Beam : a formal approach for privacy coins

Beam MimbleWimble
Beam MimbleWimble
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The above references an opinion and is for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.

Summary

Market Capitalization: USD 56’970 Mio.                

Coin Market Cap Ranking: #116

Validation: Proof of Work                        

Algorithm: Equihash (modified, forked every 6 months to counter ASICs)

Risk:

  • Crowded field (Zcash, Monero, Grin, Bitcoin second layer solutions for privacy)
  • No first mover advantage
  • Open-source, non-complying privacy projects preferred by the market

Opportunities:

  • Formal governance backed by a treasury
  • Further establishing a non-profit institution
  • Regulations might restrict Beam and other complying projects.

Rating: Speculative Buy

In the already crowded space of privacy coin, Beam offers a well-established and complying privacy coin based on MimbleWimble. This approach might be problematic, given the fact that many users,e.g. because of criminal nature, do prefer an open-sourced system.

So far, MimbeWimble’s privacy features are superior to any other private application existing in the market.

However, they might still not be satisfying. For instance, Monero works well enough and has the clear first-mover advantage of a big network effect. What can be seen in the crypto space is that this fact alone often justifies dominance.

Therefore, Monero has been able to hold the lead in the privacy domain (CMC ranking #14). Not even Zcash (CMC ranking #23), also establishing kinder of formal governance, has managed to challenge Monero’s dominance so far.

The author adopts a simple valuation method: It is assumed that Beam offers the same formal governance, compliance, and strategy of becoming a legitimate privacy coin as Zcash. However, due to MimbleWimble, Beam offers a better underlying technology.

Furthermore, it is assumed that none of the privacy coins (neither Monero nor Zcash) has already reached a critical network effect. Therefore, the technology effect can still outweigh the network effect.

To conclude, Beam providing mode advanced technology than Zcash should at least receive the same evaluation as the latter. Zcash market capitalization stands at USD 712.6 Mio. which would imply a potential 12x factor for Beam.

Overview

MimbleWimble white paper was released under the pseudonym ”Tom Elvis Jedusor” on a blog in July 2016. It is mainly focused on fungibility, privacy as well as scalability. However, in October 2016, Jedusor’s white paper was refined by Andrew Poelstra, a cryptographer at Blockstream, who centered his work on the privacy issue of Bitcoin. MimbleWimble still relies on the unspent transaction output model of Bitcoin but shows no addresses nor transferred amount to third parties due to the “Confidential Transactions” model.

MimbleWimble has also implemented the CoinJoin model, which basically merges all transactions in a block into one single transaction, thus reducing the traceability.

Second layer solutions

Those models only exist as second layer solutions for Bitcoin, but MimbleWimble has already implemented them. Furthermore, the “Dandelion” model obfuscates the IP address, hence adds to the privacy of MimbleWimble.

Moreover, a “cut-through” of the transaction structure helps to reduce storage requirements for nodes. However, the downside to the protocol is the lack of a scripting language, which could make the technology more neat for developers to program on. However, this “openness” allows for more open development, e.g. innovation such as cross-chain atomic swaps and payment channels, which could still be added.

Image result for grin bitcoin

So far, two implementations exist in the market: Grin, whose testnet was launched in November 2017,relies more on open-source, non-complying governance, and Beam, which, in contrast, has a formal governance structure (e.g. Zcash, Horizen). Grin will be investigated in the upcoming report. The author will elaborate on Beam’s specifications in the following section.

Beam’s Specification

C++ is used as the programming language, which is commonly used and hence should guarantee an openness towards developers. Supply is fixed around 263 Mio. coins, thus ensuring the deflationary character of Beam and in addition, no premine exists. The project is backed by a treasury (e.g. Zcash) and will establish a non-profit foundation after the mainnet launch. The website and overall communication of Beam makes a professional impression. Nonetheless, a specific road map does not exist. The nodes still need to fully sync Beam’s ledger, but this might and can change in the future. Beam has also already proposed an audible wallet, which emphasizes the formal and legitimate path Beam seeks to take.

Contrary to Monero and Grin, Beam wants to become legitimate and fully comply with existing and emerging regulations. Beam also already provides a working desktop as well as a smartphone wallet and leads the way in terms of usability.

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