Beam and its underlying technology, Mimblewimble, are an exciting concept in regards to the issue of cryptocurrency privacy.

While Bitcoin may be the flagpole cryptocurrency, during transactions, Bitcoin exposes a substantial amount of information, particularly about sender and receiving parties’ addresses and the amount being transacted.

While that may not necessarily be a bad thing, especially if the identities of the parties are unknown, it is not very difficult for authorities or other sophisticated actors to find out further information on the transaction.

Once someone, even if it is a friendly person, once they know which address belongs to an individual, they can look in and see all of that persons account activity, knowing that it belongs to them.

However, with Beam and the Mimblewimble platform, there are no addresses or other private information. None of this is stored on the blockchain. This includes all sender and receiver information aswell-nothing.

This is achieved in part by ‘blinding factors’ which are used to connect the two participants of any given transaction. The blinding factor is shared between the two parties wishing to transact, and no-one except for these two participants in that transaction have access to that. The blinding factor can be used to prove ownership of the values that were sent.

Beam differs from standard cryptocurrency transactions as it allows both the sender and receiver to both participate in creating the transaction. So transactions are not merely one-way executions similar to most other cryptocurrencies.

Another piece of crucial technology is called the ‘Peterson Commitment.’ This is where nodes take care of the encrypted math’s, particularly in terms of who has what between the senders and the receivers, and that the sum of all inputs minus the sum of all outputs on the blockchain is zero to validate the chain.

In this system, network verifiers can confirm that two transactions are real and of course that no cryptocurrency was created out of thin air. So instead of storing the full transaction history as we do Bitcoin, in a Beam node, only needs to store the current UT EXO state. In this situation, only the heads of the previous blocks are required to confirm the validity of transactions as they hold the validity of the transaction before it.

Image Source