Assignment Crypto Academy Season 04 - Week 02 | Advanced Course -Mimblewimble Protocol[@fredquantum]
This is my submission for the Assignment provided by Professor @fredquantum. The session was on MimbleWimble protocol and how it makes our transaction anonymous.
1. In detail, explain your understanding of the Mimblewimble protocol.
I have heard this word in Harry Potter as I am a big fan of Harry Potter, Avengers, X Mean, and all Sci-fi movies and today after attending the session I got to know that there is a project with this name. lol...
MimbleWimble protocol was developed to solve the Scalability and Privacy issue in the Bitcoin Blockchain Network. As we know on the bitcoin network everything is public like Sender's address, Reciever's address, Amount, and previous history, and it can be easily seen by outsiders. In the MimbleWimble protocol, the Transactions will be visible for the Participants only as it will be encrypted. For example, if person A is sending some amount to Person B then these transaction details can only be seen by the Participants who are making the transaction. Let me show you practically. We will take the example of block 949340 and as we know that I am the outsider.
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As you can see in the given transaction you can't see any specific details about the transaction like Sender's address, Receiver's address, amount also previous transactions, and this is how the protocol is hiding the important information from the outsiders.
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Now let me show you a transaction on Bitcoin Network. As we all know that Bitcoin is a public network where all the details are public like Sender's address, receiver's address, amount, etc. Also if you will the sender's or receiver's address in the explorer you can get the information of the previous transactions and other details as well.
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2. Discuss in detail how the Mimblewimble blockchain protocol works.
As we have discussed that Mimblewimble blockchain makes our transaction completely anonymous and saves our information from outsiders. It has 2 parts Confidential Transactions and CoinJoin.
The meaning of Confidential Transaction means whatever transaction has been made between the Senders and Reciever the details will be visible for them only and the details will not be published anywhere. I will be discussing this in detail in the next questions on how we make it confidential.
CoinJoin combines the transactions of Multiple people in a single block with minimal information like List of inputs, List of outputs & Signature data which is nothing but a smart contract signed by the sender and receiver. This is how the CoinJoin removes the storage of Unnecessary data over the blockchain and makes it scalable. After the implementation of CoinJoin, the issue of Scalability impacted drastically as it reduces the size of the block also more transactions can be stored in a single block as compared to the normal block.
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Suppose if we are mining Bitcoin then to run a Node we need to download or go through all the transaction details over the Blockchain this makes things a bit completed and time taking wherein MimbleWimble as the block size is small because it stores less data it would be less time talking to mine.
3. Discuss in detail your understanding of Confidential Transactions (CTs).
In simple words, Confidential Transactions means whatever amount is being transferred between the Sender and Receiver will be anonymous and it will be known by the Sender & Reciever only. These transactions details will not be published on the public network so that outsiders won't be able to see the transaction details, unlike the BTC network. The transferred amount will be encrypted with the help of some random values and the values are called Blinding Factors. This random value is used to encrypt the transaction and this random value is a range and from this range, the sender will select the value to encrypt the transaction. The blinding factor messes up the transaction details and makes it confusing for the outsider to crack it.
And this how only 3 things will be public Inputs, Outputs and Sign apart from this information all the details will be limited to the participants only. This is how anyone can be identified whether the transaction is valid or not just by comparing the number of inputs and outputs.
The Number of Inputs = The Number of Outputs => ** Valid Transaction**
4. How do you think Mimblewimble Protocol can be utilized on the Bitcoin Network to enable anonymity of transactions and improve scalability?
As we know MimbleWimble Protocol has two main parts Confidential Transactions and CoinJoin features. Confidential Transaction will help the Bitcoin network to make even more secure as it will hide all the important Transaction related information except some less important data. The CoinJoin feature will combine the Multiple transactions in a single block and this is how it will be impossible to identify which payment was made for the specific recipient.
The growth of BTC adoption and growth of Block size is exponential in this situation if we need to set up a full node then it would require 200 GB of storage along with enough bandwidth support and computing power. This blocksize will keep increasing along with the time then it would be very difficult for the trading mining system or an average system to run a full node. As long as the Bock size will increase we require a more advanced mining setup that would be costly for sure and it may lead to centralization as big firms have a lot of money to build Advance setups.
Now what Mimblewimble protocol does is compress the size of the block by storing only the essential details on the block like Inputs, Outputs, and Sign data also it combines a group of transactions in a single block. This is how it can help the Bitcoin network to improve scalability.
5. State the Pros and Cons of the Mimblewimble protocol.
Mimblewimble came into the existence to solve two problems in the Bitcoin Network which are Privacy and Scalability. Here are some of its Pros and cons-
Pros
**Privacy: ** Confidential Transaction is one of the core features of MimbleWimble protocol as it limits access to the important transaction details to the participants only which make it secure from outsiders.
**Scalability: ** With the help of the CoinJoin feature in the Mimblewimble blockchain we can compress the size of the block by storing minimal data like Inputs, outputs & signatures. It is better than the lighting network also makes it easy to scale and mine with less computing power.
**Implementation: ** As Mimblewimble is a protocol like BTC network and it can be simply merged into the bitcoin network to make it more feasible and scalable. It can be also implemented as a sidechain as well.
Cons
**Anonymity:- ** Although this is one of the core features of the MimbleWimble protocol however this is not 100% anonymous and Big money can still overwrite the anonymity well there is only 1% chance that it can happen. However, this drawback can be overcome along with time as the userbase will increase and the transaction will also increase as a result the Privacy will also increase. it would be very difficult to target any specific transaction if the data/vol will be huge. ting
**Scripting:- ** Mimbwimble Blockchain doesn't support Scripting where Bitcoin network support scripting which makes it handy also enables some features like Multi-signature, secure cross-chain trading, and High-frequency trading.
6. Discuss in detail at least a Crypto that uses the Mimblewimble protocol.
I would like to talk about Grin Coin which is the complete implementation of the MimbleWimble protocol. Grin coin is a fully community-driven coin and was founded by an anonymous person. It is an Open-source project where developers from all over the world are contributing to its development. Also, there was no ICO or IEO for this coin also whatever the coin is available came from mining.
There are three main features of Gring Coin-
Private
Scalable
Open Source
It is not fully tested yet that is the reason they have mentioned use it as per your own risk. Grin coin is listed on KuCoin and Gate.io which is very famous for gem coins. The current price of Grin is $0.3390 with a Market Cap of $29,415,680. At the time of its Mainnet launched the price of Grin reached $261 due to its unique feature in the market. It has an infinite supply and all the coins are generated by mining.
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source- Coingecko
source- CoinMarketCap
Conclusion
The session was really full of knowledge and I really enjoyed doing this assignment. MimbleWimble protocol is really amazing and it can be very helpful to build an anonymous and scalable ecosystem. Because of this unique feature at the time of launch, the hype of the Grin coin was at its peak.