Mimblewimble is an improved version of Bitcoin’s UTXO protocol, designed to change the method of constructing and validating transactions, leading to increased efficiency and privacy on the network. Another side-benefit of the new protocol is the fungibility of the coins.

Mimblewimble uses a combination of Confidential Transactions (CT) and Pedersen Commitments to allow users to verify and validate transactions and make sure no coins have been artificially created while maintaining privacy by default. Transactions within a block in Mimblewimble look like a random mix of inputs and outputs, rather than a block listing a set of corresponding inputs and outputs.

Confidential transactions are known to be heavy, and a transaction can be 10 to 15 times bigger than a traditional one. Mimblewimble’s design is an elegant workaround, wherein not all transaction data has to be transmitted over the network to validate a transaction.

Since every input in a transaction is the resulting output of a combination from previous transactions, the protocol only needs to check that the excess value between the inputs and outputs of a block coincides with the excess value of the last block. The blockchain size is considerably smaller as it relies only on verifying the authenticity of specific inputs rather than the entire blockchain using the elegant ‘cut-through’ feature of Mimblewimble.

Mimblewimble uses a transaction aggregation method similar to CoinJoin that removes the need for storing much of the past transaction data in the blockchain. Mimblewimble also foregoes using addresses to keep the blockchain size as small as possible.

The result is a blockchain protocol that confers better privacy and scalability deriving directly from its method of constructing transactions.

Beam also enhances privacy by implementing the Dandelion++ transaction routing protocol. Beam extended the Dandelion++ implementation by adding decoy transaction outputs on every step of the Stem phase for further increasing privacy.

The Beam project uses Beam Hash -  (a Proof-of-Work algorithm based on Equihash)as its mining algorithm. Beam targets early decentralization of the network by remaining ASIC-resistant over the first 12 to 18 months, allowing Beam to be mined on GPUs. The development team announced that it would hard fork the protocol twice to adjust the mining algorithm over the first 12-18 months, eventually allowing ASIC mining.  The idea is to give GPU miners a head start over ASICs to encourage wide distribution of the mining hash rate from the start. The first Hard Fork was successfully performed on Aug 17, 2019.

Beam & Monetary Policy

Beam sees itself as a confidential store of value coin with a fixed issuance schedule similar to Bitcoin. Beam’s monetary policy uses a deflationary model that comes with periodic halving of the block reward and a maximum supply of around 262 million coins. The first year has a block reward of 100 Beam coins per block. The first halving occurs after one year, and then the block reward halves every four years until the 133rd year when the maximum supply is scheduled to be reached. Beam’s monetary policy explicitly emphasizes a private store of value use case rather than digital cash.

Moreover, Beam issues rewards on a per-block basis to the Beam Treasury that is paid out every month to the Beam Foundation that includes investors, developers, and advisors. This model is similar to ZCash’s Founder’s Reward and is used for funding the ongoing company-based approach to develop the network. During the first five years of operation, 20% of the block reward is issued to the Treasury. Thus, the Treasury receives20 coins per block during the first year and ten coins per block every year for the next four years. The Treasury allocation ends after the expiration of the fifth year.

Governance & Development

Beam’s governance and early VC funding resemble a startup approach where full-time developers and contributors are hired in a traditional company environment. The team plans to transition to foundation-based governance, which is set to be a non-profit in Singapore that will guide the development of the network.

Beam has several features — both under development and working now — that expand on the original Mimblewimble design, including the use of transaction signing via the Schnorr protocol, hardware wallet support, multi-signatures, and atomic swap support for Bitcoin. In the longer term Beam plans to deploy a lightning network and integrate with other payment tools like BTCPay Server.

Considering its method of funding development through the Beam Foundation, Beam will generally be able to implement new features much faster. BEAM can steer ahead of other platforms implementing similar technologies, like Confidential Assets transactions on Mimblewimble. However, the transition from a centralized entity to a decentralized organization can pose some risks and challenges.

Bulletin Board System

Normally, when setting up payments on the Mimblewimble blockchain, all participants collaborate and need to be online. Beam tries to make offline transaction creation and asynchronous communication more seamless and secure by using a Secure Bulletin Board System (SBBS).

In Beam, BBS wallets are comparable to home computers plus modems (they are the “client”), and Beam's full nodes are similar to BBS hosts (they serve the purpose of the server). BBS' full nodes create a store-and-forward network to relay messages to offline recipients. Messages are encrypted using public keys and are then relayed to receiving wallets via Beam's full nodes. In this case, public keys act as addresses in the P2P system. If the receiving wallet is offline, store-and-forward Beam nodes can store messages in a database that acts as a message board.

Auditability

One of the differentiating features of Beam is the opt-in auditability feature. This feature helps businesses avoid any regulatory risks from using the cryptocurrency. This allows companies to create a wallet that has auditor keys attached to it so auditors can identify tagged transactions on the blockchain created by the business wallet. With the opt-in auditability feature, Beam enables transparent payments for businesses while keeping transaction details private from external observers.

The general use case for Beam today is similar to the use case of Bitcoin and other cryptocurrencies - it is both Store of Value and Means of Exchange. Confidentiality is a desirable property of money. While no sane person will want to publish their financial activity for everyone’s view, using Bitcoin, Ethereum, and other non-confidential cryptocurrencies is very close to that.

Confidential Store of Value is essential to make sure that no government or bad actors can get information about the user’s crypto holdings and thus cannot try to expropriate the funds.

Confidential Means of Exchange is essential for any financial activity, but arguably even more so for acquiring confidentiality-related services, such as VPN access and anonymous web hosting.