Litecoin is one of the first alternative coins (altcoins) to appear after Bitcoin (BTC). Created in October 2011, it is now the 20th most valuable cryptocurrency with a market capitalization of over $4 billion. according to CoinMarketCap data.
The MimbleWimble update was the first conceived over two years ago as part of a proposal to improve Litecoin. It was in November 2019 that the network began planning to increase anonymity between senders and recipients of transactions on its network.
And now MWEB is finally out after the approval of most of the nodes. The upgrade was performed with a Litecoin block height of 2,257,920 and was accompanied by significant changes to privacy features on the Litecoin network.
But there’s more to MWEB than just newly added privacy features for LTC users. MWEB also brings key improvements to the blockchain experience. For example, it helps to reduce unnecessary transaction data from blocks to a minimum using the pass-through feature.
slotted function guarantees that long transactions are broken into one. That is, instead of recording each input and output separately, the block will record only one input-output pair, thereby removing unnecessary data.
After years of development and community expectations, Litecoin (LTC) is finally activated its MimbleWimble Extension Blocks (MWEB) update on May 19th. But since blockchain renewal is mainly focused on executing private transactions on the network, global rules can certainly be broken.
South Korean rules are undermined
Despite the transactional privacy hype that Litecoin has now launched, there appear to be issues on the regulatory front, especially around anti-money laundering (AML) and Know Your Customer (KYC) laws. Actually, it is for this reason that the leading exchanges in South Korea have excluded the coin from the list of their platforms.
On June 8, 2022, Upbit, along with four other leading crypto exchanges in South Korea, stopped supporting Litecoin. Other exchanges include Bithumb, Coinone, Korbit, and Gopax. However, each of the exchanges cited similar reasoning statements, arguing that the MWEB update was inconsistent with the Reporting and Use of Specific Financial Transactions Act. According Under the provisions of the law, all Korean crypto exchanges are expected to comply with KYC and AML standards. Upbit wrote partially:
“The optional feature that does not disclose transaction information included in this network update complies with anonymous transmission technology under the Specific Financial Information Act.”
Apbit always repeated its determination to mitigate money laundering and illegal activities of all kinds. Therefore, it is not surprising that it, along with other leading exchanges, is not ready to be caught on the wrong side of the law, especially with the recent privacy-focused update of MimbleWimble on the Litecoin blockchain.
Bithumb and Upbit together account for the majority of South Korea’s trading volume, and with their recent delisting, other South Korean exchanges are expected to follow suit.
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South Korean exchanges are shunning privacy-related cryptocurrencies after regulators introduced strict and outright banned darkcoins in 2020.
How exchanges can stay compatible
Meanwhile, all hopes for Litecoin in South Korea are not yet lost. June 3 Elliptic, a blockchain analytics and crypto compliance company. announced what he claims will be the solution to the curious situation caused by the MWEB update.
The firm insists that it has no intention of tracking down those behind any disguised LTC transactions. However, he believes it can help regulated businesses continue to support Litecoin transactions while still complying with current AML regulations.
According to Elliptic, its solutions will help merchants figure out when a Litecoin transaction or wallet contains funds that went through an MWEB transaction. With such information, businesses can then decide not to proceed with such activities, which would be analyzed as “high risk”.
This essentially means that businesses, including South Korean crypto exchanges, can continue to support Litecoin as long as they are aware of every moment users activate the privacy feature.
According to Tom Robinson, chief scientist and co-founder of Elliptic:
“By providing visibility into Mimblewimble’s activity, Elliptic’s transaction and wallet verification solutions provide businesses with the risk information they need to continue supporting Litecoin while meeting their legal obligations.”
Robinson was, in fact, talking specifically about exchanges and the possibility of delisting Litecoin. He argues that exchanges don’t need this as they can run their business just fine without necessarily violating any pro-Litecoin AML rules. In addition, he added that at some point you need to realize that almost all cryptocurrencies have some way to hide their transaction flows, including connections in Bitcoin or Tornado Cash (TORN) in Ethereum.
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Interestingly, this is not the first time Elliptic has provided solutions for privacy protection technologies such as MWEB. In 2020, the crypto compliance firm will also added support for Zcash (ZEC) and Horizen (ZEN) privacy coins.
Growing adoption of Mimblewimble
Without a doubt, the emergence of Mimblewimble has been an outstanding achievement in the blockchain industry. Especially with its pass-through feature and other upgrade related benefits.
In light of this, several other blockchain projects such as Beam and Grin may already be exploring the potential of implementing the MimbleWimble design, albeit in technically different ways. While Beam uses the Mimblewimble protocol to reduce blockchain bloat as well as improve scalability, Grin uses it to remove past transaction data that could affect its platform if such data is stored on-chain.
For now, however, there is still uncertainty about the possibility that Mimblewimble will see a significant level of adoption, especially given its tendency to cause compliance issues. Nevertheless, the idea is very young and, undoubtedly, very promising.
Credit : cointelegraph.com