Litecoin’s Mission to Change into the Good Type of Cash

Charlie Lee, the creator of Litecoin, not too long ago introduced the Litecoin growth workforce’s plan for rising the fungibility and privateness of Litecoin throughout 2019.

Lee acknowledges that neither Litecoin nor Bitcoin but fulfill all of the properties of sound cash. The primary deficiency proper now’s an absence of fungibility, that means that every one cash are usually not but interchangeable. The dearth of fungibility and lack of privateness are one and the identical, you can’t have one with out the opposite. Right here’s why.

Proper now, because of the transparency of Litecoin, you’ll be able to observe cash alongside the blockchain. This lack of privateness signifies that in case your cash have been beforehand held by somebody concerned in criminality, then exchanges and retailers may deal with your cash as inferior to cleaner ones, resembling coinbase cash, that are these which can be freshly created from the mining course of. The actual fact that your cash and their historical past are usually not stored personal means they might be separated and are usually not interchangeable.

To unravel this, Lee has advised quite a lot of enhancements that ought to no less than considerably remedy this situation. Presently, recommendations vary from Confidential Transactions (CTs) and Bulletproofs to MimbleWimble and Extension Blocks. It’s possible that the ultimate proposal will embrace a mix of those options.

We’re going to check out these completely different upgrades and their implications. Litecoin has a historical past of introducing upgrades earlier than Bitcoin, as they did with SegWit in 2017. If the workforce can reach these efforts, then it may pave the way in which for related enhancements to Bitcoin.

Confidential Transactions

Confidential Transactions (CTs) have been initially a proposal for Bitcoin led by Adam Back, Gregory Maxwell, Pieter Wuille, and Andrew Poelstra. CTs are a type of vary proof, a cryptographic methodology to stop double-spending. They can disguise each the quantity and sort of asset. Consequentially, one get together can not see what number of cash the opposite has and onlookers can not decipher the scale of transactions.

In regular Litecoin transactions, all output and enter values are publicly seen. In consequence, it’s easy to confirm transactions by guaranteeing that the full worth of inputs and outputs are equal to zero. CTs, nonetheless, disguise all these values whereas guaranteeing that every one different nodes can confirm that the stability of outputs and inputs equals zero.

The Limitations of CTs

Sadly, transaction sizes in confidential transactions are considerably bigger than regular ones. On their very own, they stand at 3.8-5.4 KB. That is compared to simply 300-400 bytes in a standard Litecoin transaction. In consequence, each Litecoin and Bitcoin would expertise a major discount of their throughput capability and sure witness a big rise in charges.

What’s extra, whereas transaction quantities are hidden, sender and receiver addresses are nonetheless seen. In the end, CTs demand a really massive trade-off in scalability with solely restricted enhancements to fungibility and privateness.

Bulletproofs to the Rescue

Thankfully, although, these points might be accommodated by different adjustments.

Bulletproofs are a proposal to carry out way more environment friendly vary proofs. They will compress the scale of CTs and thus restrict the scalability limitations that CTs alone impose. Bulletproofs cut back the preliminary CT dimension of three.8-5.four KB right down to roughly 700 bytes. Monero recently upgraded to Bulletproofs. On this regard, Litecoin would profit from utilizing a examined know-how.


Bulletproofs obtain much more environment friendly vary proofs.


MimbleWimble is a design proposal that has been bouncing round for a number of years. When initially launched by its nameless creator, it challenged lots of the current assumptions round blockchain design. MimbleWimble isn’t just an improve you’ll be able to stick onto Litecoin, nonetheless. It’s truly a substitute for the Litecoin design itself and requires further buildings.

The Cryptographic Constructing Blocks

Apparently, MimbleWimble makes use of an identical design to that of CTs. Each MimbleWimble and CTs derive their privateness skills from using Pedersen Schemes and blinding components.

A Pedersen Dedication Scheme is a cryptographic algorithm. Such schemes can help you assure some info, resembling transaction quantities, whereas hiding it from all different events. The dedication ensures that you simply can not change the knowledge at a later date. The one manner the knowledge might be revealed is thru disclosure of a blinding issue, which is a random sequence of numbers.

With regular CTs, the sender creates this blinding issue. In MimbleWimble, the receiver creates the issue. This issue truly serves as proof of cash.

Equally to how CTs permit for the sum of all inputs and outputs to be confirmed to be equal, MimbleWimble does all this via a multisignature. Within the present iteration of Litecoin, the keys for every enter signal transactions. Nevertheless, in MimbleWimble one thing akin to a multisignature key capabilities as a mass public key for all these concerned in a transaction. That is shaped by subtracting the full worth of all of the enter keys from the full worth of all of the output keys.

Which means we are able to validate a big bunch of transactions collectively by way of this multisignature, just like how CoinJoin works.

Scaling this as much as a MimbleWimble block, we find yourself with a block consisting of only a collection of inputs, outputs, and multisignatures. These multisignatures are all that it’s good to confirm transactions. This different mannequin removes the necessity for brand new nodes to obtain all of the transaction knowledge on the present Litecoin blockchain.

Limiting the Prices of Privateness

The results of all that is that we now have massively elevated privateness with out enduring a big enhance within the dimension of transactions and blocks. We are able to disguise the variety of cash in a transaction in addition to making it very laborious to trace the sender and receiver.

What makes MimbleWimble so thrilling is that it has solved the same old trade-off that we see between privateness and fungibility versus scalability. As an illustration, each Monero and ZCash, when used for his or her privateness functions, have the trade-off of extraordinarily massive transactions and excessive charges. Till now, no blockchain mission has been capable of obtain sturdy privateness and fungibility with out inflicting a significant discount in throughput. MimbleWimble, although, might be the primary answer for this dilemma. In actuality, this implies we are able to now have fungible and personal cryptocurrency that’s prepared for mass use.

Performance Limitations

One draw back of this different design is that Litecoin scripting won’t work with MimbleWimble because of the removing of signatures from particular person inputs. Poelstra has stated that whereas this does restrict many sensible contract capabilities, there are methods round this through the use of timelock transactions, multisignature, and unidirectional cost channels. Nonetheless, it appears some trade-offs must be made.

Bulletproofs Strike Once more

It seems that Bulletproofs’ advantages lengthen past simply these pertaining to CTs.

Bulletproofs can truly assist the scripting limitations in MimbleWimble. Poelstra has demonstrated which you can bypass scripting solely and carry out sure sensible contracts via a mix of bulletproofs and one thing referred to as Scriptless Scripts. Scriptless Scripts use Schnorr Signatures, a extra compact different to the present ECDSA signature scheme. These disguise the knowledge of the scripts or sensible contracts.

The results of all that is that we are able to enhance the privateness of atomic swaps and any cost channel perform. Scriptless Scripts beforehand relied on incomplete cryptography referred to as sigma protocols, which weren’t prepared to be used. Bulletproofs are actually unlocking the complete potential of those scripts. In consequence, we may see some spectacular and anonymized sensible contract options on MimbleWimble in spite of everything because of Bulletproofs.

By stacking the completely different proposals that we now have mentioned to this point, we’re beginning to acquire spectacular fungibility, privateness, scalability and sensible contract options beneath one roof with far fewer trade-offs than nearly each different blockchain mission seen up to now. It’s no marvel that the Litecoin workforce is so excited in regards to the potential.

Not So Straightforward

The primary downside with MimbleWimble is that we can not simply add it to Litecoin.

MimbleWimble just isn’t a alternative to sure components of the Litecoin blockchain, however fairly a unique structure altogether. In actual fact, the one approach to transfer ahead is thru both a sidechain or one thing referred to as extension blocks.

Extension Blocks

Extension blocks have been round since 2013 and have been another Bitcoin scaling proposal to SegWit and block dimension will increase. They’re primarily further blocks that run alongside the already current blocks that we’ll name basis blocks. Importantly, not like basis blocks, that are linked linearly again to one another all the way in which to the genesis block, basis blocks are solely linked to their parallel basis block.

This implies which you can bolt on options like MimbleWimble parallel to the unique Litecoin blockchain.

The primary limitation of extension blocks is that they aren’t backward suitable. Previous nodes that don’t improve to a softfork that introduces extension blocks wouldn’t have the ability to see these extension blocks. In consequence, they’d be severely restricted in interacting with any options that may be supported on the extension blocks. In Litecoin’s case, a lot of the upgrades could be dwelling on these extension blocks. In concept, there might be a significant separation between previous and up to date nodes.


The ultimate improve that may be coming to Litecoin in 2019 is Taproot. This can be a Maxwell invention that, together with its brother Graftroot, is about to obfuscate common transactions from multisig transactions. It will blur the strains between layer one and layer two transactions. Consequently, it is going to be not possible to distinguish between transactions on the Litecoin blockchain and people on the Lightning Community. In consequence, if I pay you over the Lightning Community or execute a sensible contract, the exercise shall be indistinguishable from me paying you with a fundamental Litecoin transaction.

Similar to Scriptless Scripts, these upgrades are depending on Schnorr Signatures. To this finish, many Bitcoin builders are engaged on Bitcoin Enchancment Proposals (BIPs) that mix Schnorr and Taproot.

Taproot truly builds on one other improve referred to as MAST (Merkelized Summary Syntax Bushes) that introduces house environment friendly sensible contracts by way of scripts again into Litecoin. These sensible contracts had beforehand been blocked due to their extreme dimension and the concern that they’d clog up the community.

Sadly, MAST leaves sensible contracts susceptible as a result of it doesn’t sufficiently obscure them to look the identical as common blockchain transactions. Taproot solves this.

After all, Taproot and MAST won’t be suitable in any of the MimbleWimble extension blocks, since MimbleWimble can not help scripting. As an alternative, these upgrades shall be restricted to Litecoin basis blocks.

Quantum Threats

Regardless of all these breakthroughs, we’re nonetheless left with the specter of quantum computing.

CTs and MimbleWimble use Pedersen Commitments of their vary proofs to encrypt transaction values whereas stopping double-spending. Sadly, they aren’t quantum-resistant. If damaged, they’d permit for an infinite quantity of recent cash to be mined, undermining Litecoin’s inflation controls.

quantum computing

Advances in quantum computing may undermine many of those upgrades.

Nevertheless, the event workforce has partnered with the Beam mission to assist combine Change Commitments right into a MimbleWimble implementation by way of extension blocks on Litecoin. Change Commitments are primarily a security mechanism that may shield in opposition to quantum advances that threaten Pedersen Commitments.

Optionally available vs. Obligatory Privateness

It’s unclear at this stage what number of of those upgrades shall be non-compulsory or obligatory. Each choices are suitable with a softfork, luckily.

An non-compulsory LIP would permit customers who needed to remain seen to take action and should mitigate some will increase in charges and reductions in throughput ensuing from the adjustments. Although, the issue with that is that until a essential mass of customers opts into these options, those that do use them might be focused by onlookers and nefarious events. Moreover, if there exists a non-public a part of the blockchain, i.e. the extension blocks, and a public half, i.e. the inspiration blocks, it’s doable that customers may leak metadata whereas shifting between. Onlookers may then use this knowledge to assist determine customers. This can be a widespread criticism of Zcash’s mannequin the place there’s a mixture of public and shielded transactions.

Balancing this dichotomy is not any simple process. It could be essentially the most difficult query for the event workforce to deal with.

Layers of Privateness

Except for all of those blockchain stage upgrades, layer two options, resembling Lightning Community, will present Litecoin with additional fungibility and privateness enhancements.

The Lightning Network makes use of onion routing, the identical know-how used for the Tor Community. Which means nodes can solely see the connection previous and following it.

onion routing

The Tor Community makes use of onion routing for additional privateness.

Regardless, layer two options are usually not substitutions for deficiencies on the blockchain.

Andreas Antonopoulos has made well-known the thought of ossification within the Bitcoin ecosystem. It refers back to the commentary that it’s more and more tough so as to add new protocol upgrades to the bottom layer. As Bitcoin’s community, ecosystem, and market capitalization develop, reaching consensus for adjustments to privateness and scalability is proving more durable and more durable. This problem applies equally to Litecoin.

As such, it is very important prioritize these options most wanted on the blockchain layer. Fungibility and privateness are absolutely such options.

If fungibility is barely addressed at layer two, it can by no means be solved. Sooner or later, both funds or contracts should be settled on-chain. By failing to safe the privateness of the blockchain itself, we are going to discover ourselves failing to ever correctly patch this deficiency.

A Constructive Ecosystem

Thankfully, we are able to combine all of the aforementioned upgrades into Litecoin with a softfork.

As such, it must be comparatively simple to combine no matter mixture the event workforce put ahead as a Litecoin Enchancment Proposal (LIP).

In the end no matter upgrades Litecoin makes this yr, they may, in fact, be standing on the shoulders of others. Builders from the Bitcoin ecosystem resembling Poelstra and Maxwell, to the various nameless contributors to MimbleWimble, in addition to the groups at Beam and Grin will all deserve a lot credit score.

However, Litecoin is as soon as once more proving that it’s on the forefront of implementing cutting-edge blockchain enhancements. Ought to the event workforce pull off a profitable improve from this extensive number of proposals, they may have fulfilled the ultimate property of sound cash lacking from Litecoin and Bitcoin: fungibility. And with it, privateness.

Thanks to Charlie Lee for reviewing an earlier draft of this text.

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