Beam and MimbleWimble
“Beam’s economic structure is designed for long term”
By Block Society
Mimblewimble is a highly scalable, highly private cryptography technology that allows for transactions on a blockchain without any signatures actually within the blockchain. A scheme that makes transactions as anonymous as possible in the base level of transaction. Instead of having transactions signed on the blockchain, users create a multisignature scheme in which both users must sign the transaction before it is posted to the blockchain. A “blinding factor” is created between the two parties. This “blinding factor” encrypts inputs and outputs and the public keys of both parties while still allowing nodes to verify that the value in and out equals 0.
This is the lowest layer of privacy that we have seen working in the industry. It makes transactions impossible to trace and keys are never known by third parties. Projects like Monero and Zcash obfuscate transactions on the blockchain level. Mimblewimble based projects, don’t put transactions on the blockchain at all. On top of the security benefits, Mimblewimble promises to shrink the transaction size – assisting in the scalability issues. You no longer need much of the data that was posted on chain. The one potential drawback of this technology set is that it is impossible to create a transaction with only one party’s involvement. In other words, you must have both parties sign the multisig transaction for it to be posted to the blockchain. This causes certain complications, but UX designers are already working on easy fixes for this through the wallet software.
So far, I have only been describing Mimblewimble, the game-changing privacy technology. There are multiple projects that are working on integrating Mimblewimble based protocols. The project that I chose is Beam. I write about Beam, not because it is the first, or because I believe it to be the best long term privacy protocol out there, but because the organizational structure mixed with the technology allows for the strongest R&D to come out through Beam. Unlike its biggest competitor – Grin, Beam has a corporate governance structure. Having a corporation back a project comes with the price signals of profit and loss allow for much more efficient planning than a decentralized organization entirely run off of donations. Don’t get me wrong, donations are important in any industry, but at some point – maybe during a market crisis – donations have a higher potential to falter than a capital structure of a business.
Beam’s economic structure is designed for long term. Block rewards won’t cease to exist for 130+ years. Whereas Grin has an uncapped supply and no explicit governance mechanism to allow for future capping. The Beam Foundation team has clear and drawn out plans to fork the consensus mechanism and difficulty so that it is asic resistant, lowering the level of centralization in mining.
Finally, Beam has an optional auditability trail for users. If a user wants to have a publicly auditable record, it is built in for them to do so. This is highly important in privacy coins, especially ones backed by central corporations. Privacy is necessary for many transaction types. Individuals need privacy in most of their day to day transactions. But auditability is important to financial institutions and public companies. They will stay far away from un-auditable records because it puts them at risk from governmental authorities. In the near future, I do not see this changing.
The Beam Foundation has developed one of the most robust blockchain based projects. They have built a scalable privacy coin, that gives users the option for non-private transactions. A clear and concise governance system is already in place. And the supply side/mining economics look to be sound thus far.