Litecoin MimbleWimble expansion block proposal has been published.

Earlier today, the long-awaited proposal for the Litecoin project’s MimbleWimble (MW) implementation was published on the organization’s Github as a new pull request under the Litecoin Improvement Protocol (LIP) titles LIP 2 and LIP 3.

LIP 2 focuses on implementing extended blocks (EBs), a method first described by Bitcoin developer Johnson Lau. This method allows you to add effective block size increases without changing the consensus rules for the network as well as MimbleWimble. The exact size is still up for debate, but the team isn’t yet sure what to set and whatever they choose will be revised once it’s accepted.

“There needs to be more discussion about what the expansion block size should be.”

It is up to the network to vote on the final code and whether to adopt the new technology, also known as a soft fork. The proposal states that the fork will be activated one year from the date the implementation is released, and that miners can activate the fork earlier with a signal threshold of 75%.

“EB’s main motivation is to implement opt-in MimbleWimble. This is currently not possible through a traditional soft fork because MimbleWimble is not script-based. But there is also an opportunity to use EB to lay the foundation for implementing alternative proposals.”

These expansion blocks run in parallel with the main Litecoin blockchain. A new surveillance program is implemented to differentiate the EB chain from its parent chains and ensure compatibility with existing rules. This new witness uses Bech32 (addresses starting with lc1) due to its higher efficiency and lower transaction fees compared to legacy (L) and standard SegWit addresses (M).

“For each main block, a secondary block is created. Auxiliary blocks look like traditional blocks without a header.”

In particular, the EB chain must store its own set of unspent transaction outputs (UTXOs) to keep track of things.

EB is technically more complex, unlike the simple hard fork of MW, which LIP did not mention. Therefore, if not properly researched and tested beforehand, new problems may arise in your system. On the other hand, from a user UX/UI perspective there is no difference and it is quite simple.

“For a coin to be converted to EB on the fiat side, it has to be pegged. Coins from the legitimate side are sent to a specially marked address that anyone can use. This results in an equal amount of MW coins being redeemed inside EB. Once in, MW trading can occur. EB’s coins can be pegged back to the official blockchain and sent from this special address. This special address will hold all the coins representing the coins in the extended chain.”

Since the parent Litecoin is stored in a special address that anyone can use, it is important that the majority of the network is included in this change to achieve a 75% mining consensus. Failure to do so may lead to potential chain splits, theft or minting of EB coins. Existing nodes, new coins, will not be able to see the new EB chain, but will still accept that activity as valid.

LIP 3 deals with the actual MW proposal and the motivation of the team behind it.

“The transparent nature of the ledger allows transactions to be publicly tracked. This hinders Litecoin’s fungibility in many ways. Personally identifiable information collected from IP addresses, exchanges, merchants, etc. may be leaked and linked to your address. Additionally, services such as Chain Analysis provide risk scores based on whether blacklisted addresses appear in your transaction history. This leads some companies to consider these coins as “tainted” and then send them back to their owners, or worse, close their accounts. “This hinders Litecoin’s functional fungibility in the government-regulated merchant world.” “We concluded that MW is the ideal protocol to implement for private transactions. Not only will the transfer amount be hidden, but the transaction history will also be deleted from the ledger. This enhances privacy by eliminating linked transactions and mitigating the growth of blockchain scale.”

MW will provide physician privacy protection before these records are deleted. People monitoring the network can save the chain state. This means that even if the value is hidden, you can still track user activity and interactions, which will help with fungibility. It’s never perfect.

The team also prepared a contingency plan in case quantum computing later breaks the MW privacy promise plan. Adding a conversion promise for Elgamal allows the network to switch to a more secure solution and delete hidden transaction value if it is insecure or there are fears that attackers will secretly create new coins.

Now that the full LIP details have been released, it is up to the community and other Litecoin developers to review and provide feedback before coding begins, while resources are dedicated to further implementation work.