Beam (BEAM) | Coin Review |
Beam is an open source protocol focusing on privacy, scalability, and fungibility that is built by implementing a MimbleWimble blockchain. This novel blockchain protocol has been receiving significant attention recently following the launch of its first two full implementations – Grin and Beam. This hype is part of the reason why I decided to look into Beam to find out if this new approach could solve the issues we are currently experiencing with traditional blockchain protocols. I found Beam to be the more interesting one of the MimbleWimble coins, because of its business-driven approach. Also, it was the first implementation of NimbleWimble. To understand Beam, it is vital to first understand MimbleWimble, how it works and what its advantages are.
Brief overview of Mimblewimble
Initially proposed in 2016 by Tom Elvis Jedusor (the real name of Lord Voldemort, the main villain in the Harry Potter universe, in the French edition), MimbleWimble is a protocol that combines several concepts, including the Bitcoin blockchain, into a hybrid blockchain to change how transactions are performed, leading to improved efficiency and privacy in the network. Privacy and Scalability are the two areas primarily addressed by MimbleWimble. As a result of its inherent privacy, MimbleWimble (and subsequently Beam) have strong fungibility, a property of a currency that does not distinguish one unit of value between another, as they are all equal.
Mimblewimble allows the receiver of a transaction to generate a “blinding factor” as the signing key for a transaction, by implementing a combination of Confidential Transactions (CTs) and Pedersen Commitments. These blinding factors are used to prove ownership of the value in a transaction without revealing its values. Transactions are based on the verification of zero sums and possession of private keys, which means, that verifying transactions with Mimblewimble requires that the amount of transaction outputs minus the amount of the inputs always equals zero. Only the participants can see transaction data, such as value and addresses and the information is not reusable by outside parties.
The protocol can achieve the same level of security and privacy as well known CTs, such as employed in ZCash and Monero but without losing speed and efficiency. When it comes to scalability and performance, MimbleWimble relies on eliminating old and unnecessary transactions, in addition to aggregating intermediary transactions on the blockchain together to further improve efficiency. Transactions within a block in Mimblewimble look like a random mix of inputs and outputs, rather than a block showing a list of correlating inputs and outputs. As a result, the protocol becomes much more scalable, with users being able to sync with the network quickly, and therefore allowing for a more practical operation of full nodes. This approach could provide long-term benefits for the decentralization of the network.
What Problem does Beam solve?
Understanding the very basics of MimbleWimble already implies certain benefits that Beam offers to users and node operators. The success of privacy coins such as Monero and ZCash proves that there is a need for this kind of cryptocurrency. Beam adds scalability, a new level of privacy and fungibility to an existing concept. This is where the Beam team sees the future of their technology, they emphasize catering to businesses, who don’t want all of their income and expenses to be seen by its competitors. They also focus on individuals who value privacy in their everyday transactions. This will be supported through an additional second-layer solution in the future. Looking at the implementation of Beam by businesses another essential quality of the protocol becomes visible: optional auditability. With Monero or Zcash it is impossible to demonstrate a provable transaction graph to an external auditor, which is often needed for businesses, Beam has implemented a solution for this.
Product and Vision
We’ve already talked about the underlying MimbleWimble protocol and how it is focused on privacy and scalability. In this part of the report, we will focus on a few specific aspects concerning the scalability and privacy features of Beam.
Beam launched in early January and was the first full Mimblewimble implementation to go live. The Beam protocol is written in C++ and expands on the original proposition of Mimblewimble with some additional features, including the use of transaction signing via the Schnorr protocol, opt-in auditability, atomic swap support with Bitcoin, offline transactions, and hardware wallet integration.
The team is very honest about the fact that the current networks primary use case is a store of value rather than day-to-day payments. With around 17 transactions per second, Beam is undoubtedly faster than Bitcoin and other existing privacy coins, but it is important to emphasize that it is not high enough to implement Beam as a widely used payment method. The Team knows about this, that’s why they are exploring the possibility to improve transaction throughput by using a second layer out-of-chain solution, such as Lightning Network, in the future.
I have mentioned the business-driven, startup-like approach of Beam before. The protocol was built in a traditional company setting, where full-time developers and contributors were hired. Beam sought investment from VC firms and is actively seeking development partners. This is one of the main differences between Beam and Grin for me. For me, Beam can be considered a real startup company, with a specific target market, at least in the first stage of their platform: Businesses.
We already talked about this in the last section. However, the audibility feature of Beam is a very overlooked, but also a significant aspect of their protocol. It allows businesses or private individuals to report their financial history to their auditors or any other party of their choosing in a secure and provable way. Wallets can generate several key pairs for this audit. Additionally, a public key can be provided by an auditor and added to the wallet by the user. This allows companies to accept crypto as a means of payment in the future and a store of value in the first step without disclosing their revenue or funds to anyone, while still maintaining transparency, where it is needed. Auditability is strictly an opt-in feature. If the user hasn’t chosen to be auditable, there is no way anyone can retrieve any information about her transactions from the blockchain. For me, this is an extremely interesting use case, and as you will see in the “roadmap section” something, the Beam team is currently focusing on.
When it comes to privacy, it is important to mention, that Beam is private by default. There are no “open” transactions at all. Reading the blockchain would not reveal any information to the observer. Users have complete control over privacy, they decide which data will be available and to which parties, having full control over their personal data in accordance with their will and applicable laws.
The Team looks solid, all three co-founders have a background in technology and/or entrepreneurship. CEO Alexander Zaidelson started his career as a software developer. He founded Nareos (a P2P File Sharing Company) and Wikitup (acquired by iMesh) and has served as VP Product at WeFi and as Principal at CIRTech VC, as well as an advisor to several startup projects. CTO Alex Romanov has worked on many complex projects with large distributed teams. Romanov leads the R&D Team at Beam since Day 1. COO Amir Aronson has co-founded and managed several technology companies such as Fitch and Playtness. He spent the past 2 years deeply immersed in the field of cryptocurrency.
Tokenomics: What is the BEAM Token?
Beam’s supply is capped at roughly 263 million BEAM tokens and uses a deflationary emission schedule based on the halving of block rewards over time, similar to Bitcoin. Beam utilizes the well known and highly adopted Equihash PoW mining algorithm, with a block reward of 80 coins per block in the first year, 40 coins per block in years 2,3,4 and 5, 25 coins in years 6-9. Afterward, a halving will take place every four years until year 133, when emission stops. Beam ensures early decentralization of the network by becoming ASIC-resistant over the first 12-18 months, allowing BEAM to be mined on GPUs. There was no ICO and no premined coins. Beams is generously rewarding early investors which could create long term problems. Beams supply curve is similar to Bitcoins and its hard supply limit, but it will be interesting to see who continues to mine it if it fails to gain widespread adoption, before rewards go away.
Beam issues rewards on a per block basis to the Beam Treasury and BEAM Foundation to pay investors, developers, and advisors. This model is similar to ZCash’s Founder’s Reward and is used for funding the ongoing company-based approach of the project.
Growth potential and Roadmap
Because Beam is a relatively new project, it is hard to judge how they performed on their Roadmap targets in the past. Looking forward, in 2019 the team will be focused on two main avenues: Beam Core and Beam Compliance. Beam Core is focused on technological developments of Beam. The goal is to increase usability, adoption, and integrate Beam into payment infrastructures. Beam Compliance aims to make Beam currency usable for businesses who want to be compliant and need to report their transactions to auditors or authorities. The 2019 roadmap is packed with interesting updates, especially on the Core end, including:
Agile Atom: An API documentation and ecosystem.
Bright Boson: Includes atomic swaps with Bitcoin, hardware wallet integration, Android mobile wallet, lightning network PoC, integration with BTCPay Server.
Clear Cathode: Mining algorithm hard fork, iOS mobile wallet, web wallet with multisig support, lightning Alpha.
Double Doppler: Alternative consensus research, porting BEAM, enhanced wallet security, lighting Beta.
Eager Electron: I2P/Tor Integration, BLS signatures, lightning mainnet.
BEAM is one of the first full Mimblewimble implementations and, in theory, offers some substantial advantages in privacy and efficiency. MimbleWimble is already a relatively well-known concept when it comes to the more technical aspects of cryptocurrencies and blockchains, Beams use of the MimbleWimble protocol gives it some compelling potential. However, at this point, I don’t see Beam as a competitor to traditional privacy coins such as Monero or Zcash. There are a number of different factors to succeed in this field, that Beam is currently missing. I think the team realized this and is, therefore, focusing on Beam Compliance and the business-oriented part of the project.
Beam and the underlying MimbleWimble technology are experiential. Beam could become a proof of concept for MimbleWimble’s privacy tech, but it is way too early to make a final judgment.
Beam is a risky bet on the success of a new technology, and generally, cryptocurrencies with truly unique algorithms and protocols perform the best long term, but they don’t rely on their technology. They find a niche and conquer it, Beam has yet to prove that they are able to do that. Beam was designed to be used as a transaction coin and will have to be adopted as such, which also means that it will go through all the different stages and cycles of a currency. Just the large amount of supply that will be pumped in by the team could water down the value. If Beam has gone through these stages and we can see it’s real value, the coin could become a hugely successful long term investment.
Beam scored 45 out of 76 Points in our evaluation program.