Litecoin is one of the oldest cryptocurrencies on the market today. While many Bitcoin enthusiasts may overlook it, the developers are constantly looking for ways to improve the ecosystem. MWEB, Or Mimblewimble Extension Blocks, are a revolutionary concept to explore.
The Concept of MWEB Explained
Back in 2019, an intriguing Litecoin Improvement Proposal (LIP) hit the internet. To increase the network’s fungibility and introduce more privacy, the team put the Mimblewimble Extension Blocks proposal forward. With the help of the Litecoin Foundation, developer David Burkett was tasked to complete this integration. A donation-based fund ensured the financial aspect of this task.
Although some people may be familiar with MimbleWimble, the MWEB implementation goes one step further. By combining different technologies – including Confidential Transactions and CoinJoin – it becomes possible to achieve a wide degree of privacy. A similar implementation of MimbleWimble exists for Bitcoin, but the BTC blockchain will not receive the MWE proposal (at this time). This is one of the use cases for Litecoin, the silver to Bitcoin’s gold. Yes, Bitcoin has a testnet that could be forked and new technologies can be tested on it but adversary hackers are not incentivized to try to attack the testnet because it literally has no value. Litecoin is like a testnet with a real-world network effect, community, and value. While it would certainly be terrible if a new upgrade had a large bug but not as bad as if it was on Bitcoin’s Trillion-Dollar value. Litecoin is the perfect blockchain as the middle step to upgrading Bitcoin just like it did with the user-activated soft fork that ended the scaling war stalemate in early 2017 thanks to Charlie Lee and Shaolinfry.
What MWEB does “extra” is the introduction of Extension Blocks, a concept first introduced in 2013. An extension block can be considered as a parallel blockchain running next to Litecoin’s primary chain. Through its opt-in approach, users can transact on either of these blockchains. One of the advantages of the MWEB chain is that it will provide better fungibility and privacy than Litecoin’s fundamental chain.
Who Will Support It?
Accessing MWEB will be possible through supporting wallets and exchanges. That is, assuming these projects will integrate support for MWEB, which has not been officially confirmed as of yet. Under normal circumstances, it will make sense for service providers to incorporate support for MWEB, although the process can take a while. More information on this progress will be made available at the appropriate time.
Based on some initial communication between Litecoin creator Charlie Lee, the Litecoin Foundation, and several exchanges, the integration of MWEB support is low-risk. As this solution is opt-in for everyone, there is no immediate reason to delay integration. We at Vaultoro are keeping a close eye on this amazing upgrade to Litecoin.
However, centralized exchanges sometimes have to keep tabs on government sentiment and how they look at privacy-oriented solutions. More often than not, that is not a favorable combination with cryptocurrencies even though fiat cash is one of the most private ways of transacting. If the worst comes to pass, providers can still disable support for MWEB and continue to process regular Litecoin transactions.
Improving Litecoin’s Privacy Issues
Similar to other public blockchains like Bitcoin or Ethereum, Litecoin doesn’t have any native privacy to speak of. Newcomers may confuse pseudonymity with anonymity, but things are very different in the real world. In the financial sense, privacy would mean that no one knows any sender or receiver of funds nor the transaction amount.
Due to these networks’ public nature and the various block explorers tracking events, all of that information is widely accessible. Identifying money flow between different addresses is very straightforward. This does deter criminals from using public cryptocurrency networks for money laundering purposes, yet there is still room for future improvements.
Achieving privacy by default is a challenging task in the cryptocurrency industry. Such features and changes need to be enforced at the protocol level instead of making users opt-in to additional privacy. While most people may not need to hide their address, transaction amounts, and recipients, there is no reason to leave it out in the open either.
So far, Litecoin seems to be ahead of Bitcoin and Ethereum to achieve this goal. Not only are the developers looking at activating Mimblewimble – a privacy-oriented protocol upgrade – but there is an improved version in the works. Known as MWEB, or Mimblewimble Extension Blocks, it provides a few extra benefits that users would otherwise not be able to access.
Fungibility is A Pressing Problem
Although MWEB is a privacy-oriented solution, there are other reasons why Litecoin can benefit from this upgrade like transactions costs and scaling solutions but fungibility is a big problem. Similar to Bitcoin and Ethereum, Litecoin has poor fungibility. Although 1 Litecoin will always be interchangeable for another Litecoin, there are limitations as to what degree of fungibility one can achieve and governments could start to enforce blacklists of certain coins wich could be detramental to the network.
More specifically, in the cryptocurrency industry, there is an aspect known as “coin age”. A Litecoin generated on the network in the first week is not the same as a Litecoin one may mine today. To neophyte enthusiasts, this may seem like a strange concept, but there is merit to it. The older LTC has years of transactions tied to it, which also introduces “coin taint”. Dealing with LTC that may have a nefarious transaction history tied to it can be bothersome in some cases. From a fungibility point of view, exchanging untainted and tainted LTC is not straightforward.
For most people, it doesn’t matter too much whether a coin has any transaction history or not. Most people acquire Litecoin and other crypto-assets for speculative purposes rather than using them for purchases or other real-world use cases. However, when using those coins through regulated exchanges and trading platforms, you may become subject to blockchain analysis procedures, and your funds may be labelled as “risky”.
Keeping that in mind, it is evident that not every Litecoin is the same as another LTC. Achieving fungibility becomes more complicated in this regard, although it isn’t necessarily something most people will worry about. The “taint” of cryptocurrencies can have significant consequences depending on where you live. It is an aspect to be wary of and why Litecoin and other assets virtually lack any fungibility.
Many people think that privacy is only for drug dealers and illegal activity but that is very far from the truth. Because these digital assets are held by the person “BE YOUR OWN BANK” it opens people up to the physical robbery. You do not want the world to know how much bitcoin, litecoin or any other value you have. Doing so opens you up to the kidnapping and countless other risks of extortion. Privacy in money is a must long term.
The Potential Drawbacks
Although the introduction of fungibility and better privacy are clear benefits, MWEB is not without drawbacks. Making privacy opt-in and not enabled by default gives users a choice but may not necessarily make a big difference in the long run. Being exchange-friendly is a smart approach, but it also prevents developers from introducing a “real” privacy solution.
Additionally, one should not overstate the privacy one gains through MWEB either. It is a light layer of privacy but will not provide functionality on the level of Monero, for example. It is still possible to link transactions to one another and to specific addresses. Using the CoinJoin feature heightens the privacy aspect, but it is not a foolproof solution either.
Last but not least, this implementation is still under development. It will remain a work in progress for the foreseeable future. The developers can make new improvements, changes, and additions over time. Either way, it is an exciting upgrade for this popular cryptocurrency and one that many users have been looking for.
What To Expect From MWEB So Far
As outlined above, there are many possible reasons to explore the MWEB proposal and integration. While development remains ongoing, several features have been confirmed by the developers.
First of all, users can hide transaction amounts through MWEB. It is a significant privacy upgrade, as the integration can erase parts of the transaction history only to include unspent coins.
Second, the network’s scalability will improve, as it enables “bigger blocks” without showing an increase on the main blockchain. All transactions flowing through MWEB exist on their own chain, with no trace of them existing on Litecoin’s primary network. For now, no one knows how many transactions will occur through this privacy layer, but the option will be available to users regardless.
Third, it is worth mentioning there is support for one-sided transactions. Originally proposed in LIP-0004, it allows for sending transactions on the MWEB network without building a transaction interactively with the receiving partner. Non-interactive transactions pave the way for easier cold storage, on-chain payment proofs, and so forth.
Beating Bitcoin To The Punch
Although Bitcoin developers aim to integrate Mimblewimble into their blockchain Litecoin’s team beats the competition to the punch. It marks the second time in the past decade where Litecoin incorporates a network upgrade ahead of Bitcoin. The first time dates back to 2017 with the SegWit activation.
Some may see this as a good thing, as it confirms Litecoin’s status as a “test network” for Bitcoin. However, the situation is never as cut-and-dried in the cryptocurrency industry. One can also state Litecoin’s developers are more eager to push the boundaries of what their network is capable of. A first-mover advantage can never be underestimated, even in this industry.
The performance of Mimblewimble and MWEB will provide valuable information to Bitcoin’s developers. If all things go according to plan, the Mimblewimble integration for Bitcoin may happen a tad quicker. Similar to Litecoin, Bitcoin’s core protocol doesn’t allow for fungibility, scalability, or privacy. Addressing all of these concerns is of the utmost importance.
Will MWEB Succeed?
Introducing a network upgrade is always tricky for cryptocurrency developers. Although MWEB has certain benefits, one has to wonder if there is a genuine “need” for privacy and fungibility. Litecoin has been a successful project to date, and every new upgrade can tarnish that image. Even so, there is a good chance this upgrade will prove beneficial for the majority of users and supporters.
Contrary to what some people may think, privacy is not just for those who have something to hide. The public nature of Litecoin allows anyone in the world to see how much money is sent to and from every address on the blockchain. It may not matter to some users right away, but exposing financial information in this modern era is always problematic. No business whats to show clients where they source their goods or how much markup they put on. No one goes around wanting to show everyone in the world what is in their bank accounts.
Second, there is a growing focus on blockchain analysis these days. When users send or receive money on the Litecoin blockchain, firms like Chainalysis can identify the sender and recipient to flag any potential suspicious transactions. Although this removes the appeal for using cryptocurrencies in illicit environments, it also erodes user privacy entirely.
The lack of financial privacy may also be a key reason why so few people embrace cryptocurrencies. In the real world, one can always use cash to prevent banks from snooping on one’s transactions. There is no ” privacy option ” to explore with cryptocurrencies such as Bitcoin, Litecoin, and Ethereum. For this reason, MWEB may prove worthwhile to the right audience.
The ongoing upgrade to Mimblewimble Extension Blocks marks a crucial development for the Litecoin ecosystem. It offers some crucial benefits, but not everyone is forced to experiment with these new options. Users are given the option to either achieve more privacy or to keep things as they are.
The big question is how exchanges and wallet providers will look upon the MWEB aspect. Given the negative stance toward privacy-oriented coins and features by governments and regulators, it may be a bit tricky to integrate this new upgrade smoothly. For now, that isn’t a pressing issue yet, as there is no official timeline for finishing the development cycle or its integration.
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Original source: https://vaultoro.com/what-is-mweb-on-litecoin/