BEAM and the Mimblewimble Protocol Breathe Life Back into Online Privacy
Online Privacy Is Broken
Now more than ever is a great time to reflect, “What does internet privacy mean to you, and what can private, decentralized money mean for our society at large?”
Security breaches reveal our private information all the time. For instance, when the secure money transfer service Zelle was exploited, the private transactions of thousands of customers became subject to fraud. Worse, the popular p2p money transfer app Venmo initially made transaction records public by default for no good reason, raising concerns and lawsuits around the privacy of the app. Even Bitcoin isn’t perfect.
Developing secure, self-sovereign software that preserves user privacy is urgently needed to restore confidence in the online mainstays we use every day. This is the premise of privacy-focused cryptocurrencies like BEAM.
From Digitized to Digital-Native Payments
Part of the problem is that online payments today try to fit a square peg in a round hole. Digitized payments retrofit physical technology for digital means. E-commerce and remittance solutions like Paypal, Zelle, and Venmo were designed to accommodate digitized payments representing credit, debit cards, and bank accounts online.
Instead of creating a new digital-native way to pay, online storefronts adapted their user interface (UI) to support a familiar payment method — cards. This legacy payments friction prompted the best and brightest minds in technology to focus on generating revenue through online advertisements and tricky data deals — creating a privacy nightmare for the rest of us — instead of creating a more open, fair, and user-friendly internet.
Abusing Privacy Hurts Everybody
10 years after the genesis of Bitcoin, many of the unethical market maneuverings that prompted the birth of Bitcoin have started to cause trouble again. This time around big banks and insurance underwriters aren’t the only parties involved. Internet giants like FAANG continue to abuse their own privacy guidelines, costing our personal privacy online and off.
Social media’s mission to monetize our attention and sell personalized data to 3rd parties has sullied what it means to be private online. Worse, blindly signing away our rights to digital service agreements has normalized the process of giving up any reasonable expectation of privacy to centralized companies. So when centralized internet giants get hacked or expose our data due to their poor security and privacy practices, we get the short end of the stick… with very little recourse.
In response to inadequate privacy solutions that leak sensitive personal data, like your purchases, products liked, email address, phone numbers, gender, date of birth, etc., or your entire personal message history, privacy coins and decentralized messaging services have emerged to help users regain control.
Digitized payments are stuck in the past and communication services are too centralized. Privacy-focused cryptocurrency BEAM provides a new way forward, enabling confidential digital-native transactions that scale online to meet real-world privacy needs. Below, we explore the background and inner workings of breakthrough technologies that make BEAM shine and provide a new alternative for truly private digital-native transactions and decentralized messaging.
How BEAM Preserves Payments Privacy Online
Around the world, trends are moving towards ever-stricter surveillance models, such as the Chinese government analyzing and evaluating everyday online purchases and interactions with a “social credit score”. The social credit score effectively limits or rewards what citizens can do with their money — like limiting the purchase of plane tickets out of China or rewarding citizens the ability to purchase certain products at discount. What’s particularly worrisome about this technology is that it’s exportable, meaning that other nations could adopt the same surveillance tech in the future. BEAM’s cryptocurrency is based on a groundbreaking cryptographic protocol called Mimblewimble that protects user privacy by default, and mitigates surveillance by design.
In traditional debit and credit card payments, transactions are supposed to be held confidential between the parties involved. As we know, this is not the reality (e.g. Zelle leaked metadata revealing private user transactions). In Asia, popular apps like WeChat Pay and AliPay offer seamless mobile digital payments and messaging with low transaction fees at the cost of state surveillance and in-app fraud scams.
In Bitcoin, transactions are pseudonymous. This means that only the sending and receiving addresses are obfuscated — not fully anonymous — while transaction value is immutably public. Unsurprisingly, governments and large organizations have developed ways to triangulate the origin and identities of these pseudonymous transactions. Letting people see what you’re buying from whom and for how much is a fundamental limitation of Bitcoin’s design.
BEAM overcomes these limitations with scalable, confidential transactions that enable user privacy by default and opt-in auditability for regulatory compliance. What’s more, BEAM has developed a Secure Bulletin Board System (SBBS) for sending and retrieving messages that are secured by elliptic curve cryptography (ECC) and private by default. This breakthrough enables private, store-and-forward communication with confidential transactions. By sending private messages to an offline node secured by the same ECC guarantees as online transactions, SBBS provides a strong cryptographic, decentralized alternative to centralized competitors like WeChat Pay.
How Dandelion + SBBS Preserve Privacy Both Online and Off
BEAM uses the Dandelion protocol in concert with other decentralized functions such as SBBS to ensure that confidential transactions remain anonymous and can occur even when the intended recipient is offline or unable to make a direct p2p connection.
Dandelion is a fantastic, aptly named protocol that obfuscates the transaction graph. Much like a real dandelion floats aimlessly through the air before distributing its seeds by chance, the Dandelion protocol charts an anonymous pathway before randomly broadcasting its transaction data.
Notably seen in Bitcoin Improvement Proposal (BIP) 156, Dandelion helps protect when and where private transactions are broadcasted by creating random transaction path across the ECC network, sending the transaction data anonymously through the obfuscated route, and then broadcasting the transaction to many nodes at once only after the transaction reaches its final destination. In this way, the transaction graph remains hidden and the chances of deanonymization become significantly lower. For BEAM, this translates to digital-native cryptocurrency that avoids surveillance by design.
In combination with BEAM’s SBBS store-and-forward functionality, users can anonymously communicate across nodes even when there isn’t a live p2p connection. Like posting a message to a bulletin board that nobody can see but the intended recipient, BEAM communications remain confidential, anonymous, and accessible offline too. This combination enables private, decentralized money with secure, anonymous communication guarantees.
Next-Generation Privacy Needs To Be Scalable Too
In the next generation of privacy-preserving cryptocurrencies like Zcash, many techniques such as the zk-SNARKs and other zero-knowledge protocols have been developed to more fully anonymize transaction data. Compared to BEAM, these cryptographic protocols fall short in their tradeoff between scalability and privacy.
In BEAM, cut-throughs operate like running account balances where only the most recent transactions are recorded and previous transactions disappear while every transaction remains cryptographically verifiable and secure. This pruning method saves block space — ensuring scalability — and obscures the transaction tree in one simple and elegant cryptographic operation that protects user privacy.
What sets BEAM apart from other privacy-focused cryptocurrencies is that using BEAM protects the identity of users and path of transactions and messages by default, transactions scale to provide a real-world store of value, and there’s room for 2nd layer performance optimization. What’s more, users can opt-in to make transactions auditable in order to meet regulatory compliance and consumer protection needs. BEAM is a huge step forward for self-sovereign digital payments and scalable cryptocurrencies at large. Welcome to the future of scalable, confidential transactions!
Find out more at www.beam.mw