Interview with Alex Romanov, the Tech Lead of BEAM Crypto
Hi everyone! Today we are launching a series of interviews with crypto enthusiasts. The first is Alex Romanov, the Tech Lead of BEAM confidential cryptocurrency. BEAM is a privacy-oriented platform running the Mimblewimble protocol.
Today we’re here for the very first StealthEX interview. My name is Maria Carola, I’m the Chief Marketing Officer. And today we’re joined by Alex from BEAM to talk about confidentiality, to talk about Privacy Center’s experiences, to talk about development, what he thinks about the space and other things that we can probably cover. Hi, Alex.
Hi. Thanks for having me here.
Can you introduce yourself a little bit for everybody to know better what you do and how you started?
Yes. I’m Alex Romanov, and I’m the tech lead of BEAM confidential cryptocurrency. And we have recently also had the DeFi platform to that list. So, I think we will talk a lot about that today as well.
Yes, of course. And at first, we’re going to start with very basic questions for everybody who probably have not heard about BEAM before or who have heard but not a lot or just starting in the cryptocurrency space. So, I’m going to just make a little introduction that BEAM is a platform working with Mimblewimble protocol just as Grin, for example, and is focusing on privacy. And privacy is a very important concept in cryptocurrency and in our daily lives right now. So, there’s going to be a lot of focus on confidentiality, on privacy. And in this interview, we’re going to cover all the basics and some more of BEAM and related topics. And the first question is probably the question that you answer a lot is how BEAM is different from other cryptocurrencies, other coins, other projects.
Yes. So, BEAM started two years ago. Actually, on January 3rd, we celebrated our second birthday.
Yes, Bitcoin was 12 and we were two. So, when we started our project back in March 2018, the idea was to create a really practical confidential cryptocurrency that combines complete and by default confidentiality with the more practical aspects, a smaller blockchain size, faster transactions, easier to use because, as you know, crypto is not a very simple topic for most people to get into. And there is a lot of responsibility that comes with all this concept of decentralization because suddenly you are responsible for everything you do and you know, it’s your keys, it’s your backside, so you’re responsible for everything. And it’s very important for us to create this experience where you can just use the product without thinking too much about the technology. It’s still a work in progress.
We’re still not where we want to be, but we’re improving. So, when we started our project, there were several key players in the space, obviously Monero and Zcash. And also there was Grin who were still developing their cryptocurrency. And we launched it almost at the same time. We launched on January 3rd and they launched a couple of weeks later. And both projects Grin and BEAM use initially the Mimblewimble protocol. But other than the protocol which was common for both projects, there were a lot of differences in how the project was structured.
We were more like a company in the beginning, and we raised money and created this Treasury model to finance our operations and also technologically we used a different programming language. We had a different emission schedule, so basically a different monetary policy. We’re more like Bitcoin, we have periodic halving, and Grin is just constant emission forever. So, of course, we were compared a lot. Two Mimblewimble projects launched almost at the same time. But then I think our roads diverged into separate directions.
So, first of all, during these two years, we have implemented a lot of expansions and improvements on top of the basic Mimblewimble protocol. I will mention just a few things which stand out like one was the creation of Atomic Swaps, which is an ability to exchange BEAM for other cryptocurrencies, such as Bitcoin, Litecoin. Currently, we’re also adding Ethereum, DAI and USDT, and Wrapped BTC to this list. Without any intermediary or third party and without any KYC in exchange. And we also created this kind of Atomic Swap marketplace which is built into our wallets. So, when they go into the wallet, you can see which offers you have for performing an Atomic Swap.
And it’s very nice because it’s completely decentralized. You don’t need to register anywhere. It’s not using a centralized exchange for that. And it works very well because with Bitcoin, you need to wait for several confirmations before the swap is complete. So, it takes a lot longer than just buying it on the exchange. But for Ethereum, for example, because of the fast time, this will just take two or three minutes to complete. And it’s very reasonable, in my opinion, it even can compete with some centralized, like exchanges that can sell you for cash or whatever. So, basically, a very efficient way to perform a purchase or exchange of currencies.
And another thing that we did, which was very interesting. Also, as an extension of Mimblewimble, we added another very recent protocol for confidentiality called Lelantus and was developed originally for Zcoin cryptocurrency, now called Firo. And the idea is that you have this shield of the pool into which you can put your coins and then you get another coin completely different and unlinked from any previous history. And you can prove that it’s the same amount.
And we don’t use it as a standalone protocol. Rather, we use it as an extension of Mimblewimble. So, one of the most, let’s say, vocal criticisms against Mimblewimble protocol is that despite the complete lack of that, there are no addresses on the blockchain and all the amounts are encrypted. However, if you are an active attacker and you really want to pinpoint someone, you can send him a lot of funds. And then by tracing the transactions up, theoretically, after a lot of effort, you can statistically deduce with some probability whether two persons are linked within this transaction up. So, yes, this is why it’s not something new. It’s something that we were aware of from the very beginning.
And it’s not a simple operation. It requires a really active attacker who knows what he’s doing. But still, it’s a weakness. So, Lelantus allows us to overcome this problem because if you really want to create a transaction that cannot be linked, you just send it through Lelantus. And we have created a special option for that. We call it the max privacy transaction because once you put your coins into the pool, you’ll have to wait for some time to accumulate the anonymity set. Because if we take it out immediately, obviously people will understand who is doing what.
So, you put the coins in the pool, you wait for some time for the anonymity set to accumulate. And currently, we support anonymity set up to 64 K, which is a lot. So, basically, this extension allowed us to overcome this problem of Mimblewimble. So, now we have both options. And when you combine these different types of transactions, you help everyone in the system because you kind of randomly unlink different branches within that transaction growth. So, it makes it more difficult to attack the entire network privacy in general. So, this was activated during the last fork in June.
By the way, one interesting thing that we also achieved during this process was the creation of offline transactions because if you remember, Mimblewimble is an interactive protocol, so it requires both the sender and receiver to sign. So, using that pool we have created offline transactions to basically send me your address and now I can send you funds any time, just like in Bitcoin, and it uses the pool. So, these offline transactions also help to kind of mix this break-in linkability. But there is, of course, a downside, like why not use just Lelantus all the time?
And the problem is that if you remember Mimblewimble, one of the benefits is a smaller blockchain size. Because of the cuts, we can remove all the intermediate UTXOs, and in Lelantus, that cannot happen. You have to store everything forever. So, what we’ve done, we’ve done this tradeoff of, yes, we allocate up to 20 percent of the block to the Lelantus transactions. And this allows us to balance this blockchain size vs. privacy. And also, Lelantus proofs are a little bit heavier. So, it would take longer to create the block if you will just fill the entire block with the largest transactions.
Now, these are the things that we have been working on in 2020 up to June or July. And then we had this thought, we said, wait a minute, the way we do this Lelantus thing is we take the transaction and we have our inputs and outputs and we have the transaction carnet. And this carnet is basically a kind of instruction or the notes to take these input UTXOs and put them in the pool. It’s a type of transaction that the one understands and says, OK, I don’t need to send this out without I need to put it in the pool, and then a separate transaction will take it out. So, we said, why not take this exact same concept?
And instead of putting it into the shielded pool, we’ve just updated the state of the notes somehow some variable and then several variables and then let’s make it call a function. So, basically what we’ve got is smart contacts. So, that’s exactly what we did. We’ve taken this concept and we have had it’s a virtual machine inside them all. It uses WebAssembly, which is a well-known and well-started technology with a lot of existing tools, applications and supports many different programming languages that can be compiled into what we’re sending.
And so we have created something that we call currently BeamX, which is an experimental network that we launched in November. It’s currently running its testnet. Anyone can download and play with it. And it’s basically a confidential cryptocurrency that supports smart contracts. And you can now start building applications such as confidential stablecoins or confidential like AMM based swap like Uniswap or similar applications on top of our blockchain. And this is something that we want to release this year by the end of Q1, somewhere around March or April.
So, there is a lot of focus on actually this decentralized finance and the DeFi that’s going to happen and already happening. So, my next question was about the main achievements of BEAM in 2020, but you’ve pretty much already covered the major ones. From the point of users perspective, from the point of people who use BEAM to transact, to store, definitely what you have mentioned it became easier, it became more confidential.
And what do you think are the next steps to make privacy, to make confidentiality simple? Because you said that this is one of the points of creation of BEAM to make this all easy and usable and kind of understandable for all people who probably have not thought about it before and for you and who are probably not that tech-savvy. And this is definitely one of the steps to adoption, the ease of use. And from your point of view, from your team’s plans, what will be this next kind of big move to make BEAM easier and more understandable? And what are the goals?
Yeah, so. There are several things that we want to achieve this year, 2021. First of all, we think that right now, when you talk about more serious trading like people who really want to deal with stricter policies or not, just like a speculative vehicle to become rich men, but take it as a more serious tool for trading and settlements and all the financial interactions. And we see this happening. We see institutional investors going into Bitcoin because suddenly they understand that it’s a great investment vehicle for them. So, basically, at this point, they will have to take care of all of these aspects that require some kind of financial privacy, for example.
I think that most serious investors wouldn’t really want just anyone to be able to see all of their actions. And we hear a lot from bigger players that they’re annoyed by the fact that just anyone can copy the trades, anyone can track their wallets and see what they’re doing, who they are dealing with. It’s very annoying. And it’s not like just open for the government or some financial authorities. It’s like basically anyone with the ability to download huge gigabytes of data and analyze it. So, we’re going to provide more services for the financial industry today. It includes DeFi because DeFi exploded in 2020 with a variety of applications, most of them run on Ethereum and none of them have any privacy whatsoever. So, we see frontrunning, we see well-tracking all of these behaviors.
And we think that by creating this ability for BEAM outspent in the media how it works to provide more private services for these kinds of trading, I think it will be useful. And of course, we will integrate it into our existing wallets, which are available for all platforms. And we will also add the Web wallets to provide better integration with existing wallets like MetaMask, for example, for Ethereum based operations. And this will allow people who are currently trading with Ethereum to move as smoothly as possible to BEAM and continue their trading in their confidential manner.
Now, of course, one of the issues that we need to take care of is how you get the liquidity onto BEAM because today BEAM is a small cryptocurrency, you know, 20 or something million market cap. Obviously, it’s not enough. So this is why we’re also focusing on building bridges between Ethereum and BEAM and we’re also building bridges for Polkadot because we think Polkadot is very promising. It’s this idea of interoperability that is based on the entire Polkadot project.
It is going to be very, very popular, I think, in the coming year because we see a lot of projects that understand that they’re no longer a reason to create this kind of silo of value. Standalone or connected to anything. Instead, what you want to do is want to be able to allow people to move their value from chain to chain as smoothly as possible and use the unique properties of this chain if it’s NANO with ultra-fast transactions or whether it’s BEAM with confidentiality or any other specific feature which is implemented in a better way.
And one of the best examples of that, for example, is Wrapped Bitcoin. What’s a Wrapped Bitcoin? People who have Bitcoin don’t want to use Bitcoin value, but they do want to participate in the trades on Ethereum. So, this is what Wrapped Bitcoin is. The problem with Wrapped Bitcoin is that it is still a kind of federated. You know, there are some intermediary involved, some third party which kind of maybe controls something or maybe there is some problem with censorship resistance.
I’m not saying anything bad about Wrapped Bitcoin. I’m just saying that it’s not like a completely decentralized solution. But what we are trying to do, we are trying to build completely decentralized breaches by basically running two smart contexts, one on this chain, which can synchronize the state and receive proofs for stateful for another chain. And this way, you will be able to move value from BEAM to Ethereum and from Ethereum to BEAM in a complete decentralization without any sort of bodywork.
Coming back to 2020, it definitely has been a year for DeFi. Like everybody was talking about DeFi, everybody was doing something in DeFi. And it was huge, even though it’s not entirely a new concept, but 2020 gave it a new meaning. And what do you think is the role of confidentiality in DeFi? Because everybody kind of forgot about it for a moment there because there’s been a lot happening besides it. But coming back to the topic, where do you think it stands and what will be the kind of improvement or the way of privacy of confidentiality in DeFi in general?
So, I think that every technological step in cryptocurrency is, but also in general, it has several phases. Like the first phase is this kind of early adoption. People get interested in something and then especially in crypto and especially if it’s kind of a profitable thing that can bring you fascination with a lot of people are drawn into this application or technology, and you see this explosion of value. But in the end, what’s happening is that the bubble bursts, but then the most important parts and most impactful parts of this technology remain and become part of our regular work.
For example, in my opinion, stablecoins are something like that. It’s become one of the pillars of this entire blockchain economy, and also MMA based exchanges which allow you to quickly rebalance a pair of assets to something that is going to remain for a long time. So, I think that once we reach the level where this is no longer just a quick get-rich scheme, but it’s more, you know, more serious players and more practical people start doing it not just to make quick money, but actually as a part of the trading pattern. I think they will appreciate the ability to do that without disclosing all of their financial information to the entire world. So, this is where we’re going.
And when we started building this and we announced that we would like to build this confidential DeFi platform, everyone was like, oh, yeah, another project that says they’re doing DeFi now. Because if I thought everybody wants to DeFi and we’re kind of like, yeah, we wanted to maybe to choose a different word, but it was exactly that. That is basically confidential, decentralized financial applications. And we said, yeah, whatever. But I think it’s more the next step of adoption of this entirely. So, when people come to us and say “I can get 20 percent yield here, how much can you give me?”
And I say, no, we’re not about that. We’re not building yet another application to stake your funds just somewhere to make some money. But rather, we’re building more like infrastructure. And even when we talk about building applications, it’s more like little basic things, confidential, stablecoin, for example, algorithmic one that works like MakerDAO DAI. I think it’s something very interesting for a project to have.
So, this is where we’re going, and right now we’re completing this kind of support layer for the smartphone infrastructure, all of the functions that you need, the UI support for that so that it will play along nicely. And we hope to roll it out, as I said, somewhere at the end of March, beginning of April. And then at the same time, we’re reaching out to the community of developers and have it talkathons in order to try to connect with people who have an interest in building these kinds of applications. So, we kind of create an ecosystem for that as well. So, we’d like to make both. Internally we build it, and we also try to communicate outside for people to build on our platform.
Yeah, of course, there need to be people who are interested in the whole concept and are ready to build something. Have you actually seen a lot of interested developers, a lot of interested projects to actually start working with DeFi and privacy together?
Yes and no. So, it didn’t come in the form of people just saying, OK, great, we have a new platform here, let’s build applications on that. First of all, because there are a lot of platforms to build. There is obviously Ethereum with solidity and all the existing tools which have been developed for several years already. And you have Polkadot with rust implementations that you have like a lot of platforms to build on. And obviously, nobody will just say “BEAM! Building on BEAM is something that I’ve been waiting for all of my life”. But on the other hand, when we talk about cooperation and we talk with different projects about possible cooperations on the building solutions, you see that most of these solutions have a privacy component. So, for example, I don’t know maybe anything that includes any type of identity.
Any type of identifying information requires privacy. Anything that has any kind of transactions. Not like a pure financial transaction, but transactions with any additional documentation or collateral or whatever that it needs to be encoded. So, there are. Basically, the thing that we said, OK, I will do that, I can do that anywhere, but this is the side with which I would like to keep private. So, I can’t right now, I can’t do it on-chain anywhere.
So, there are a lot of projects, there are a lot of good projects that build progressive solutions that are either on top of Ethereum or related to Ethereum. But it’s all very like the second layer. It’s like layer two on top of something. And what we’re trying to capitalize on is the fact that BEAM has very strong privacy on the base layer. So, it’s better suited for these kinds of applications. And so that’s what we’re trying to do. So, I believe that during 2021 we will launch a few like a proof of concept, sort of like applications of this kind to show what our platform can do. I’m not sure that it will become popular as a platform this year, but I’m confident that we will strengthen our position in the market as this series of blockchain, which has great confidentiality, very usable, strong performance. And obviously, we have one of the most productive things, I think, in the industry.
We had like 180 releases over two years, which is a lot. So, we’re working a lot and doing a lot of things. So, I think this year we will try to kind of bring it all together as the infrastructure that can really support confidentiality and smart contracts together in a nicely wrapped package. That’s the dream and that’s our goal.
How do you think it’s going to be with the general hype around DeFi? Well, it’s kind of like mature and grows into something else, like crypto did. For example, at first, it was kind of like a play for people who code, and then it was Bitcoins and to the Moon and all this stuff. And now it kind of becomes there’s still that. But it’s just more interesting. It’s more mature, it’s more thoughtful. And it kind of shaped itself as space. Do you think with DeFi, this is going to be kind of like the same story? Because there has been a lot of play this year as well, some kind of like around joke projects and all of that.
Yeah, I think that is what is going to happen. Because I don’t think this kind of crazy action around, this relatively simple application is sustainable for a long period of time. So, it’s obviously sustainable when they have an inflow of money into this. But many of these applications look exactly like the pyramid scheme. But, you know, you have these components of the need for new money in order to be sustainable, because where does this 20 percent come from? So, yeah, there is some economic reasoning behind this, but not necessarily to the extent that we saw this year. So, I think it will kind of settle down. But I still think that the most important elements that we saw this year will remain.
As I mentioned, the stablecoins, definitely all the swap exchanges like BEAM swap and the like will definitely remain because, for example, let me give you just one example, Flash Loans. These crazy transactions, when you borrow some money, do something and then give it back before the transaction is over. This is something unique for the DeFi world in a way. And we saw both a lot of the use and abuse this year of this kind of transaction. And we saw how incorrect architecture of the protocol can basically ruin you if you allow some kind of operation that can just create an infinite loan and then put it back instantly.
Coming back to the topic of DeFi. Actually, in one of the interviews, the previous one that I did for a very different project we have been discussing quite a lot of DeFi is probably one of the things that are making new people come to the crypto space more easily. Do you think the same way that it kind of eases this adoption process?
Yes, it does. Because if you go into most of the DeFi applications today, the process of onboarding is actually very simple. You open the Web page, you are presented with this MetaMask button, and then you immediately get access from the water to this specific application. And then you do some operation like, for example, if we’re talking about a swap, you create the position or create the vault, do some operation. It’s very simple. And as a result, you can become richer or poorer. In order to get to action, it’s very simple.
However, there is still a lot of work that needs to be done because, for example, in Ethereum specifically, there is a situation where the transaction fails and you have made your fees already, and people are like, you know what just happened. Because these fees are high today. You can pay like $60 in fees for an operation, and it wouldn’t even go through. It’s a lot of money. For example, this is something that we are trying to avoid specifically in this scenario. So, if the transaction doesn’t come through, you will not pay fees with BEAM. And this is just one example of things that are currently very simple because it seems like it’s just, you know, several clicks away.
But in reality, a lot can happen in the background and you will not really know what just happened. So, I think it still has a long way to improve in order to really become, you know, very usable. But I think that’s the biggest reason for this kind of rush to use these applications is just basically a simple opportunity to make some money. I’m not sure most people really understand what’s going on behind the scenes. Another example that I think is very important today. Or maybe you heard that there was a contract that I will not say names, but some developer just published it on humaneness. And it’s very important, like a very well known developer. So, all the people just went and put in money without even knowing what they’re doing. And he didn’t say anything about it. He just published it to test something.
But people saw that it was published on this account. So, they just put like 15 million dollars into this untested project. And then, of course, they were stolen somehow, but not exploited. So, for example, this is something that’s also even though it’s a decentralized system with smart contacts with Ethereum, but most of the actual usage is hidden within these websites. And I’m not sure that most people go and check the actual smart contracts, whether they were audited or verified or whether they even changed recently like nobody cares. But in actuality, you can hide a lot of problems.
So, this is also something that needs to improve in order for the people to be able to trust it because I think that if somebody lost even some amount of money because of this bug in the smartphone, which was not validated correctly or the most viewed. I think it’s not good, I think it’s a bad reputation for the entire industry.
Yeah, that’s very true. But here, it’s like exchanges, for example, big centralized exchanges, they can be hacked and the funds can be stolen. And it’s very bad and everybody kind of knows about it. But here, because the space is so new and it’s so hyped and kind of people know less about it. And if you go to Coinbase and create a wallet there and you’re like, OK, something might have happened one day.
Yeah, but centralized exchanges, especially if they’re regulated, they have some responsibility.
Yeah, that’s the point. And in here, it’s just kind of if something happens then something happens.
And another interesting example that happened, I think it was in March when there was this relatively big drop down in the markets. And for example, in MakerDAO, a lot of people were unable to get to their collateral in time because when the position of MakerDAO drops below the threshold, there is an auction that is initiated automatically. And you just have to put more collateral in order to maintain your positions. Otherwise, it will be liquidated with I think, a 15 percent penalty for you. And in order to do that, you need to be able to pay the currency.
So, a lot of people relied, I think, on some kind of automated software to do that. And the fees specified in the software were just not high enough because it was a crazy amount of transactions on Ethereum and a lot of people lost their collateral because they couldn’t push the transaction through in time. So, it’s a very interesting combination of systemic risks that are related to the technology and also the financial engineering behind these applications, which can be exploited in a completely legal way by using Flash Loans, for example, as we saw also several times this year.
And it’s like this unique set of challenges that I think there’s still work that needs to be done on that in order to be appealing to the general public. Because in most cases, if you’re using some financial instruments today in your regular banking system or exchange, I don’t think you’re really worried about software glitches.
And I believe we’re generally kind of going in this direction that more and more people are kind of becoming more interested with the news, with the wider adoption generally. So, probably my last question for today will be about the future of the space. What do you think are going to be the next big things? How is BEAM going to be involved in that? And what kind of hypes do you think we will stumble upon in the next year, for example, or the next couple of years?
So, first of all, there are some very, very interesting developments that are happening right now. First of all, I think as a result of the interest of additional and bigger investors in Bitcoin, there was also, I think, a very perceptible shift in regulation efforts. So, suddenly, this no longer this strange niche thing, you feel like a lot of people who are big corporations and big companies invest money they need also the way to be for accounting and all the financial controls that they already, you know, all the regulations that they need to comply with are still there. And so this regulation needs to now account for the fact that this company also holds Bitcoin on the balance sheet.
And I think it’s good news because it will require the governments and the financial bodies of all of these countries to work on that. And they think it will result in some more unified and stable regulation because today it’s kind of a mess. Like every country makes its own decision. You don’t really know in some cases what is going on when you go to pay taxes and you say you have cryptocurrency, in many places, it’s still like, you know, what? What is that? Or like if it’s not regulated well.
And we see a lot of things like suddenly, for example, there is the auditing of REPO. And suddenly it’s like, OK, that was security back then. And now let’s talk about what we do with that and the Beam coin price drops. And it’s something that potentially could happen to a lot of projects because there was very little regulation when these projects were initially created. So, I think the sooner we have this organized regulation, the better will be for the markets to be more stable. That’s one thing.
Another interesting thing that we see is that the notion of censorship resistance suddenly in this recent affair with Twitter blocking accounts and things like that, suddenly became kind of, you know, the newsworthy topic. And it’s something that actually existed all the time, which wasn’t just as loud or as, you know, related to such hirings and people as it was recently. And when we talk about financial terms, I think that in general, how to work with that.
I think this is also something that’s happening. I think that in the next year, 2021, we will see more stabilization. We will see serious projects, serious features, and serious technologies becoming more stable and more usable. I think the entire like maybe the DeFi industry will be smaller, but it will be more practical and more unified in a way.
I was just saying that what we would like to achieve with BEAM in 2021 is to become this platform for financial applications that have great privacy by default and combined with our inevitability. So, you can comply with any regulations you would like to comply with, but without giving any information to whoever you don’t want to give it to, basically, you’re in control. This is our role, and I think this is going to be a very different year.
This will be exciting to watch. Actually, like you have described a lot of things that are going to happen to BEAM this year already and actually starting with March, which is very soon. And so, I believe it is going to be a great year, and we will be watching closely what is happening to BEAM. And on this positive note, I think that we’re going to be wrapping up our interview, and I’m just reminding everybody that today we’re joined by Alex from BEAM. And it was a great pleasure having you here and chatting with you and discussing all this DeFi and BEAM and space general news. And do you have some last words to all the people who would watch this interview very soon?
So, I think you can see already that just two weeks of 2021, but the action is incredible. I wish everybody to have a great ride with crypto. There are a lot of great projects out there to watch, buy, trade, participate in, or whatever. BEAM is definitely one of them. So, have a great year.
Thank you very much, Alex.
Where to Buy Beam Coin?
The best way to exchange your coins to Beam is StealthEX. It’s a super-friendly, non-custodial and limitless cryptocurrency exchange platform. So if you already have savings in crypto and wish to invest in Beam crypto, just go to StealthEX and follow these easy steps:
- Choose the pair and the amount for your exchange. For example BTC to XVG.
- Provide the recipient address to which the coins will be transferred.
- Move your cryptocurrency for the exchange.
- Receive your BEAM coins.