I recently wrote that Bitcoin’s next major upgrade cycle will center around Mimblewimble and will bring tremendous value to Bitcoin itself and the ecosystem. I’ve thought more about how this scenario might play out and wanted to share my thoughts.
Up until recently, it was widely accepted that Confidential Transactions (CT)would be implemented in Bitcoin. Litecoin (Bitcoin’s all but official testnet) announced it would be implementing CT and after that it would be a fait accompli for it to be implemented in Bitcoin itself. But in recent weeks, the narrative has shifted with many prominent Bitcoiners saying things like CT is not needed, too risky, etc, etc. It’s very clear that a narrative shift has taken place. See for example:
So why the change of heart regarding CT? Well, I suspect the people who control the narratives (lets call them the smart money for these purposes) have come to the same realization that I have which is that Mimblewimble has all the upsides of CT, but none of the downsides. Lets recap what those are:
CT Transactions are private but enormous and cannot be deleted, ever. Mimblewimble has the same private transactions, but only a very small part, about 100 bytes needs to be saved forever and the rest can be deleted after the transaction is spent. These transactions have the same privacy as CT because Mimblewimble is based on CT. Also, with Mimblewimble, all transactions are private whereas with CT, as it would be implemented in Bitcoin, only transactions where people pay the higher fee will benefit from the privacy. This is the case in Zcash as well and basically no one uses the private transactions. If you’re the only one doing a private transaction it’s a lot easier to identify you. When there’s a big herd it’s much easier to blend in so, as with Mimblewimble, if all transactions are encrypted by default privacy is dramatically increased. So, I suspect that the smart money understands that CT is dead on arrival. So, does that mean there will be no privacy feature added to Bitcoin, as these prominent Bitcoin influencers are saying? Not a chance.
So, if CT was supposed to be implemented but for some unknown reason, these prominent Bitcoiners now don’t think it’s a good idea, what will be implemented? Well, they say that nothing will be implemented at all and Bitcoin has to be “verry conservative”. There is more to this story though. The reason for the narrative shift is that the smart money is preparing for another narrative shift in support of Mimblewimble. That’s at least how I read this “CT is a bad idea narrative”.
But, let’s go through what might occur in the future. Let’s, for the sake of argument consider what might happen if Bitcoiners dig in their heels and say no way to Mimblewimble. That would mean that while Bitcoin does have the original UTXO set (with a fair launch and 10 year history, etc etc), there is another (or group of) chain(s) that have superior technology to Bitcoin. This would include MimbleWimbleCoin (MWC) which we are launching as a fork of the grin codebase with a supply limit of 20 million coins that will ever exist and as an airdrop to holders of Bitcoin. Our registration opens on April 20, 2019 but you can follow us on twitter (@M_M_Coin) or join our discordtoday. Anyone who holds Bitcoin should register for their free coins.
While Bitcoin not adopting Mimblewimble would be a great scenario for Mimblewimble based coins, as they would have the claim to more scalability and privacy than Bitcoin, it would be a bad thing for the ecosystem since the original chain would not clearly have all the best features. It’s better that the best features end up in the dominant and first chain. That way, Bitcoin Maximalists can rightfully say there’s no point in holding other coins. But if Bitcoiners refuse to adopt Mimblewimble and stick with the narrative that they want to stay ultra-conservative (being conservative is good, but there’s a difference waiting for a change to be thoroughly tested and flat out rejecting it forever without good reason), eventually it will be clear that these coins have superior technology that is mature and reliable and due to Bitcoiner’s stubbornness it’s just not being incorporated. This would mean that there could be a risk of a massive capital flight from Bitcoin to the Mimblewimble coins. This could threaten Bitcoin’s dominance and be a problem for the entire space. At some point, someone would accurately asses this threat and propose a hard fork to incorporate the superior technology, namely Mimblewimble. It might even have to be a contentious hard fork. Let’s say this happens and you have BitcoinMW and BitcoinClassic which are the respective sides of the fork. Holders will have to determine what to do. Do you hold the Mimblewimble version or not? It’s fairly clear to me that if Mimblewimble technology matures and has a track record (lets say 5–10 years) that the BitcoinMW chain wins out over the BitcoinClassic chain in that scenario.
While I believe this is a possible scenario, I don’t think it is the most likely one. More likely is that the narrative slowly shifts over to one that is more accepting of Mimblewimble. In fact, we may have seen the first signs of such a narrative shift when Charlie Lee announced that the Litecoin foundation is working with Beam on possibly incorporating Mimblewimble through extension blocks. And, while I wrote that extension blocks are not the right way to implement Mimblewimble in Bitcoin because you don’t fully benefit from the scaling improvements and privacy improvements, they are probably the first step along this process of incorporating Mimblewimble into Bitcoin. I expect more steps over time until there is consensus that Mimblewimble should clearly be implemented directly into Bitcoin.
Those are two possible scenarios for how this plays out. In either one, I expect that the process will be a multi-year very slow and conservative process that culminates in a new upgraded Bitcoin blockchain with enormously more value than the prior chain, just like Segwit, but this upgrade is much more important and the magnitude will be much greater. Either way, this will probably play out over the next decade and Bitcoin holders will surely benefit from all this innovation. If you want to speculate more directly on this technology trend, you can buy Grin or Beam, but due to the unlimited supply in Grin and the fact that Beam’s corporate structure may hamper it’s growth they are very speculative investments. It might be better for Bitcoin holders to register for the free airdrop of MWC so that they can participate in the upside without any downside risk. Coins like MWC will help prove out Mimblewimble technology with real value which is absolutely necessary before it can be implemented in Bitcoin itself. Our registration opens on April 20, 2019 and will run nearly 3 months into our snapshot date of July 19, 2019 after which our mainnet will launch. Follow us on twitter and join our discord.