Given that the price action of the last week has been, by crypto’s standards, pretty unexciting – most coins are down a couple of per cent, typical for a quiet week in a bear market – I wanted to step away from my normal price analysis today to look at two new coins on the crypto block. These are Grin and Beam.
Our story begins with Mimblewimble.
All the best crypto stories begin with an anonymous white paper, and so it is with Mimblewimble. This time it wasn’t Satoshi Nakamoto, but one Tom Elvis Jedusor – which is the French name for the Harry Potter villain Lord Voldemort (He Who Must Not Be Named). Making the not unreasonable assumption that Tom Elvis Jedusor is not the real Lord Voldemort, but a pseudonym, Jedusor first proposed the Mimblewimble protocol in a developer chatroom in July 2016 with a link to a white paper. By using the Mimblewimble protocol, Jedusor argued in the paper that both the scalability and the privacy of the Bitcoin network could be significantly enhanced.
Mimblewimble itself is a spell in the Harry Potter books which leaves victims tongue-tied.
With Bitcoin itself, Satoshi Nakamoto developed the early Hashcash proposals of coder Adam Back, and so has Mimblewimble developed another idea of Back’s: Confidential Transactions. Using what he calls “blinding factors”, the amounts being transacted can be encrypted without there being any effect on the input and output of a transaction. The recipient randomly selects from a range of blinding factors provided by the sender, and these blinding factors are then used to prove ownership, thus allowing the coins to later be spent. Public addresses are no longer needed.
Mimblewimble also makes use of the cryptographic innovation CoinJoin (first proposed by Gregory Maxwell). With CoinJoin, multiple transactions can be aggregated into a single transaction with mixed inputs and outputs. Therefore, any outside party will struggle to work out which payment was intended for which recipient. There is no insight into a specific transaction.
With inputs and outputs obfuscated and public addresses eliminated, Mimblewimble gives you anonymity, rather than the increasingly easy to unravel pseudonymity of Bitcoin. The growing fungibility issue of Bitcoin (in which different coins have different worth based on the provenance) is also pole-axed. Finally, the theoretical space saving potential of aggregated transactions means the increasingly problematic scalability issues of Bitcoin are also addressed. More transactions can be included in a single block, and so the blockchain is heavily pruned of unnecessary transaction data.
It’s all pretty cool stuff.
Mimblewimble is effectively a sidechain to Bitcoin’s blockchain. So, if I have understood it properly, it can eventually be used to transact Bitcoins – more privately than is currently the case – but for now the two coins to launch using the protocol are Beam and Grin.
If you were to compare the two to existing privacy coins, you might say that Grin is more like Monero, whereas Beam is more like Zcash.
Grin, like Monero, is being developed on an open source basis. Its founder is another anonymous character from Harry Potter legend – Ignotus Peverell – one of the true-blood wizards who, among other things, carried the Cloak of Invisibility. I can’t think why that name was chosen.
It began mining on January 15th, and though it is still very much at the experimental, developmental stage, there is a lot of excitement about it. The price has ranged from as low as $2 to as high as $15. It currently sits at around $8.
The developers have quite clearly stated that they do not want it to be a store of value, hoarded for speculative purposes in the way that Bitcoin is, but rather they want it to be used to transact. So they have followed a different plan of supply, which I find interesting. 60 Grin per minute will be issued forever.
Initially, that might be a major deterrent, but as that supply is linear, it means that on a proportional basis, the amount of coins that will be issued actually shrinks. In other words, the inflation rate falls with each passing year, even if there is no finite supply.
In year one, 31,536,000 coins are issued. The inflation rate will then be 100% as the supply of coins doubles in year two to 63,072,000. By the end of year three, there will be 94,608,000 coins, but the inflation rate has come down to 50%. The following year, there will be 126,144,000 coins, but the inflation rate has come down to 33.3%. The year after, the rate falls to 25%, and it keeps on falling after that.
The inflation rate, for sure, brings the long-term investment potential of Grin into some doubt, but in the shorter term, there is so much excitement about the project it is bound to rise a little.
All in all, the privacy model is strong – though perhaps not as strong as Monero. It is much more scalable, however. In fact, it is quite easy to make the case that it is more scalable than Bitcoin. It certainly has advantages. As a private, anonymous, open source project, it has attracted a lot of excitement from the original Bitcoin community. In short, this one has legs.
Beam, on the other hand, I am less sure about, and judging by the price action, the market feels the same way. Its low around January 17th was around $0.50. It got as high as $3 over the weekend and now sits at $2.
It attempts to address the same issues as Grin – the privacy, scalability, and fungibility doubts around Bitcoin – but as it is a privately funded Israeli operation, it doesn’t have the open source je ne sais quoi that comes with Grin. If its technology proves dramatically superior to Grin, maybe it will win the race, but for the moment, my money is on Grin.
Dominic Frisby is author of the first (and best, obviously) book on Bitcoin from a recognised publisher, Bitcoin: the Future of Money?, available from all good bookshops, and a couple of rubbish ones too. Dominic is director of Cypherpunk Holdings (CSE:HODL), a company set up to invest in privacy-related technologies. Follow Dominic – @dominicfrisby