In 2022, Litecoin, the second-oldest cryptocurrency forked from the Bitcoin protocol, activated the privacy-based Mimble Wimble Extension Blocks (MWEB) protocol at block height 2,265,984, which is referred to by many crypto players as the largest LTC upgrade in history. MWEB’s user base is rapidly expanding, with steady growth in active addresses, an evidence that the MWEB privacy function meets the expectations of Litecoin users.
The privacy-based MWEB protocol has a major influence on the future of Litecoin and even all crypto privacy projects. We all know that blockchains are characterized by their openness and transparency. In the case of most crypto projects, including Bitcoin and Ethereum, all transactions will leave a “mark” on the blockchain, and that “mark” is publicly available and immutable. This means that anyone can check your transaction records and account balance once it is known that you are the owner of a certain address.
Most users detest the fact that their data is public information, which triggered the strong demand for private on-chain transactions. Litecoin is one of the most widely adopted cryptocurrencies in the world, and many LTC users urgently need privacy protection. Members of the LTC community soon captured the demand for privacy. Subsequently, in October 2019, the Litecoin Foundation proposed a draft of two Litecoin improvement proposals (LIP-0002 and LIP-0003) to develop a privacy function by integrating the MimbleWimble protocol into the Litecoin network.
Official introduction to MWEB: https://www.youtube.com/watch?v=n3giboWvnro
The MWEB upgrade took three years and was finally completed on May 20, 2022. With the MWEB function, LTC users seeking private transactions can transfer coins to extension blocks, which can be regarded as a parallel blockchain of the main chain. With extension blocks, the amount being sent is only known between the sender and receiver. Of course, the addresses of both parties to the transaction are also hidden from the public.
It is noteworthy that the function is not mandatory, and LTC users can still choose to initiate regular transactions on the main chain. Although MWEB provides users with enhanced privacy protection, the new feature has also captured the attention of regulators. Since the launch of the MWEB feature, Litecoin has been delisted by many crypto exchanges around the world. For instance, in South Korea, we can no longer find LTC trading pairs in the trading markets of Korbit, Bithumb, and Upbit, and the exchanges explain that it is because the MWEB privacy function conflicts with the country’s AML regulation, which requires exchanges to record the data of crypto transactions.
Restricted by the AML regulation, Upbit announced the suspension of LTC deposit/withdrawal
But that didn’t hurt the enthusiasm for the MWEB function among LTC users. Since the function went live, over 50,000 LTC coins have been transferred to MWEB addresses via extension blocks. To date, the average MWEB balance has exceeded 9,000 LTC.
Litecoin MWEB Balance Chart (as of January 28, 2023)
Some have asked whether it is possible to adopt the MWEB technology on the Bitcoin network, given that LTC’s fundamental technique is similar to that of BTC. In fact, Litecoin is often used as a “testing ground” for developers to experiment with the blockchain technologies to be adopted on Bitcoin. For example, Segregated Witness (SegWit) was first adopted on Litecoin in May 2017 and was activated on the Bitcoin network three months later; in November 2017, Litecoin introduced the Lightning Network, which was launched on Bitcoin four months later.
Right now, Bitcoin developers might also be tracking MWEB. If MWEB manages to strike a balance between regulation and privacy and maintain its solid performance, Bitcoin and other cryptos are likely to launch similar solutions in the future to meet the demand for privacy and safeguard users’ privacy more effectively.