Grin is a cryptocurrency focused on confidentiality, scalability and fungibility, which is built by implementing the MimbleWimble blockchain with some various optimizations. MimbleWimble is a stripped-down blockchain protocol proposed by Tom Elvis Jedusor in July 2016, which has gained popularity among many supporters of Bitcoin and privacy.
Grin is an open-source project that offers an updated list of what it will not do, many of which contradict current events in the cryptocurrency market. To understand Grin and how it works, it is important to first understand MimbleWimble and its advantages.
Initially proposed by Tom Elvis Jedusor in 2016 and subsequently revised by Andrew Poelstra a few months later, MimbleWimble is a block chain protocol that combines several innovative technologies to radically change the structure of transactions in bitcoin and reduce the size of the block chain.
MimbleWimble primarily works in two directions, such as confidentiality and scalability. As a result of its inherent confidentiality, MimbleWimble, and subsequently Grin, have high functionality.
Transactions in MimbleWimble are opaque, but can still be properly verified despite the absence of addresses and transaction amounts. MimbleWimble uses the properties of elliptic curve cryptography (ECC) to structure transactions based on verification of zero sums and ownership of secret keys.
Verifying transactions using Mimblewimble requires that the sum of the transaction outputs minus the sum of the inputs always equals zero. This is achieved using confidential transactions, which confirm that double spending or creation of new funds has not occurred with the transaction while simultaneously obfuscating the actual amounts in the transaction. MimbleWimble bases its concept on Greg Maxwell's confidential transactions (CT).
Proof of ownership in MimbleWimble is based on blinding factors, which are essentially users' private keys and excess values that are part of the transaction kernel. This blinding factor can be used to prove ownership of the transaction value without revealing its values.
The concept of verifying transactions without knowing any of the transaction values reflects the zero-knowledge proofs and RingCT used in ZCash and Monero, respectively.
However, there are no addresses in MimbleWimble. Instead, two wallets exchange data with each other when the recipient creates and sends an address to the sender. Only the participants can see this data, and the information cannot be used by third parties. The participating parties do not even need to be online at the same time.
In addition, blocks in the blockchain do not list individual transactions, but are combined into a single transaction with mixed inputs and outputs. Viewing a block will not provide any information about a specific transaction. Transactions in MimbleWimble are actually a non-interactive variant of CoinJoin that cannot be separated from one another.
To sum up, it can be said that nodes can verify the authenticity of transactions without revealing the transmitted values; there are no addresses and no identifiable information about the transaction.
An interesting component of the cryptocurrency that has developed recently is monetary policy. Grin aims to be a currency for making transactions rather than a store of value, currently different from Bitcoin. At the same time, it has created a monetary capability that is intended to make the value of the currency more stable.
Grin uses an inflation schedule with a linear supply, in which the total supply is unlimited, and the model encourages spending rather than hoarding. The inflation rate in Grin starts at a high level and subsequently falls below 10 percent after a decade and eventually approaches zero. The block reward is fixed over time.
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