Internet of Things, Cryptocurrencies, Beam and Lelantus Mimblewimble

The rapid evolution in miniaturization, electronics, and wireless communication technologies have contributed to unprecedented advances in our society. This evolution, in turn, has resulted in an increase in the number of suitable electronic devices for various areas, a reduction in their production costs, and a paradigm shift into the digital world from the real world.

Therefore, how we interact with each other and the environment has changed, using current technology to understand the world better.

The Internet of Things (IoT) has emerged as a set of technologies from Wireless Sensors Networks (WSN) to Radio Frequency Identification (RFID), cryptocurrencies, and digital payments that provide the capabilities to sense, actuate with and communicate over the Internet.

An IoT device can be an electronic device from a wearable to a hardware development platform, and the range of other applications encompassing many areas of the society.

The IoT plays a central role in turning current cities into smart cities, electrical grids into smart grids and houses into smart homes, and paper money into digital money to interact with intelligent devices. This is only the beginning.

Various research reports, the number of connected devices has been predicted to reach numbers between 20 to 50 billion by the end of 2020, mainly due to the vast amount of devices that the IoT can place on the scene.

The massive expansion of the IoT has to be supported by standard mechanisms and protocols to reduce the existing heterogeneity. This heterogeneity leads to vertical silos and reduces the adoption of the IoT.

However, besides heterogeneity and integration challenges present in the IoT, the trustworthiness of its data is also a vital issue to bear in mind.

Nowadays, information provided by financial entities and the governments can be trusted, but can we really verify the information provided by them and by other external entities? Especially, IoT companies, that it really has not been tampered and altered and sometimes even falsified in any way? Though this is not a difficult question to answer, there are very few means to prove so in centralized architectures.

Untrusted entities can alter information according to their interests, so the information they provide might not be completely reliable. Hence, this brings about the need to verify that the information was never modified and tampered.

Although the IoT can facilitate the digitization of the information itself, the reliability of such information is still a key challenge. In this sense, a new technology that was born as the first decentralized cryptocurrency has the potential to offer a solution to the data reliability problem: Bitcoin, which has revolutionized the mechanisms in money transfers.

The idea of having a digital currency goes way back in time. Before cryptocurrencies, many attempts at creating one have taken place. The most important issue most of them were facing was the double-spending problem. A digital asset somehow needs to be used only once to prevent copying it and effectively counterfeiting it.

Over ten years before cryptocurrencies, the concept introduced by computer engineer Wei Dai. In 1998, he published a paper where he discussed “B-money”. He explained the idea of a digital currency, which could make it a reality to exchange digital currency along with a group of untraceable digital pseudonyms. That same year, a blockchain pioneer Nick Szabo attempted to do so by drafting under the name of “Bit Gold”.

Bit Gold equally looked into creating a decentralized digital currency. Inefficiencies spurred Szabo’s idea within the traditional financial system, such as requiring metal to generate coins and to reduce the amount of trust needed to create transactions. Both were part of the inspiration behind Bitcoin but never really saw the light and launched.

Bitcoin, and many other upcoming variants of cryptocurrencies, can be globally transferred without traditional barriers and intermediaries and foreign exchange agents who eat into the fees, with a digital wallet over which you have complete control.

The likes of Beam and Bitcoin are supported by a protocol that details the infrastructure responsible for ensuring that the information remains immutable over time. This protocol is known as the blockchain. Not only is blockchain widely used in many different areas, but information immutability is also guaranteed in applications that go beyond cryptocurrencies.

Blockchain has revolutionized trustworthiness of information as well. For instance, this technology has been used in voting systems by government entities, renting, and data storage, among others.

By design, Privacy isn’t enforced in the Bitcoin protocol. Transparency is a crucial feature of Bitcoin. In the blockchain, we can check each transaction, even audit, and trace from the system’s very first transaction. Traditionally speaking, this is indeed unheard of a new level of transparency that doubtlessly helps to build trust.

However this transparency has a knock-on effect on Privacy, even though there is no direct relationship between wallets and individuals, user anonymity compromise may occur despite the mechanisms that Bitcoin provides, such as pseudonymous and the use of multiple wallets.

In this sense, some effort has reached to offer more robust anonymity features in Bitcoin. On the other hand, not just open virtual currencies, but many applications based on public blockchain technology require a higher level of Privacy in the chain, specifically those that deal with sensitive data.

Cryptocurrencies use cryptographic protocols and algorithms with extremely complex code systems that encrypt sensitive data transfers, to secure their units of exchange. Cryptocurrencies design pushed for decentralized control. The activities of their users control cryptocurrencies’ supply and value and highly complex protocols built into their governing codes, not the conscious decisions of central banks or other regulatory authorities.

Importantly, cryptocurrencies can be exchanged for fiat currencies in specialized online markets, meaning each has a variable exchange rate with major world currencies.

Most, but not all, cryptocurrencies are characterized by finite supply. Their source codes contain instructions outlining the precise number of units that can and will ever exist. Over time, it becomes more difficult for miners to produce cryptocurrency units until the upper limit reaches and new currency ceases to be minted altogether.

In March 2018, Beam came into fruition. Beam initially sought VC funding for sharper business sense and hired a team of developers to work on the software full-time, allowing it to speed ahead of Grin in its implementation. Beam raised ~$5.2 MM via private token sales with Alexander Zaidelson as the founder.

Beam started off as scalable, confidential cryptocurrency based on the Mimblewimble protocol. The recent hardfork, substantially a network upgrade to Beam Hash III on the 28th June 2020, added several improvements, adopting Lelantus Mimblewimble. This network upgrade will help enhance its privacy protections and paint the creation of privacy-first DeFi ( Decentralized Finance ) applications.

The Beam blockchain utilizes Proof-of-Work (POW) to reach network consensus using the Lelantus Mimblewimble protocol currently.

We have seen massive growth in the flourishing DeFi sector. According to DeFi Pulse, a gigantic $1.52 Billion has been locked up so far with the majority of them being public built on the Public Ethereum Blockchain making all transactions trackable potentially leaving the persons/institutions vulnerable to tracking.

According to our very own Beam Keyser Söze, Guy Corem,“Beam will enable true private and decentralized DeFi instruments like private stablecoins and private synthetics which will track commodity, stocks and ETFs. All will be traded on a fast and unstoppable true DEX. Most of this will be built and will be launched this year.”

Beam can enhance Privacy and fungibility while reducing blockchain bloating and improving scalability. Addresses are not stored in the blockchain, and transactions are private by default.

BEAM is designed to be a deflationary coin with capped supply, halving every four years and stopping emission altogether after 133 years.

The BEAM token initially had two forms of utility: a medium of exchange with full anonymity, and confidential store of value. Now with the network upgrade, this is going to be enhanced even further.

Eager Electron 5.0 includes a change in the mining algorithm, will add confidential assets to the Beam network. Confidential assets are a type of token that can be created on Beam and can be used to represent practically anything, including other cryptocurrencies. They have the same levels of Privacy and can be traded on Beam’s decentralized exchange (DEX).

Creating Confidential Asset can be very simple. One needs to lockup 3,000 Beams to create a Confidential Asset. One can issue tokens and decide their emission rate. The money locked up as collateral can be returned if all confidential assets are brought back and destroyed; this feature implementation is mainly to avoid any spam on the network.

One-sided payments and scriptless contracts will primarily help keep the details of the contract private, whereas everything on a smart contract may be publicly visible. If you are a business, you may have specific aspects of your business to be kept confidential, and this enables the very same use case. With the dawn of Confidential DeFi, creation of Mimblewimble sidechains will get more simple and easy and help integrate many scriptless contracts for collateralized debt positions, oracle based settlements, multiparty transactions and even escrows.

Beam CTO Alex Romanov believes that Beam will initially focus on DeFi Applications with centralized components, like confidential stablecoins, DEX, synthetic assets.

Some key features of Mimblewimble Confidential Lelantus Assets are:

✔ CA support
•Each UTXO may optionally have a blinded asset tag (similar to the Elements design by A.Poelstra).
•There’s proof of the validity of the asset tag, based on the 1-out-of-many Sigma protocol (by Jens Groth).

✔ Shielded pool (a.k.a. Lelantus-MW)
•CA support for shielded operations too
•Support for one-side payments and direct anonymous payments

✔ The system design is heterogeneous:
•All kernels carry excess blinding factors, and (optionally) extra validation rules (height lock, relative lock, etc.)

✔ Some kernels may control subsystems:
•Asset control (creation, emission).
•Shielded operations (mint, spend).
•Those kernels will have side effects in addition to contributing to the balance.

According to our Beam Weekly Newsletter, work has started on 5.1 of the GUI Wallet. The release will come with breaking linkability support, Atomic Swap improvements, Segwit Support, automatic fee extraction etc. There work on Beam sidechains has also begun. Hardware and Web Wallets are in final stages of testing and will be released to testnet soon. Work on GhostDAG has already started too.

Are you excited about the upcoming updates? What would you like to see on Confidential Assets? Let us know your thoughts below or join us on our channels to discuss more.

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