MimbleWimble Explained: Privacy is a MUST

Today I want to talk about one of the most revolutionary protocols in privacy coins, and that's Mimblewimble. In fact, this protocol with a funny name, it costs people's jobs to drop. So today I'm going to talk about Mimblewimble as part of my Nutshell series. If you guys don't know, the Nutshell series is where I do an executive summary and break down what is important about a particular piece of technology. We're going to talk about why we need privacy at all, what are the key features of Mimblewimble? What is the technology behind this and how this compares to other privacy coins as well, like your Monero and your Zcash. So we're going to do all that in today's episode. And I'll try to keep this as short as possible and as simple as possible so anyone can understand this and realize what this means for the whole of the cryptocurrency ecosystem. Why do we even need a privacy coin? What's important about that? So right now, if you send someone a non-privacy coin, just like your Bitcoin, Ethereum, your Litecoin, you're going to reveal a lot of information about yourself. The receiver of the coin can find out exactly what's in your wallet, how much the amount in your wallet, what you receive. It's like, as if someone knows your income even, and where you spend it on your spending habits and how much you spend. That's a scary amount of information to be telling someone when you just do a simple transaction, say, for example, buying coffee. And if this guy's a creeper or a stalker, they can essentially know everything they need to know without hiring a private investigator. Yikes. So the purpose of privacy coins is to actually hide those amounts, hide the amounts that you transferred, hide the addresses of who you're transferring to. And that makes it really an occurrence that you can use on a day-to-day basis. So what are the key features of Mimblewimble? And I think the most mind-blowing one is that there's no addresses. That's kind of crazy. Right now, when you send Bitcoin or receive Bitcoin, you always have an address. Say I have a donation address for Bitcoin or Ethereum, you can send to that address. But in Mimblewimble, there's no such thing as an address. And this is really mind-blowing because there's no trackable kind of tag for anything. So this is unlike any other cryptocurrency we have today where there are tracers, there are addresses, and you can try to tag and track or even cluster analysis these addresses. With Mimblewimble transactions, that just doesn't exist. And it removes one of the core elements of how people can track you. Next up, there's no amounts when it comes to Mimblewimble. You kind of hide that, hide the amount of cryptocurrency transfer. Lastly, it also hides which IP you send them from. So this is kind of important. So if you send or receive cryptocurrencies every day using a particular phone, then that phone's IP could be an identifier for you. But with a new layer of something called dandelion in Mimblewimble protocol, essentially it hides that information, giving you an additional layer of privacy. So what was the technology behind this that makes it possible? Is it super complicated? Is it some crazy equation? Actually, it wasn't. It was something super simple. And when this paper was published, people's minds were just blown at how simple and elegant the solution was. And the way the paper was published and all these funny names here, it's all textbook movie material. It was published just like how Satoshi Nakamoto published the Bitcoin paper anonymously. And we don't know who is the actual real person behind the Mimblewimble protocol. It's published under name called Tom Elvis Judicor, which is a name from Harry Potter. And yet again, Mimblewimble, the name is also a reference to a spell, a tongue tying curse. So beyond the funny names, what is the core technology? So one of the core technologies here is that instead of signing a transaction with your own signature, you make a new signature every time you sign a transaction. So that signature is really your identified, that's your address. And that's what makes you trackable. With Mimblewimble, what you do is you use a little bit of funky mathematics to combine signatures from the receiver and from yourself and create a new signature. It hides your actual address. So that's why there's no addresses when it comes to Mimblewimble. It's all mathematically generated on the spot. That's the first piece. So what else does it use? It uses the second piece of confidential transactions. This idea has been floating around in cryptography for a while. And it's an idea that you can hide the amounts transferred so long as the inputs and the outputs, they subtract to zero. So as long as you know that particular bit of information and the mathematics of this is just really complicated, but as long as you know that bit of information, you can hide the amounts transferred. Now we already see confidential transactions being proposed for Bitcoin or for other cryptocurrencies, but how Mimblewimble uses it is it uses it to the next level. Not only does it do this for a transaction, but it does it for the entire block as well. So when you see Bitcoin transactions being packed in the blocks includes all the transaction information, Mimblewimble says, let's discard all that transaction information and just make sure that the inputs and outputs, they kind of subtract to zero. That sounds crazy complicated, but let's give you an example. Let's say for example, I withdrew some written from the KuCoin exchange and you know, maybe I sent a little bit of that to Omar, my friend, and Omar sends it back to KuCoin. So that's pretty simple. And on Bitcoin, if it was Bitcoin, you'll see multiple transactions, KuCoin going to me, me going to Omar and Omar going back to KuCoin. And that way I can be identified, Omar can be identified and our names will be exposed. So with Mimblewimble, we can pretty much discard all that information. So it goes from KuCoin and ends up in another KuCoin. Who the hell is Michael and Omar? I don't know those people. That's a mystery to everyone. And that's really special because our names are never mentioned. It's never ever even reported on a public blockchain. It's gone. We're just ghosts. We disappeared and all that information is lost and untraceable. Now it's also quite important for scaling as well, because by discarding that information, you essentially compress and make the blockchain a little bit smaller. So it actually solves scalability there too. And this is the beauty of it. It wasn't, it wasn't about adding extra, extra complications. It was about removing it. And this is why people's minds were blown. It's because of the whole elegance of this. And another key important fact to remember here is that this applies to all transactions on the Mimblewimble protocol. So it's not like just one or two transactions are private. The rest are transparent or public. Everything here is private, which is a very key important factor to remember, because if only a few transactions are private, we've been into this mindset now that you can start tracing and tracking those private transactions, especially if only three parties are involved. Let's say example, like three people wear a mask and the rest people don't wear a mask. You can pretty easily identify who those three weirdos are, but here, everyone's wearing a mask. Everyone's hidden, everyone's private. And that's what's really important as well in this system. So how does this compare to other cryptocurrency coins or privacy coins? And I think this is not a section to say, oh, everything else is bad, but I just want to compare what are the core ideas and concepts. I think the biggest privacy point to compare to is Monero because we know that it's kind of the king of all privacy coins. Monero hides the addresses by creating a bunch of other fake addresses or wallets to send cryptocurrencies from, and it kind of camouflages the real transaction in there, making it really hard to find where cryptocurrency comes from and goes. I think the main advantage of the Mimblewimble approach is that it's smaller. So every block, because it just contains the inputs and outputs and discards the information between, it is much, much smaller and you can pack more and scale a little bit better. The other privacy technology to compare to is ZK-SNARK technology. So you've probably heard of Zcash, Zcoin, these all, even Ethereum, they're trying to adopt ZK-SNARKs. And ZK-SNARKs are a brilliant piece of kind of cryptography and mathematics, but the kind of key disadvantage is that it relies on something called a trusted setup. So in this trusted setup, there's these master keys that needs to be destroyed. And if these master keys are used or not destroyed properly, they can kind of control the entire network and create coins out of thin air. And that's kind of the major weakness of anything using ZK-SNARKs. It relies on the trusted setup and there's various ways of trying to create these keys and then destroying them like big public shows of destruction. And in many ways, it feels like a lot of rings, you know, there's these nine master keys. And if anyone controls these master keys, this world's over. A little bit like that. So MimbleWimble doesn't use a master key setup. It doesn't have trusted setup. And that way it's a little bit more secure in that sense. The last privacy implementation I want to talk about is the way Zcoin does it, where they rely on destroying coin, destroy, and then re-birthing them. Yeah, my handwriting is not the best here. But the way it works is that if you have Zcoin maybe like say 5xzc and you can prove mathematically that they are destroyed. And the way this is done is via zero knowledge proofs. Because you can provide the proof that's destroyed, but you don't have to reveal which address is destroyed from, which is kind of special. So you just destroy them using zero knowledge proofs. So once it's destroyed, it's reborn, rebirthed somewhere else in another address. The interesting aspect here is that there's no link. So there's absolutely no way to link up what destroyed coin gave birth to what other set of coins. And this is where you actually break all that transaction history. So you have no transaction history tying these coins together. So they're giving you a lot of privacy. The advantage of this way, even though at first I thought this sound sounded really complicated, is that because everyone can destroy coins, the pool from which this destruction comes from is so massive that everyone's part of it, that it's impossible to trace to to really do that trace back. So it's a little bit different from all the other methods where it's still sometimes possible. You can maybe have a set of seven people that you can tie those transactions to and start tracing back. So here, the problem says, it's just way bigger. It just, it becomes a whole community of anyone who's destroyed coins, which means that privacy is definitely much better preserved. Okay. Obviously I've been talking really good stuff about memblewimble and it seems like I really love it, but there are some drawbacks and there are some disadvantages as well. First of all, the major drawback here is that a lot of this math is not tested by discarding so much information. Does it really work? And let's talk about the two implementations as well of memblewimble. There's two projects that use the memblewimble protocol. One of them is called GRIN. The other is called Beam. And there was an epic battle between these two points. So let me just talk to you about what's important about them. So they're made by two different teams. The GRIN team is made by this anonymous group of cryptographers who passionately develop for this project and contribute out of their free mind. They kind of do it for free. The Beam team is a little bit different. So Beam is more of a corporate structure. So it's a company with a CEO and all that stuff. And a portion of mining rewards will go towards that company. So it's a much more corporate structure and it has a governance system that keeps us company alive. And these are two very different approaches in governance and mindset. Personally, for me, I'm much more tending towards GRIN, which is the kind of passion because what I found, and this is kind of surprising, but these corporation structures don't work very well because a lot of money is involved. If one developer doesn't get paid as much as the other one, they'll just rate quit. So that's kind of why I don't like the corporate structure as much anymore. And I favor this more anonymous community driven approach more. And for sure, I'm going to keep an eye on the space overall and on privacy coins, because honestly, if you want to make this into a currency used every day, you really need a privacy coin. You can't just let whoever you pay track your wallet. And that's it for this episode and this nutshell summary guys. So I really hope this explains Mumble Wimble to you. If you guys are looking for resources, I'm looking, putting them down below. There's a great video by Andrew Posta, one of the core developers behind Bitcoin, describing what he thinks and how this whole thing works. Andreas Antonopoulos was really good with them. Just leave a bunch of links down below. If you guys are interested to explore this topic even more. And if you guys like the nutshell series, please do put a like button. It really helps this channel grow. And I would love to hear what technology you want me to discuss as well. There's a lot of different technologies out there. And just looking at this made me so excited. So I hope to do another one in the near future. And I'm going to include a playlist of all the nutshell videos as well. It's kind of like all different technologies explained. And I hope you guys can have a fun time exploring that list. Thank you guys so much for watching. Remember to hit up that like button and subscribe to this channel if you haven't done so already. See you in the next one. Thank you. Thank you. Thank you. Thank you.