreted as financial advice. While we strive to provide accurate and up-to-date information, we do not guarantee the accuracy, completeness, or reliability of any content. Neither we accept liability for any errors or omissions in the information provided or for any financial losses incurred as a result of relying on this information. Actions based on this content are at your own risk. Always do your own research and consult a professional. See our Terms, Privacy Policy, and Disclaimers for more details.

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