LIVE NOW

Litecoin to introduce Confidential Transactions in 2019 soft fork

Andrew Munro 30 January 2019 NEWS

The move is aimed at introducing fungibility to Litecoin.

Litecoin creator Charlie Lee announced on Twitter that he's decided to introduce Confidential Transactions to Litecoin. It "should be sometime in 2019," he explained.

"Fungibility is the only property of sound money that is missing from bitcoin and Litecoin. Now that the scaling debate is behind us, the next battleground will be fungibility and privacy. I am now focused on making Litecoin more fungible by adding Confidential Transactions."



It's a secret

Fungibility is the property where two things of the same type are functionally identical.

A cash dollar is fungible because a dollar is worth a dollar regardless of whether it's fresh from the mint or if it just got seized from a drug dealer. You can swap one for another without anyone caring. A bitcoin is arguably not fungible because you can tell one bitcoin apart from another based on its transaction history, and a dirty stolen bitcoin might be worth less than a shiny honest bitcoin.

As the theory of sound money goes, fungibility is a highly desirable property of money to better protect its value. Beyond that, it also makes it more usable for people who want to conduct illicit transactions.

As Greg Maxwell, the bitcoin developer who originally proposed the concept of Confidential Transactions said:

"Insufficient privacy can also result in a loss of fungibility – where some coins are treated as more acceptable than others – which would further undermine bitcoin's utility as money."

According to at least one Twitter comment, this is already happening to bitcoin.


How do Confidential Transactions work?

Confidential Transactions were proposed for bitcoin, but never implemented. They've since been implemented elsewhere, most notably in the Mimblewimble protocol used by the recent Grin and Beam cryptocurrencies.

It works by basically breaking individual transactions into multiple pieces and then concealing its values with a screen of white noise numbers. The end result is to conceal the values of each transaction and to cover up the histories of the individual coins used in a transaction, thereby instilling fungibility. With Confidential Transactions, it becomes almost impossible to prove that someone was sending or receiving dirty cryptocurrency or which coins are ostensibly dirty.

The move was widely welcomed by at least 72% of the people who voted on a Twitter poll.


Disclosure: At the time of writing, the author holds ETH.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Crypto explained


Latest cryptocurrency news

Picture: Shutterstock

Latest crypto guides

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site