On October 23, Litecoin announced a draft privacy upgrade plan, using technology originally designed for Bitcoin. The proposal will allow users to conduct Mimble Wimble (MW) transactions through sidechains like Extension Blocks for alternative privacy.
Claire Lee, the founder of Litecoin, originally announced plans to explore privacy technology earlier this year. He pointed out that "the battle for expansion has passed, and the next battlefield will be fungibility and privacy."
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Today, a draft of the Litecoin Improvement Proposal (LIP) has been released, and the project will need to assess community responses before writing, testing, and auditing new code.
What is an extended block and MimbleWimble?
The technology included in the Litecoin proposal was originally developed for the Bitcoin blockchain. The extended block was originally proposed by Johnson Lau in 2013 and is planned as a bitcoin soft-fork expansion solution that enables better interchangeability while minimizing the potential impact on the existing wallet ecosystem. In the end, the proposal was rejected and lost to Bitcoin's SegWit expansion.
MimbleWimble was presented by an anonymous developer in a July 2016 white paper using the pseudonym Tom Elvis Jedusor. The payee can randomly select a series of blind factors (used to encrypt the random number of bitcoins in the transaction) provided by the sender, thereby disrupting the transaction. Mother MimbleWimble has been deployed in two cryptocurrencies, Grin and Beam.
Litecoin privacy program is expected to activate after one year
The Litecoin proposal "joined MimbleWimble, an alternative new trading format, through the extended block." The team stated that “the extension time of the extended block and the main block is 2.5 minutes”. The ability to deploy a private transaction occurs in an "extended block" where users can use MimbleWimble by "transferring their currency into and out of the extended block via a collection transaction."
This sounds complicated, but by moving the privacy part of the transaction to the extended block sidechain, this means that this upgrade can be done with a backward compatible soft fork. This also means that there is no risk of producing two versions of Litecoin.
The Litecoin Foundation has proposed an activation plan one year after the code is released – but if 75% of the computing power supports this improvement, activation may be advanced. As this proposal has just been announced, there will be no changes in the privacy of the Litecoin blockchain until next year.
After the privacy feature, Litecoin may be removed?
However, this proposal is not zero risk. The extended block has never been deployed on other blockchains.
Lite Yang researcher and technology author Andrew Yang said:
“It will take a lot of time, effort and review to ensure that it is fully compliant. If you don’t, you may lose money or expand your supply.”
In addition to technical concerns, Yang also wants to assess the response of government regulators, banks and exchanges.
“In the past few months, we have seen Coinbase remove the privacy of coins like Zcash and Dash; we have seen a similar situation at OKEx. The optional MimbleWimble feature will make Liteco face the same situation. ""
Yang said that this may cause Litecoin to face liquidity risks.
However, the scope of this upgrade may not be limited to Litecoin. More and more blockchain developers are shifting their focus from capacity expansion to privacy measures.
Because of the "Bit Gold, Wright Silver" statement, Yang regards this privacy upgrade as a test field for Bitcoin:
“I want to see something similar on the Bitcoin network. Whether Bitcoin can be upgraded this way will depend on the community – but the upgrade of Litecoin will provide proof of concept and case studies, which I hope will be valuable. ""