In short, this is a new way of structuring and storing data used within the blockchain network. Compatible with most systems running on the PoW consensus algorithm. Significantly improves security and scalability.
Mimblewimble was first talked about in 2016, when somebody named Tom Elvis Jedusor (a pseudonym) shared his best practices with the cryptocurrency community. However, the technical document was far from ideal, so other specialists took up its revision. For example, Andrew Poelster from Blockstream. And in October 2016, he published an article “Mimblewimble”, which already spoke about the practical application of this idea.
Some users, however, believe that integrating this principle into Bitcoin is too difficult and inconvenient. But Poelster himself offers a solution to the problem in the form of sidechain (side chain). And he has great chances to be right.
The main difference between the MW protocol is the lack of reusable addresses. That is, the starting point and the ending point are indicated. The system works with them, and they can be seen by everyone. Intermediate points are available only to the participants in the process.
An approximate situation. Sam receives from his parents two transactions for 5 coins each. And then - passes 10 coins to George. George sees where the money comes from, but he won’t be able to find out how it came from Sam. And no one on the network can. However, for the effective operation of the Mimblewimble protocol, exchange of verification information between participants is still necessary. But at the same time, they do not have to be online at the same time, which also significantly increases the efficiency of the network.
In addition, MW also has a “cut-through” function that removes unnecessary transaction information. In the context of this example, this means that information about the "intermediate" wallet of Sam in the block will not be encoded.
Also, this protocol supports the concept of "confidential transactions", which in 2013 was proposed by a somebody named Adam, and implemented by Greg Maxwell and Peter Will. The essence of this concept is to hide the total number of transfers in the blockchain block.
Comparison with current Bitcoin protocols
The Bitcoin blockchain allows you to download all the information about all ongoing transactions, starting from the very first block - the genesis block. This information is freely available so that anyone can get acquainted with it.
The Mimblewimble system contains only the necessary information, which guarantees a high level of confidentiality. As for suspicious activity and attempts to manipulate information in blocks, the validator nodes that even do not have complete data on the contents of the block can monitor its reliability and logical connection with existing information.
In addition, this protocol deletes almost the entire system of organized scripts that are used in the Bitcoin blockchain to store many consecutive transactions. This allows you to pack more useful information in one block, which positively affects the scalability and speed of processes.
In addition, due to the need to process less information, the operation of a Mimblewimble-based system consumes less computing resources. This applies to both block validation and mining.
Smaller size. The protocol provides more efficient compression of information so the overall size of the blockchain is reduced. Checking transaction history becomes easier; new nodes become easier to integrate into the network. Yes, and it becomes easier to mine, which eliminates the need for large mining pools.
Scalability. Due to the fact that part of the processes taking place in the blockchain is implemented by a third-party sidechain, it becomes much easier to interact with more nodes. What is also useful for the operation of external payment channels, such as Lightning Network.
Confidentiality. Since some details of operations are excluded from the general record, confidentiality is increased for each individual user. In addition, by using the Mimblewimble protocol, you can organize the exchange of different tokens for each other, since the system supports the fungibility function.
- Low capacity. There is an inverse relationship between privacy and capacity. That is, the safer is the transaction, the less of them can be made per unit of time. Therefore, Mimblewimble networks are slower than traditional blockchain versions.
- Low quantum stability. Since most MW networks work with simple digital signatures, they are not very resistant to cracking using quantum computers. However, this problem will not become real soon, since there are no efficiently working quantum computers yet - only some prototypes.
The Mimblewimble protocol allows blockchain networks to be cheaper, more reliable and more resistant to scalability issues. And the fact that an external sidechain is used for this allows you to integrate it over an existing system.
Currently, several teams are working on developing an effective MW protocol. The most famous is Litecoin, as well as two other projects - Grin and Beam. What is characteristic, each of them has its own technical approach to the implementation of the Mimblewimble structure.
However, the real practical use of the protocol has not yet been discussed. Yes, this is potentially a very profitable solution, but it still needs to pass the test of time and active use. However, there is a big chance for it.