Earlier this year, Litecoin creator Charlie Lee announced that soon confidential transactions and MimbleWimble implementation would be introduced to the 6th largest cryptocurrency.
Last month, it has been announced that the Litecoin Project is working with David Burkett, a Grin ++ developer to add MimbleWimble support to the Litecoin network.
Now, a draft of two Litecoin Improvement Proposals to implement MimbleWimble through Extension Blocks has been proposed on GitHub.
The LIP introduces opt-in MimbleWimble (MW) as a new transaction format through extension blocks. These blocks run alongside the main chain blocks at the same interval of 2.5 minutes. Inside the EB is where MW transactions occur.
Initially, it would be opt-in, meaning it’s up to users to use MW by using coins in and out of the EB through an integrating transaction.
MW with EB, the proposal states can be soft forked in via version bits. Old clients won’t be aware of the EB side but will only see the coins ending up in the anyone-can-spend address.
— Litecoin Foundation (@LTCFoundation) October 22, 2019
What are the Options?
Due to the fact that transaction history can be publicly traced, it hinders Litecoin’s fungibility. The private transaction is one solution to the problem that provides financial privacy and allows for plausible deniability. But such transactions can be selectively disclosed and validating them requires processing the entire history of transactions.
The team looked at other options like Confidential Transactions and Zk-Stark as well but decided to not go with them because while the former one would have been very expensive with large transaction sizes, the latter came with an estimated 20kb transaction size.
So, they decided to go with MW, which not only hides the amount being sent but also deletes the transaction history from the ledger.
However, it has its own disadvantages in the way that transactions must be built interactively, impossible to implement as a typical soft fork and makes private Litecoin attractions BOLT incompatible. Also, it’s currently unsuitable for the Lightning Network.
But it can be implemented without a hard fork through extension blocks.
As such, Litecoin will be using MimbleWimble protocol whose two components, Transaction Kernels and Transaction Cut-Through the team will be leveraging.
This new privacy protocol will be activated with BIP8. One year from the day the implementation is released, the soft fork will be activated, reads the proposal. The miners will be able to activate it “early with a 75% signaling threshold.”