Litecoin Foundation has received two drafts of improvement proposals to implement MimbleWimble through Extension blocks. The draft proposal for MimbleWimble privacy is titled LIP 2 and LIP 3.

The implementations would purportedly allow the network to offer privacy features to users. Moreover, it is the most important improvement proposals Litecoin developers have been working on. LIP 2 will be focussing on extension blocks which will increase the block size without any change in the consensus. Furthermore, the extension blocks will be running alongside the main Litecoin blockchain and a witness program will be implemented to differentiate the extension blocks chain from the parent chain, thus ensuring compatibility. 

LIP3 will, in turn, help Litecoin become fungible. While MimbleWimble will improve the privacy on the Litecoin network, it will still be possible to track user activity and transactions. Thus, it will increase privacy but it will not make it 100% fungible.  Furthermore, the team is working with the threat of quantum computing and has added a switched commitment for Elgamal. This will allow the network to move towards a more secure solution.  

While the idea of implementing extension blocks is new and innovative, it can take up a lot of time and it also needs to be audited to ensure the correct implementation. A twitter user, with handle “ecurrencyholder” has thrown light on significant aspects of the implementation. He alleged that with private transactions the total supply cannot be easily audited. The implementation of the same increases the probability of an attack. However, in case there is an inflation bug in the extension block, the total supply on the canonical chain will never exceed the set schedule. But, there is another issue with the same as people who do not withdraw their Litecoins, their coins will be stuck.  Another possible loophole is the regulators’ response to the same. The past few months saw Coinbase delist privacy marketed/focused coins like Zcash and Dash. This, in turn, risks Litecoin’s liquidity. 

However, extension blocks have their own set of advantages. Extension blocks instead of being an independent chain get added on Litecoin’s canonical blocks. Furthermore, it will allow making ground for a future soft fork.  The latter also provides for fungibility and also increases financial privacy. Whenever a transaction takes place, a user need not worry about disclosing his/her personal wealth.  MimbleWimble protocol further reduces the strain of Initial Block Download and after the transaction, a significant part of the transaction data is “cut out”, thus, making IBD more efficient. 

Will MimbleWimble be beneficial for Litecoin? Let us know, what you think in the comments below!