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Major Cryptocurrency, Litecoin is again in the news. Making rounds is its privacy upgrade proposal in which it will be making use of a technology that was previously designed for Bitcoin.
Earlier this year, it had revealed its plans for improving its privacy and fungibility. Previous years it had dealt with the scaling problem.
Litecoin has released a draft of the Litecoin improvement proposal. It anticipates reactions from the crypto community to launch the new code.
The proposal captures two major techniques that operate hand in hand. One is the MimbleWimble (MW) and the other is Extension block (EB). Both were originally designed for Bitcoin but were later overtaken by series of events.
Extension block (EB), dating back to 2013 by Johnson Lau is a scaling solution that is a soft fork in nature. It was created to improve fungibility without the effect being felt on the crypto wallet.
A soft fork or a soft-forking change is described as a fork in the blockchain which can occur when old network nodes do not follow a rule followed by the newly upgraded nodes. Fungibility means that all Bitcoin’s have the same value, regardless of who owns them or what their history is – and fungibility is extremely important to the success of a decentralized network.
The Bitcoin scalability problem refers to the discussion concerning the limits on the number of transactions the Bitcoin network can process. It is related to the fact that records (known as blocks) in the Bitcoin blockchain are limited in size and frequency.
Bitcoin’s blocks contain the transactions on the Bitcoin network. Mimblewimble was developed in 2016.
The Litecoin proposal co-opts the MimbleWimble(MW) as the new transaction format on Extension blocks (EB), the extension blocks (EB) will form part of the major blocks which run simultaneously at an interval of 2.5 minutes with it. The main purpose of EB is to hold private transactions while operating seamlessly with MW through an integrated approach.
The benefit of this upgrade is that it is a soft fork and there would not be any need for another version of Litecoin. However, it can only be activated a year after the program code is released. This may come earlier if it gets an almost perfect signal number from the community. But this proposal may not take effect until the year 2020 as indicators present.
Challenges It May Pose for Litecoin
Extension blocks have never been on the live blockchain before so it may take time before a perfect blend is achieved with lots of simulations and checks.
It may result in a price hike of coins or even loss of investment coins. Litecoin may also face delisting from major wallet and exchange while it may reduce its liquidity.
The long term impact will go beyond Litecoin. There is an urgent shift from scaling solutions to privacy in the crypto space. This will also give a head-on for Bitcoin technology development too.