Litecoin has activated Mimblewimble in May and not only developers and the community got excited. The Litecoin blockchain has repeatedly improved over the last couple of years. One example is the integration of the Lightning Network which is basically the same second-layer technology that is also used by Bitcoin.

What is the Mimblewimble upgrade all about and how does this improve Litecoin transactions?

Privacy means data protection

One advantage of blockchain technology is that it is transparent and everybody can check out every transaction as well as the money supply in the network. This allows checking if the protocol in question is working and that nobody is creating money out of thin air or manipulating the transaction history.

The downside of this system is that literally anybody can check out your wallet and see with whom you have transacted and how much crypto you’ll have. One option to avoid this situation is to share your wallet addresses only with as few parties as possible. If we assume that blockchain technology will be adopted by the masses at some point in the future this solution won’t work.

Everybody will be connected somehow and cannot escape prying eyes. In most countries, there is such a thing as a bank secret. And this is where Mimblewimble comes into play.

MWEB obfuscates transactions

In order to activate Mimblewimble, the developers chose to push the MWEB upgrade through a block extension rather than implementing the protocol upgrade through a hard fork, hence the name Mimblewimble Extension Blocks (MWEB). This leaves all nodes with the option to choose whether they accept blocks with or without the extension.

Users can opt-in for MWEB transactions but don’t have to choose the additional privacy protection. This also means that it is still possible to pinpoint transactions through blockchain analysis. The point here is that in order to protect your data you don’t have to opt for a 100 % anonymous transaction method.

Exchanges and service providers using blockchain analysis for compliance will check transactions anyway and they already know who you are since you’re a customer with them. Unauthorized third parties on the other hand are not supposed to search your transaction history and check your wallet balance. Mimblewimble may “only” provide 90 % of the protection that users enjoy with privacy coins like Monero. But it is quite enough to do the trick and guarantee the basic privacy of your data.