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463 sats \ 14 replies \ @rblb 17 Dec 2023 freebie \ on: Liquid is not a scaling solution bitcoin
Correct me if i am wrong, since i couldn't find a lot of info regarding fedimint.
From what i can tell, Fedimint doesn't have any way to punish or prevent or protect against a dishonest guardian.
With liquid you are trusting the majority of a federation of selected well known companies that have vetted security mechanisms in places.
With fedimint you are trusting your community, that in fact means that if i download a fedimint wallet right now, i am trusting random people or one random company at best.
If that's the case, i'd rather trust liquid, since fedimint is like a protobank of which i'd have to trust not only the present and future honesty, but also the competence.
Also from what i can tell, liquid records are public in the blockchain, while fedimint is entirely off chain, if that's the case i could be joining a community that is secretly involved in bad practices (eg. censorship) and i would have no way to know it beforehand.
Please tell me what i am missing.
I cant speak directly to your fediment concerns because I'm simply not knowledgeable enough, but its a good question.
However, I would like to point out, that if we zoom way out, its clear that some type of federation is the only real solution for mass use. I mean imagine tomorrow 1B people decide that they want to use Bitcoin....how would those people even onboard? Even if LN is ultimately a solution, how do they even get into LN?
The most probable scenario would be that they onboard via some type of exchange that then gets them into fedimint / LN / whatever. My point here is: true wholesale scaling will require some type of federated approach at best - or a single custodian solution at worst (Coinbase). So given that choice, we should aim towards federated solutions....of which fediment and Liquid are both contenders.
As an aside, I know that Liquid is talking about launching their own LN solution, which to be honest could wind up being a "good enough" solution for 99% of the "onboard - scale" issues of mass adoption.
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Anyone can setup a liquid federation just like anyone can setup a fedimint federation. The community stuff is just global south marketing stuff that the fedi team is doing.
Also from what i can tell, liquid records are public in the blockchain, while fedimint is entirely off chain, if that's the case i could be joining a community that is secretly involved in bad practices (eg. censorship) and i would have no way to know it beforehand.
all of this is kinda irrelevant, you are trusting them with custodianship on both, it is either they steal or they don't. fedimints have such good privacy properties that they can't selectively censor a user, they can only rugpull everyone or no one.
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Thanks for your response. After doing more research, I now have a better grasp of fedimint. I agree that if it's scaled properly, it could be a promising better alternative to liquid, for the scaling and privacy part at least, i believe it is inferior for transparency.
However, I have reservations about the part you mentioned as irrelevant. While it's true that they may not be able to see your balance, my understanding is that they can potentially hold your BTC (not the IOU) hostage. This means they could restrict your trading outside the mint, impose KYC requirements for specific trades, or even compel you to "upgrade" the mint protocol to something else with different rules, as long as all guardians agree.
I recognize that this is a risk in liquid as well. However, the current state of liquid is a decentralized federation not under a specific authority or jurisdiction of entities that have a lot to lose if they were to attempt something. This stands in stark contrast to the PR campaign for fedimint, which encourages small secluded communities. These communities are vulnerable to government overreach or manipulation.
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Let imagine a future world in which there are a few "gold chip" fedimints that are widely trusted. What features would those fedimints probably have?
- public known actors
- known history and reputation
- some sort of legal repercussion possible for bad acts
Its hard to imagine how - in practice - those "gold chip" fedimints are going to be materially different than current Liquid federation setup.
To be clear: I'm not against fedimints, far from it...I welcome the development.
Lastly, I think the "magic" of Liquid is the blinded / confidential transactions. I think this renders 99% of potential "censorship" ability of the federation moot.
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Confidential transactions are cool but I'm not sure if there's the risk/incentive of amount-based transaction censorship with regards to each federation (Liquid or a gold chip Fedimint). Blinded amounts mainly seem to help with maintaining privacy among peers while still having an auditable circulating amount.
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I think the most important thing about fedimints is how they verify the supply. What's stopping one mint from inflating the supply?
I'm sure there's a good answer, I just haven't heard it yet.
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you're trusting them with custody, inflation should be the least of your worries
it boils down to if you trust them or you dont
I've been thinking a bit about the non-global-south fedimint federations. If we were to embrace fedi instead of liquid at some large scale then surely all the federations aren't going to be extremely-trusted-in-meatspace community leaders. We need to find some liquid federation-like fedi trust solution for 'the masses.'
What if it were something like the very top bitcoin devs making a large fedi federation together? People who would harm their existing life's work if they rugpulled... How many people like this can we put in an M-of-N federation inside fedi? I might trust that very much.
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I think developers already have a big say in things, and they might not be completely neutral about the project. So, trusting them with something like that is not a good idea.
For it to seem somewhat trustworthy, it should sample a wide range of people so that their interests never align.
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