Introduction
Any crypto – asset or crypto – related discussion usually finds the mention of Bitcoin and for all the right reasons. After all, it was Bitcoin in 2008 which gave the world the first crypto – asset followed by blockchain as a revolutionary solution. Take a look at the number of ICOs in 2017 to ratify the claim that there is, indeed, a supercharged adoption of crypto-solutions ranging from secure wallets to decentralized storage asset sharing.
All this definitely augurs well as Bitcoin and every solution since, embraces the concept of decentralization, open and immutable ledger, non-corruptible information and many other aspects which are the inherent strengths of a blockchain. So, all looks well, then?
To be honest, it is, barring few technical constraints which hamper faster adoption of the blockchain. Well, what are those?
You see, the underlying premise of a blockchain is an open ledger, which makes it highly adoptable solution for, say, a supply chain where the user can track the product right up to the source. But is this good for financial transactions? What I mean is, let’s say tomorrow financial operations come on to the blockchain, would customers be fine with their transactions being open to the public? Definitely not, and maybe that’s why financial world is not embracing blockchain solutions with as much fervor. After all, the most basic need of “privacy” runs the risk of being undone at any point like at an exchange, merchants or OTC. Moreover, once the identity of a user is revealed wouldn’t it be easy to identify all the transactions of such individuals? Possible, since the transactions are permanently stored in the blockchain.
Adding on, it is not just the privacy part but also the size of the blocks and the chain itself. It becomes quite huge for an auditor or validator to study a chain to its source. In case of Bitcoin, it may be as high as 80 GB of data at this point in time and will continue to increase as we get closer to mining the 21 millionth coin. So, the blockchain in its core form is bulky and raises privacy concerns.
So, what is a better solution? The answer is obvious, a chain that can ensure privacy and is nimbler (in terms of size) as compared to the current blockchains. But do we have such a solution?
Turns out we do!
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We are talking about Beam!
Before we get to know Beam, it is pertinent that one other aspect of privacy is understood. In our need to make the chain confidential, we may end up adding additional kilobytes of information as proofs at every output. And if a validation signature was to be added then the bulky blockchain becomes even heavier. So, privacy inflating the blockchain is also not a good proposition.
However, Beam manages, all three concerns – size, privacy and adding privacy solution without making the chain heavier – quite effectively. Beam in their own words are described as follows:
BEAM is a next-generation confidential cryptocurrency based on an elegant and innovative MimbleWimble protocol
In other words, Beam brings to the world a crypto-solution which ensures privacy by allowing users to define what can be seen, by whom and at which point, ensuring unnecessary information is not broadcast and transactions can happen confidentially. Now, most Harry Potter fans, much like me, would be quite amused to see the MimbleWimble spell on a crypto-solution article. So, the obvious question is - what is it?
MimbleWimble refers to the publishing of a new protocol on the topic of efficient confidential blockchain by an anonymous author in 2016. The protocol builds on two concepts:
- Confidential Transactions and
- Transaction Cut – Through
These were originally proposed by Greg Maxwell. But how does it work?
Let’s take a look.
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The MimbleWimble Protocol
In the Bitcoin world, we can see the input and output values and can verify the transactions if the sum of all inputs is equal to the sum of outputs. Under the MimbleWimble Protocol, however, confidential transactions are encrypted with random strings of numbers called “Blinding Factors” therefore, hiding the real values from the public.
For the technically inclined, the basis of the blinding factor is the Elliptic Curve Cryptographic equation of the form:
C = r*G + v*H
Here, r is the blinding factor, hiding the real value v and G and H are random points on a specific elliptic curve. This equation is well known as the Pederson Commitment Scheme. Now, in order to transact or transfer ownership of an Unspent Transaction Output (UTXO), the sender reveals the value and blinding factor to the receiver, who in turn creates another blinding factor. The holder of this new blinding factor is, therefore, able to spend the coins.
Further, since we are dealing with linearity in the Pederson Commitment, it also follows that if there are two identical transactions such as A to B and B to C, we can cut through the intermediate transaction to create a merged transaction A to C.
Now, if we extend this logic to the entire chain, then all that is required to store is the UTXO state instead of the entire transaction history. Storing headers of the previous blocks will suffice to prove the validity of the previous states; also referred to as Proof of Validity using a structure called Merkel Tree. In case of blockchain branching, the Proof of Validity along with the Proof of Work will help in reaching a consensus on which of the header should be considered as a correct one in the previous states. Now, if we look closely, we also realize that in such a blockchain all that is needed to prove the ownership of the UTXO is the unique value and the blinding factor. And all that the blockchain stores is the commitment and nothing else. This further means that the system is quite guarded against revealing any personal information, no matter how impressive a hack could be.
Lastly, a MimbleWimble transaction includes transaction kernel in addition to Inputs, Outputs, Proofs, and Fees. So, what is the transaction kernel? It is basically the difference between the blinding factors of the receiver and sender which should be a positive value without revealing the actual value. It is important that the value should not be negative, otherwise, it would be akin to arbitrarily creating new coins. This is ensured through the implementation of Bulletproofs, a compact and highly computation efficient implementation of zero knowledge range proofs.
So, this in a nutshell explains the two concepts of, Confidential Transactions and Transaction Cut-Through, under the MimbleWimble Protocol.
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So, how does the Beam solution look utilizing the MimbleWimble Protocol?
The pictorial representation of what has been explained so far, will help readers understand the Beam solution better.
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Features of Beam
1. Confidentiality
This is the most important parameter which sets Beam apart from other blockchain solutions as it allows confidentiality to the participants. What’s more is that the levels of privacy can also be set depending on the scenario in which the user is participating in the blockchain.
What is the benefit of having the ability to choose levels of privacy?
To answer this question, let’s look at the following scenario:
Case 1: Coin Collector
Alex is a coin collector and buys coins from people across the globe. He pays them in cryptocurrencies. However, he hates the fact that all his purchases are visible on the blockchain and he fears that the values of his transactions could also be leaked through an exchange or a seller’s site. This is an unfavorable condition as the sale price, if known to the world, would hamper his negotiation ability on new coins. That is, if his payment value for even one transaction is known then chances are that the other sellers may quote or expect similar prices.
Therefore, for customers like Alex, Beam forms a good solution. Alex can ensure that the value of his purchase is not visible to the chain while it is visible only to the seller. This ensures that Alex’s negotiation power is not compromised when he is buying from other sellers.
Similar to the above case, there may be other scenarios, even in a basic transaction where a buyer would want confidentiality in what is visible to the blockchain while present the complete information only to the relevant parties. This, therefore, is the benefit that Beam blockchain presents to the user.
2. Versatility
Beam is powered by the “scriptless script” technology which allows it to support various transaction types like, simple transmission of value, atomic swaps, escrows, time-locked transactions and many more. Users, therefore, can choose a particular option while transacting on Beam.
3. Scalability
We discussed the “Cut-Through” feature of MimbleWimble which helps to avoid computational overheads as well as storage of only the commitment in the blockchain. This, therefore, makes BEAM orders of magnitude lighter than any other blockchain implementation.
How does allowing smaller blocks increase performance and scalability (Mimblewimble)?
In our discussion under the MimbleWimble protocol, we saw that the entire history of transactions is not required to validate the chain. This allows cutting the size of the chain itself. In a Bitcoin blockchain, it is estimated that around 423,000 blocks have been mined so far and if it has to be audited then around 80 GB of data has to be gone through.
Compare this with MimbleWimble powered Beam. Each UTXO for range-proof and Merkel proof would be roughly 3 KB. In addition, a 100 bytes is added per transaction for k*G value and a signature. Further, a negligible amount is added for the headers, and therefore, the whole size ends up at 30 GB. That’s like nearly one-third the size of Bitcoin blockchain and yet provides confidentiality and an obscured transaction graph.
All this means is that the entire blockchain is nimbler leading to enhanced performance and is scalable.
4. Sustainability
Beam is an open source solution backed by a vibrant community. The blockchain has been implemented from scratch in C++ by a team of professional developers. Sustenance comes from the Beam Growth Pool where 20% of rewards from the block mining goes back to the pool for managing development and promotion.
5. Usability
To make the usage of beam solution easier, a wallet is designed both for mobile and desktop users of both kinds, individuals and small businesses. There is also a built-in dashboard to keep stock of spending, earnings, and other insights.
6. Compatibility
At the heart of compatibility of Beam is the Equihash algorithm to promote broad adoption by miners. The running and management of nodes is also made simpler through Beam’s extensive set of tools.
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With all these features, how does Beam compare to the other prominent chains?
Here is how it compares.
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Let’s summarize the benefits of Beam
- User controlled Privacy – Users decides which information is available to which party and in what quantum
- Confidentiality without bloating the chain – the building of the privacy protocol does not make the chain bulky, instead, the cut-through logic enhances performance and improves scalability
- There is no need for alternate trusted set-up
- Well-known Equihash algorithm is used for block mining
- The total amount of coins is roughly 210 million; nearly ten times Bitcoin
- Blockchain stores only commitment on the blockchain and absolutely no information about the sender and receiver
- Supports multiple transaction types like escrow, time-bound transactions, atomic swaps, and many more
- Implemented in C++
- There is no premine or ICO. It is backed by a treasury, emitted from every block for the first five years
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Use Cases
Case 1: Rent Payment
Carl has rented a place for the next six months and the landlord has tough penalty clauses on delay in payment. Carl does not want to end up paying penalties over and above the already high rentals. He thinks of using the blockchain and make the payment time bound to the landlord. However, he is unhappy with the lack of privacy of his wallet balance and other transaction details which may be exposed on the chain. Besides, he needs to know a robust solution which can execute the rent transfer at the assigned time.
Carl hears about Beam and is impressed with the privacy it provides. Further, he is elated to know that Beam itself can provide him the time-bound transaction implementation. Devoid of Beam, he would have had to use multiple solutions to enable his payment. Now, the same is done through just one blockchain solution and that is Beam. Carl goes ahead and uses Beam.
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Case 2: Cryptocurrency Trader
Lucas is a cryptocurrency trader and has a good amount of investments on various crypto-assets. He has made a fortune on the blockchain and that also makes him wary of various scenarios. First, he is concerned that the trading of cryptocurrencies on the exchanges may lead to some kind of a leak and expose his holding to the public. This may result in his balances to be visible and prone to hacking. He wants to keep his wallet and other transaction details private but does not know how. In addition, he would want to know ways of not using the exchange, if possible, for his transactions.
Lucas comes to know about Beam and is happy at the privacy solution it offers. Not only that but the fact that the atomic swaps are possible in Beam itself, bypassing the exchanges, makes him euphoric. He does not have to depend on multiple solutions to safeguard his wallet, transactions, and his stated need to avoid exchanges.
Lucas can trade cryptocurrencies directly under atomic – swaps and can rest easy that the privacy of his transactions are adequately guarded under Beam.
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So, how does Beam’s Roadmap look like?
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And the team behind Beam?
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Advisory Team and Investors
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Summary
At a time when cryptocurrency adoption were limited due to lack of privacy, Beam comes as a breath of fresh air. Not only are the users able to look at blockchain as a possible avenue to hold crypto-assets of value but also ensure that it is kept confidential enough. What’s more is that the users get a nimbler blockchain in choosing Beam. Other features like atomic swaps, escrow, etc. ensure that users find bulk of the solutions that they need under the same Beam blockchain.
Beam, therefore, lends credibility and safety to an otherwise wild world of crypto-assets and crypto-solutions. In doing so, Beam transforms the blockchain to a confidential and scalable solution!
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Annexure – Some FAQs
Please note, these are questions covered under the Beam Position Paper.
Please feel free to submit additional queries at Beam’s community group on Telegram: @BeamPrivacy |
https://t.me/BeamPrivacy
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Here’s my Twitter Link:
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It is also recommended that readers understand more about Beam through any of the following informative resources.
- Beam Website
- Beam Position Paper
- Mimblewimble Paper
- Beam YouTube
- Beam Telegram
- Beam Facebook
- Beam Github
- Beam Bitcointalk
- Beam Medium
- Beam Twitter
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This article is written in response to originalworks’ call on authors’ thoughts on Beam. It can be read here.
Image Courtesy: Beam Resources
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