Much of the hysteria around Litecoin’s activation of Segregated Witness (SegWit) this week has focused around the altcoin’s rising exchange rate, but the implementation of this change on one of the oldest alternative cryptocurrencies in existence could also have implications for Bitcoin. In addition to turning Litecoin into a proving ground for SegWit, the change will also allow developers to test out systems currently being built on top of the SegWit base.

One of these new systems that has Litecoin creator and Coinbase Director of Engineering Charlie Lee excited is Confidential Transactions, which is a method of improving privacy by masking the amounts involved in transactions.

Lee recently discussed the topic of SegWit on Litecoin on The Bitcoin Podcast with co-hosts Corey Petty and Marcello Milteer. Blockstream CTO and Bitcoin Core contributor Greg Maxwell, who has worked heavily on the Confidential Transactions proposal, also recently shared some of his own thoughts related to SegWit on Litecoin during a presentation at the Coinbase headquarters in San Francisco.

Improvements Enabled by SegWit

While many have viewed SegWit as mainly a scaling solution, Lee told The Bitcoin Podcast that the improvement is about much more than that.

“In reality, SegWit allows us to do lightning networks [and] to do a lot of other things with soft forks like Confidential Transactions, MAST, and a few other things,” said Lee.

According to Maxwell during his presentation at Coinbase, many Bitcoin developers are now going to work on Litecoin because “no one really doing a lot of protocol development in Bitcoin wants to work on script enhancements and things like that without SegWit” because the improvement makes that sort of development much easier.

“The idea of doing some kind of script enhancement without [SegWit] is just not interesting,” Maxwell added.

During his appearance on The Bitcoin Podcast, Lee claimed that many developers have already reached out to the Litecoin team to port over some of their SegWit-related work that is intended for eventual deployment on Bitcoin. “They all appreciate what SegWit brings to Litecoin and Bitcoin, and they want to help make it happen,” he added.

From Lee’s view, the Bitcoin and Litecoin codebases are very similar, so porting development progress from Litecoin back to Bitcoin would be “a very simple change” once the improvement is available on Bitcoin. Lee added that SegWit proving itself as a valuable addition for Litecoin will increase the chances of seeing the improvement activate on Bitcoin.

Confidential Transactions for Better Privacy

While a Lightning Network for Litecoin is the first priority for Lee, he told The Bitcoin Podcast that he’s also excited about Confidential Transactions.

“With SegWit, Confidential Transactions can be done as a soft fork, and that’s exciting,” said Lee. “The only major thing missing from Bitcoin and Litecoin in terms of like being good money is fungibility . . . and Confidential Transactions is kind of halfway towards like a perfectly fungible currency.”

Confidential Transactions is referred to half of the equation because it only obscures the amounts involved in transactions. In other words, information related to the sender and recipient in a transaction is still available on the blockchain without the use of something like CoinJoin, which can already be used on Bitcoin.

In terms of seeing Confidential Transactions implemented in Litecoin, Maxwell stated in his presentation at Coinbase, “I’m happy to help other people experiment on it . . . I think it’s even premature to do [Confidential Transactions] in Litecoin today, but I’d like to see it get more use. That’s how the technology matures.”

In terms of why privacy is useful for Bitcoin and Litecoin, Lee told The Bitcoin Podcast that it was not about being able to buy drugs on various darknet markets. “It’s more about when you’re using money, you don’t want to have to decide which of your coins you should spend due to it having some history,” he clarified.

Image from Pixabay.