I think this is all right. Correct me if I'm wrong...
It took me a long time to wrap my brain around bitcoin (and I'm still wrapping). Lately, I've been taking some time to wrap my brain around Cashu. When I first heard of Cashu, I thought it was merely yet another altcoin...something to leach some of the thunder from bitcoin sats and bolster up Cashu "nuts." With it's 8-bit cartoonish logo and talk of keeping your nuts hidden, it all sounded rather sophomoric, meme sunglasses and all. That was at first and on the surface. Digging in, it's not an altcoin, or juvenile, or a meme. It's a protocol and it's clever.
Cashu info and docs: https://cashu.space
In a sentence or two...
Cashu is an implementation of "Chaumian eCash." It's a way to send bitcoin sats via the Lightning Network (LN), except not actually over Lightning all the time, but instead as ecash over the Cashu protocol.
Alice sends Bob ecash tokens over Cashu, then Bob can hodl the ecash, send the ecash, or redeem those ecash tokens for bitcoin sats at any time if he wishes.
Is this just another solution without a problem? I don't think so. It's true that bitcoin sats can be sent without using ecash via the Cashu protocol. Alice could just send Bob sats over Lightning. Why, then, use Cashu at all?
Cashu seems to have a couple of added benefits:
- better privacy - Users, wallets, and wallet amounts are unseen thanks to "blind signatures." In this way, ecash is like regular paper money.
- "handability" - Like handing a friend a dollar or a silver coin, or like leaving a $20 bill on the table and walking away, a Cashu token can be handed over. It can be given in any way you can send data...wallet-to-wallet, or a QR scan, an email or text message, or even the Cashu token handwritten on paper (if you want to go through the trouble of scribbling out a long list of characters).
Example of what an ecash token looks like.
Background
Cashu is an implementation of "Chaumian ecash." To understand Cashu, a little pre-bitcoin digital money history is helpful.
David Chaum wrote about "ecash" in 1982, a long time before normal folks used the internet and far before bitcoin. The goal was to allow for digital micropayments. Ahead of its time and ahead of what we might call value-for-value today, the idea was that you might wish to pay a penny or two to read an article: "Good article, here's two cents." There were a few weaknesses however: (1) it had to work with big tech companies to make it fly (and did in fact get huge partnerships), (2) Chaum's company made mistakes, and (3) Chaum's managerial style did it in. Sources: decrypt, saylor.org, next magazine.
For quite some time, ecash was largely forgotten.
When Bitcoin came along, and especially the Lightning Network, the idea of tiny, fast digital payments became possible. With bitcoin and the LN, Cashu is now resurrecting ecash.
ecash uses bitcoin, the Lightning Network, and the Cashu protocol
People often mistakenly think "bitcoin is anonymous." However, bitcoin transactions are recorded forever and can easily be traced by block explorers. In this way, one's coins and transactions can be followed and possibly reveal a lot of unexpected information about the person.
With Cashu, bitcoin addresses can't be linked back via a series of transactions. There are no breadcrumbs to trace backward. In this way, ecash (and Cashu tokens) are more like the dollar bills in your wallet. No one has any idea where the dollar bill in your wallet came from, where it's been, what it purchased, what the person who held it prior to you did with it, and the owner before that, etc. You just know that dollar bill there in your wallet and it can be used in the future if you wish.
How it works, conceptually
In its essence, there are a couple of players with Cashu: you and a "mint" (think of a mint simply as a bank). You have bitcoin sats. You deposit them in a mint/bank, and the mint issues you Cashu tokens saying you have X amount deposited. You can then pass the Cashu (ecash) tokens around to others, just like passing around cash dollar bills. Or, if you choose, you can redeem those Cashu (ecash) tokens back with the mint/bank whenever you wish and receive bitcoin sats.
This site and its animation helped me better understand Cashu and how it works: https://lconf.gandlaf.com/
To start with Cashu, you set up a new wallet (several are listed at https://cashu.space). Thus far, I've only looked at the web-based wallets https://cashu.me and https://nutstash.app. Set it up, save your seed words safely, then play from there.
Notably, Cashu.me seems to be doing big things. This announcement is for a new, overhauled version.
Conceptually, ecash is just better money when compared to fiat. Fiat money is paper, backed by nothing other than the decree that it is money combined with the trust that in fact it actually has value because of this decree. It is circular logic. In fact, "fiat" derives from the Latin meaning "it shall be" or "let it be done" - fiat is money solely due to the decree, "It is money."
Think of how money was supposed to work. The paper was simply a physical representation of an actual, physical something, usually gold. That gold has been acknowledged to be of value by humans throughout history. Gold-backed money meant that swapping the paper for gold was possible...the money actually worked.
Of course, fiat money is no longer backed by anything, so this point is now moot.
But, then came bitcoin.
Instead of gold as the backing agent to paper money, imagine substituting bitcoin. It has all of the qualities of gold, but adds the benefits that it can also be transferred globally, digitally, and quickly. And, instead of paper fiat money, substitute a Cashu token...a string of digital characters. Just as paper money used to represent the physical gold backing it (and could be swapped for it), that Cashu token represents the bitcoin backing it (and can be swapped for it). Like turning back the clock to gold-backed paper money, ecash (via Cashu protocol) is now bitcoin-backed digital money.
- During the gold-backed money days, you could pass around green papers with George Washington's picture to your friends and neighbors. Then at any point, anyone could take those papers to the bank and exchange them for gold (at least in theory).
- Now in the bitcoin-backed ecash days, you can pass around cashu tokens with a sunglassed cashew's picture to your friends and neighbors. Then at any point, anyone could take those tokens to the mint/bank and exchange them for bitcoin sats.
It's early still and Cashu is still being developed, so it's probably best to only play around with small amounts of sats. Who knows how far this will pan out? I certainly don't. But, it's fun to play and learn.
The mint can run away with your money at any time.