Fedimint and Cashu ecash are gift cards \ stacker news ~ecash

16.3k sats \ 67 comments \ @Scoresby 23 Jan ecash

We are all trying to understand the risks and benefits of using something like Fedimint and Cashu as opposed to purely self-custodial bitcoin (or purely custodial bitcoin a la Wallet of Satoshi).

So here's a table comparing some relevant attributes of these things:

	Fedi	Cashu	Liquid	WoS
Can you be rugged?¹	Yes	Yes	Yes	Yes
Can you be frozen?	No	No	Maybe²	Yes
Permissionless exit?	No	No	No	No
Can it be frac resrvd?	Yes	Yes	No	Yes
Single point of failure?	No³	Yes	No	Yes
Bearer asset?	Yes	Yes	No	No

Here's the same table with some other assets:

	USDT	gBTC	wBTC	Walmart Gift Card
Can you be rugged?	Yes	Yes	Yes	Yes
Can you be frozen?	Yes	Yes	Yes	Maybe⁴
Permissionless exit?	No	No	No	No
Can it be frac reservd?	Yes	Yes	Yes	Yes
Single point of failure?	Yes	Yes	Yes	Yes
Bearer asset?	No	No	No	Yes

It seems to me that the most important thing that ecash has to offer is its ability to provide permissionless use of the asset within its own ecosystem (it gets this property chiefly from strong privacy guarantees). This is the one property they have that all the other protocols lack.

On every other count, things like Fedi and Cashu look a lot like Liquid, Wallet of Satoshi, or even a stablecoin like Tether.

(I don't think they are like shitcoin tokens because shitcoins don't purport to be pegged to something like dollars or btc, they're speculative. Ecash isn't speculative. You do something like an atomic swap to get into the mint; it's either valued at par with the money you came from or it's worthless.)

Now, here is my probably foolish take: I think ecash looks a lot like gift cards, too.

I can hand you a gift card and you can be pretty sure I am not going to double spend you because it requires a pin which you can visually inspect to see if it has been exposed. Of course the company who issued the gift card can rug you or fractionally reserve the value or go bankrupt and disappear, but so can ecash mints.

Gift cards, like ecash, are designed to be bearer instruments, to be permissionlessly transferrable inside their own ecosystem, and sometimes they even get resold to third parties (at a discount, sure) even if the issuer says they can't.

So, what are we doing when we buy a gift card? Are we having Walmart custody our dollars? I've never heard it described that way. We are purchasing something. Or maybe we are storing value. Stored value is a term that gets brought up in one of the US laws that regulates this stuff, the Consumer Protection Act, 15 U.S.C. §§ 1693-1693r

Ammending that act, Public Law 111-24 has a whole section (Sec. 401) on gift cards, with this particular definition:

(C) Store gift card.--The term `store gift card' means an electronic promise, plastic card, or other payment code or device that is-- (i) redeemable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo; (ii) issued in a specified amount, whether or not that amount may be increased in value or reloaded at the request of the holder; (iii) purchased on a prepaid basis in exchange for payment; and (iv) honored upon presentation by such single merchant or affiliated group of merchants for goods or services.

If you replace the word "merchant" with "fedimint" or "ecash mint," the definition more or less makes sense. As you have no doubt picked up by now, I'm not a lawyer and I'm not even that familiar with ecash stuff. (For instance, I should note that under (D) Exclusions, you find the exclusion of electronic promises, cards, or payment codes which are "(ii) reloadable and not marketed or labeled as a gift card or gift certificate." I'm sure regulators will laugh at my sophistry and send me off to some prison where I will be abused by Bullet-Tooth Tony. Maybe he will take my electronic promises in lieu of more immediate gratification...)

For now, I'm going to say that I am purchasing ecash tokens when I send my sats to a mint.

Okay, that's it. I am prepared for my walk of shame if I have woefully misunderstood this situation. Heft your putrid vegetables and come at me.

Here are longer versions of the questions I am asking: Can you be rugged? Can you end up losing all the money you came into the protocol with? Can you be frozen? Can you be prevented from moving your money around within the protocol? Permissionless exit? Is there a way to return to the form of money you originally had without needing the permission of the protocol operators? Can it be frac reservd? Can the protocol produce more tokens than are represented by the money they hold? Single point of failure? Is there any one person or business that prevent you from exiting the protocol? Bearer asset? Can you give the token directly to another person without permission from the protocol operator and in a way that you can no longer spend it either? ↩
Liquid uses a blockchain. Blocks are built and validated by functionaries. Presumably, they could collude to prevent your transactions from entering blocks. ↩
I'm not sure about this, I'm saying there is no single point of failure because as far as I understand Fedimint, each guardian is keeping a copy of the database and so there is some redundancy against any single guardian failing accidentally or acting against you maliciously. ↩
Walmart can void any gift card they like, but since identities are not tied to gift cards, they don't necessarily know who has which gift cards. So it would be difficult for them to choose to censor a particular person. ↩

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2808 sats \ 2 replies \ @calle 23 Jan

Very thoughtful summary. I mostly agree with everything you've said.

One note on gift cards: in some European countries, gift cards can become "e-money" and must then be regulated as such if (I'm quoting from memory) their purpose and utility becomes "too universal", i.e. you can doo too many things with them. I've heard (I might be completely wrong, didn't verify) that Amazon gift cards are regulated as e-money in Sweden because of this: you can buy too much different stuff with it and people started using it for a money substitute.

Insane if you ask me.

Anyway, awesome post. Have a zap.

40 sats \ 0 replies \ @blushethnic 23 Jan freebie

Indeed, a friend of mine living in Germany who uses cash to buy amazon gift cards very often, told me that recently his account was blocked and amazon requested KYC with an ID/Passport, after they identified him with this procedure he was able to use gift cards again.

2 sats \ 0 replies \ @Scoresby OP 23 Jan

I didn't know the term "e-money." Thanks for bringing it up. I think I have some googling ahead of me.

2038 sats \ 2 replies \ @tolot 23 Jan

This is honestly a pretty good summary of the similarities between chaumian ecash tokens and gift cards.

My perspective on this is that ecash tokens have some crucial differences with gift cards:

eCash as implemented by cashu or fedi is several orders of magnitude more private than gift cards, because nobody is going face-to-face with a merchant to spend the card or being caught from surveillance cameras. For online usage, most of the times an account is required to redeem gift cards, so the privacy problem still exists (also because the majority of merchants don't let you refill an account with gift cards if you don't put in an identifiable payment method like a credit card or bank account [at least this happens where I live]).
A mint can either permit blindly agree to all the requests to the server (eCash minting or burning) or agree to none. There is no such thing as as blacklisting of some users. On the flip side, gift card providers can deny YOU the usage of the gift card but allow all the others to use it...this is because of the account-based model for gift card redemption (in an online environment) and for the face-to-face aspect for in-person usage.
In Cashu there is no such thing as user, only coins exist. Moreover, coins are minted in such a way that amount correlation is not possible. In other words, if I request 13 sats (in eCash) to a cashu mint, the mint will blindly sign 3 different coins, one coin of 8 sats, one of 4 sats, one of 1 sat. This means that coins are potentially separately spendable. Gift cards simply work as a single-tranche transaction for any amount. For uncommon gift card sizes, some kind of amount correlation can be done (at least theoretically).
Gift cards do not have a common settlement layer between gift card providers, whereas eCash tokens potentially have common settlement layers, at least in the cashu and fedi implementations (LN as a settlement layer).

Your examples are really interesting and I consider your perspective really interesting. Consider my 4 points as and add to what you said.

30 sats \ 1 reply \ @Scoresby OP 23 Jan

Great points. Imagine if gift cards were all their own little ecash mints and you could spend the gift card you bought at a BBQ place in Boise at a small bar in Avignon.

40 sats \ 0 replies \ @tolot 23 Jan

Yepp that would be nice. Fortunately enough, bitcoin protocol is a common language that multiple hardware devices and software products can speak, and Lightning is a protocol that has the same characteristics. Fiat rails cannot enable cross-merchant gift-card settlements if a merchant-specific agreement doesn't exist. Fair enough, I'll stick with bitcoin ahaha

929 sats \ 5 replies \ @Undisciplined 23 Jan

Gift cards sound so ridiculous when you start describing them in other terms.

It's a zero interest loan to the store, that can only be repaid in kind (with goods that the store chooses the valuation of), and the store reserves the right to default with no penalty.

436 sats \ 4 replies \ @Scoresby OP 23 Jan

What's interesting is most of the laws around them seem to be aimed at consumer protection (gift cards can't charge maintenance fees, can't expire before five Yeats, can't hide your balance from you). Nobody seems to be interested in regulating the money the company holds for you.

They also often must be redeemable for cash under a certain nominal balance ($10 or $2.50), although some states in the US require redemption in cash at any amount.

I saw some numbers that there was more than $100 billion loaded on gift cards in 2018 or something like that. So we aren't talking about chump change.

70 sats \ 3 replies \ @Undisciplined 23 Jan

regulating the money the company holds for you

The store isn't really holding money for the consumer though, is it?

A gift card is basically a prepayment for an unspecified later purchase. Even if they're required to redeem them in cash, that would presumably just be treated the same way refunds are treated.

393 sats \ 2 replies \ @Scoresby OP 23 Jan

You are right. Prepayment is the term.

But it does make me think that I can "pay" for ecash tokens.

40 sats \ 1 reply \ @Undisciplined 23 Jan

Sure, but who's the analogue of the store, then?

Is it more like a Visa gift card? People probably think of that more as Visa having custody of your money.

393 sats \ 0 replies \ @Scoresby OP 23 Jan

I think the mint is the analogue store.

There is a lot of language in the gift card laws about the card only being redeemed at the company it came from. This is true of fedimints and Cashu mints I think even in the case where you are interacting with a LN gateway or another mint. The gateway and mint both have to "redeem" the ecash at the original mint. So that's another similarity.

647 sats \ 8 replies \ @freetx 23 Jan

Very good summary.

Discussing fedi / cashu is difficult because they are nuanced subjects....and it can be difficult to express both openness to the ideas and really seeing usefulness in them, while at the same not believing that they offer anything other then limited stopgap measures which are fraught with moral and security hazards.

The summary is Fedi / Cashu can be very useful in either (a) Small known groups, or (b) Short time duration exposure.

Otherwise, if someone is interested in Layer-2 solutions that have a better security model more aligned with bitcoin principles, things like Liquid / Mercury spring to mind (note: Liquid already exist and proven for 8 years.....unlike other 'whitepaper' style solutions)

3 sats \ 7 replies \ @Scoresby OP 23 Jan

I suppose. I think if there is a case that can be made that ecash isn't custody, but rather a product you buy, the use cases expand. For instance, SN could perhaps solve some legal headaches this way. (Although maybe it is just trading one headache for another).

I would add (c) small amounts.

60 sats \ 6 replies \ @freetx 23 Jan

ecash isn't custody, but rather a product you buy

well....in 1925 when you deposited your gold in the bank you got one of these

was that a "product you were buying" or a claim against the gold you had turned over?

13 sats \ 5 replies \ @Scoresby OP 23 Jan

Probably not a product. But when the USD was still redeemable for gold it wasn't custody either. Custody implies they have your bit with your name next to it. This is my point: whatever is happening at a mint, it isn't right to describe it as custody.

Especially in custody law today, the custodian is supposed to have each persons' assets in separate accounts with their name clearly attached to it.

110 sats \ 4 replies \ @freetx 23 Jan

Yes, true custody is covered by "bailment law" - which is segregated accounts, non-transfer of ownership.

There was a famous case: Carr V Carr that opened the door to modern fractional reserve banking. In essence it found that banks were responsible for the "general obligation" not the actual item. (Fun fact: This is why your bank statement shows "Credits" - since you are loaning the bank your money....)

Which brings me around to my point: Federations / Cashu are legally much closer to modern frac-reserve banking schemes (regardless of whether debase or not)

57 sats \ 3 replies \ @Scoresby OP 23 Jan

I'm going to do something horrible and take the side of the banks here: it's not like it matters which dollars (or which bitcoin) they give back. In the cliche bailment examples of coat checks and valet parking, it is pretty important that they give you your coat or your car back. Money, not so much.

However, with banks, I'm putting my money there to keep it safe because I don't want to stash a bunch of cash in my closet.

I guess I'm also giving it to them because I can't actually access the digital monetary world directly (can't actually use cash on the internet).

And yeah this sounds exactly like why I might use a fedimint...but the difference is in the bearer instrument-ness of ecash. The mint doesn't have an account for me. I don't have a balance with them. From what I've read, ecash is a certificate that by itself is the claim, no further info required. So, it's not really the same as a bank. I don't have any credit with them.

I still want to try to call ecash a product. If we can make that case, it would ease a lot of the legal weirdness.

70 sats \ 2 replies \ @freetx 23 Jan

I agree with everything you've written.

However (just like banks), over a long period of time, the likelihood of fractional reserve debasement goes towards 100%...and that is the most crucial "just like banks" similarity.

The "no account / no fyi" while very good, are less significant. With traditional banks, you can already mitigate lots of tracking concerns: (a) Go to ATM, (b) Pay with cash

50 sats \ 0 replies \ @anon 23 Jan

This discussion is very helpful. Thank you Can't the eventual fractional reserve worries at least be mitigated with the "automated banks runs" @calle has proposed? My left side of the curve understanding was the ecash has an expiration of say 1 year, so you have "epochs" of ecash that all expire at a certain point and need to be rolled over periodically. Thus you have a regular interval of "bank runs" that help keep the Fedimint or Cashu mint honest. While certainly not perfect this seems like a strong mitigation. I guess in theory they could still do shenanigans like frac reserve into short term interest bearing products that expire in between the ecash "epochs", but something like that at least becomes much harder, more likely to be caught, and more costly. With a Fedimint or Cashu mint maybe that 1 year time period could also be adjusted for different groups with different threat models and tradeoffs. Maybe a hardcore security minded Fedimint has a very short window for epochs say 3 months, and the tradeoff is more overhead and work for the guardians and people have to come online more often. I would way rather pay a team of guardians 20bps in fees on my Fedimint ecash balance that has a robust security model with short term regular bank runs than an ETF. Maybe its like an Uncle Jim ETF option? Or maybe even the epoch/expiry time periods could be somewhat randomized to make it even harder to frac reserve, e.g. this epoch has a 9 month expiration but the next one has a 7 month expiration? I'm not a dev so maybe that's way too complex. Just trying to brainstorm. I think this is either a solvable problem or at least one that is mitigate-able. If ecash had automated bank runs and I knew and trusted the guardians the tradeoffs and security model are plenty strong for my tastes long term in small to medium amounts and not my core stack.

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1040 sats \ 0 replies \ @calle 23 Jan

I'm trying to fix that: https://gist.github.com/callebtc/ed5228d1d8cbaade0104db5d1cf63939

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495 sats \ 3 replies \ @kevin 23 Jan

Add mercurylayer to the comparison and you'll get a column of just "NO" :)

40 sats \ 1 reply \ @_b_o_n_e_s_ 24 Jan

statechain maxi has joined the chat :-)

10 sats \ 0 replies \ @kevin 24 Jan

😂 I don’t know about that. I’m not convinced it’ll solve all the issues of scaling Bitcoin but at least it’s better than Fedimint…

10 sats \ 0 replies \ @kevin 23 Jan

(Except permisionless exit, which would be a YES)

544 sats \ 1 reply \ @siggy47 23 Jan

Good post. You laid out the facts.

685 sats \ 0 replies \ @Scoresby OP 23 Jan

Thanks, I'm still pretty fuzzy on how gift cards are able to work without being custodians of some sort. I made a table (that didn't make it into this post) looking at the different terms these protocols use for themselves. "Redeem" came up a lot in ecash and gift cards but less so in the others.

502 sats \ 1 reply \ @garyKrause_ 23 Jan

Fedi is a company. Fedimint is the protocol.

That being said, this is exactly how i conceptualize ecash. Well done.

42 sats \ 0 replies \ @Scoresby OP 23 Jan

Trying to make the table fit on mobile. Shortened it.

539 sats \ 11 replies \ @supertestnet 23 Jan

Correction:

	Fedi	Cashu	Liquid	WoS
Can you be frozen?	Yes	Yes	Yes	Yes

Addendum:

	Fedi	Cashu	Liquid	WoS
Susceptible to shotgun KYC?	Yes	Yes	Yes	Yes

Fedi, Cashu, and Liquid can all freeze their users' assets by refusing to automatically process any further transfers or withdrawals by anyone. They can then introduce shotgun KYC for their users to reacquire access to their funds.

On a related note, here is what your second footnote says:

Liquid uses a blockchain. Blocks are built and validated by functionaries. Presumably, they could collude to prevent your transactions from entering blocks.

Here it is modified to apply to fedimint:

Fedimint uses a sql database. Entries are created and validated by federation members. They can collude to prevent your transactions from becoming entries in their database.

236 sats \ 1 reply \ @TonyGiorgio 23 Jan

Go ahead and apply that to Bitcoin miners then too instead of selecting choosing what to apply it to based on things that you do not like.

60 sats \ 0 replies \ @supertestnet 24 Jan

Go ahead and apply that to Bitcoin miners then too

Done. It applies to them too

instead of selecting choosing what to apply it to based on things that you do not like

I only applied it to fedimint and liquid, both of which I like. I like fedimint a bit better than liquid and I want to incorporate it into some of my projects

195 sats \ 1 reply \ @TonyGiorgio 23 Jan

Fedimint uses a sql database.

Wrong. It's not SQL.

They can collude to prevent your transactions from becoming entries in their database.

Wrong. Signatures are what makes ecash valid and anyone can validate and transfer signed ecash at will. Just like the cash you like using. Entries are made to prevent double spending, not to validate transactions.

415 sats \ 0 replies \ @supertestnet 24 Jan

Wrong. It's not SQL.

What a pity

Signatures are what makes ecash valid and anyone can validate and transfer signed ecash at will

To me, the transfer is not finalized til the fedimint reissues the ecash for its new owner

Otherwise it's a set of "bearer assets" held by several people rather than a bearer "asset" held by one

Just like the cash you like using

Except with ecash that was only handed over, not burned/reissued, two people can have a copy

40 sats \ 4 replies \ @_b_o_n_e_s_ 24 Jan

super, I've seen you comment on another fedi post (sorry can't find rn) something to the effect of 'we can come up with better scaling solutions that dont rely on custodians'. what can you point us to that's in the wild/usable today? state chains?

415 sats \ 3 replies \ @supertestnet 24 Jan

what can you point us to that's in the wild/usable today?

Here are my top 6 favorite scaling solutions that work right now:

Lightning [your own node - self custodial]
Statechains [custodial by default but can be self-custodial if the operator is honest, I don't know any way to verify that though]
Fedimint-run-by-one-person [custodial, no caveats]
Fedimint-run-by-a-federation [custodial, no caveats]
Federated sidechains [custodial, no caveats]
Lightning [someone else's node -- custodial, no caveats]

I like all of these options.

I am working on others, including bitvm, that are not ready yet. I wish it will be better than lightning. But I can't be sure yet, or even confident. We'll see.

0 sats \ 2 replies \ @_b_o_n_e_s_ 25 Jan

thank you sir. I took from other comment that you were against all these current scaling options, particularly fedimints, is that the case?

I'm interested in fedimints to see what they offer. But I have also been reading about statechains. I'm not technical enough to really get all of them, I just want to play with them all and see.

I'm really looking forward to what gets built out over next decade or so ☺

1126 sats \ 1 reply \ @supertestnet 25 Jan

I took from other comment that you were against all these current scaling options, particularly fedimints, is that the case?

No, I think fedimints are incredibly cool, probably the biggest breakthrough in multisig technology in the last five years. I particularly like that the fedimint software was designed from the ground up to support lightning without the members of the fedimint needing to trust the lightning node operator with their money. That gives it similar properties to a federated lightning node and can probably serve a lot of the same use cases. I also think Mutiny deserves some kind of award for integrating it into their wallet. They are doing amazing things and I'm very proud of them.

I just don't like hiding the risks. The fedimint software is just as custodial as the software Coinbase uses to manage their multisig vault. Telling people that a fedimint "counts" as non-custodial (or close enough) seems dangerous to me and is likely to get people rekt. If folks are fooled into thinking fedimints are inherently safer than "regular" custodians, I predict scammers will soon run fedimint software to steal people's funds under the guise of "you can deposit your money here, it's safe, it's a fedimint, stealing your money would be super duper hard!" Unfortunately it's all too easy, because it's custodial software.

I know that when I go into rants like that it sounds like I disapprove of custodial software such as fedimints. But I don't disapprove of them. I think they are very cool and useful, I just want users to be clear about the risks and know that it is experimental custodial software, and, like all custodial software (and most non-custodial software too), if they put any money in it, they should be prepared to lose it.

0 sats \ 0 replies \ @_b_o_n_e_s_ 25 Jan

right, that makes total sense. thank you.

I think I agree with you about needing to make risks as apparent as possible. I don't like the risk of their supply not being auditable.

I'm also mad keen to see what happens with mutiny, can't wait.

10 sats \ 1 reply \ @Scoresby OP 23 Jan

These are excellent points.

I included the permissionless exit question to get at this, but I think "Can you be shotgun KYCd?" Is better.

I should also change the long version of the question Can you be frozen? to "Can you be prevented from moving your money around within the protocol without shutting down the whole thing?"

There is a difference between freezing a person's account and shutting down the entire service/protocol. If a business has to shut down in order to freeze you, they aren't freezing you, they are ceasing to operate.

Also: can fedimint guardians collude to deanonymize me or target my specific ecash tokens, or is their collusion limited to not adding any new entries to their database? If it is the latter, I think it is fundamentally different than liquid where functionaries could target specific transactions to exclude from blocks.

Specifically targeted freezing is far more dangerous in my mind.

With ecash, they can't tell which tokens are mine and that gives me a little power that I don't have in any of the other systems.

50 sats \ 0 replies \ @TonyGiorgio 23 Jan

can fedimint guardians collude to deanonymize me or target my specific ecash tokens

No, they can not. It's either applied to all or applied to none. Anonymous bearer tokens have incredibly great privacy.

490 sats \ 3 replies \ @joda 23 Jan

I love this analysis but obviously no analogy will hold up perfectly.

One thing I think gets overlooked is staring us in the face: the name is "e-cash". There is a "mint". You give them real money (Bitcoin) and they give you an IOU. What they are producing is "currency".

0 sats \ 2 replies \ @Scoresby OP 23 Jan

You are totally right. Since the beginning, it's called itself cash and used the language of currency.

I do wonder a little if that isn't because Chaum needed to make it seem legitimate. When DigiCash was being marketed around, he couldn't call it "points" or "credits" or something because he was trying to sell it to banks and credit card companies.

But my question is, do we have to keep using this language? Is there a reason we can't shift to using points language or credits language or gift card language?

50 sats \ 1 reply \ @joda 23 Jan

Huge legal and regulatory issues either way. Imagine if one of the big gold sellers allowed you to trade in your gold for an IOU, or directly exchange dollars for the IOU. Then society starts using these as bearer instruments, de facto money. In the United States at least, this wouldn't go over well, as the government has a monopoly on currency. In the case of the gold company, and in the case of a fedimint, the government shuts it down, because both are centralized.

An issue with the lingo from a psychological perspective is that bitcoiners don't want to part with their sats for "points". If it isn't denominated the same, I don't think it will fly. Also, have you noticed how airlines and credit card companies "re-value" their points?

20 sats \ 0 replies \ @Scoresby OP 23 Jan

You are 100% correct. But I also think things Luke fedimint and Cashu aren't necessarily being built for bitcoiners. They are ways to help non-bitcoiners take advantage of the awesome properties of bitcoin. So maybe lingo changes could work.

479 sats \ 0 replies \ @birdeye21 23 Jan

Thanks for this. Love the use of the tables to compare each :) Speaks directly to what people want to know about these things

434 sats \ 0 replies \ @0xbitcoiner 23 Jan

Good, well-structured summary. Thanks for sharing

419 sats \ 0 replies \ @037447d9ca 23 Jan

If drivechains were enabled then Liquid could be rugpull-proof.

409 sats \ 1 reply \ @BlokchainB 23 Jan

Fantastic post love the table

130 sats \ 0 replies \ @anon 23 Jan

Maybe an unpopular take: clear left side of the curve tables do more to move forward bitcoin ecosystem projects than anything else. Look at ARK. Burak creating that green and red colored pro and con comparison chart was the single biggest thing that got everyday plebs interested and behind it. That project went from zero to practically having consensus support for some form of covenant soft fork overnight and that chart was arguably the main reason.

375 sats \ 0 replies \ @oliverweiss 23 Jan

With my very limited knowledge of the topic my impression of fedimint and cashu is like ‘don’t touch it’ and ‘stay away’. Thanks.

295 sats \ 1 reply \ @TonyGiorgio 23 Jan

Great write up. There does indeed seem to be a lot of similarities there.

Some random thoughts to add on (I'm also not well versed in gift card law):

expiration dates can indeed apply to ecash if you build it as such. Makes it seem even more like a gift card.
I think there's open loop and closed loop gift cards. Ie visa gift cards vs Walmart, which have different laws for
the redemption back to cash is something I'm unsure of. In ecash, if you made the argument it's a gift card, but allow for the issuer to allow conversion back to BTC, does it still apply? You don't really see conversion allowed by Walmart gift cards (though you make an interesting point for when it dips below a certain point)
what can you spend the ecash gift card on? Is it allowing you to buy something in that network? I'm not sure if gift card laws can apply if it's only purpose is to eventually redeem the gift card and not actually "use it to make a purchase"

In either case, "For now, I'm going to say that I am purchasing ecash tokens when I send my sats to a mint." is very much how im looking at it too whether that may be 100% accurate or not.

280 sats \ 0 replies \ @Scoresby OP 23 Jan

I think most (probably all) the open loop gift cards are issued by banks and credit card companies who have money transmitter licenses and are so regulated that there isn't much additional burden for them.

I like the analogy when it is with closed loop cards. One way to put it is that you buy the ecash from the mint and then you spend the ecash at the mint to buy different btc. Kind of like using an azteco voucher with fiat.

Another way would be you buy the ecash from the mint and then you spend it at a shop in your community that also accepts ecash, but under the hood, isn't the first ecash token being returned to the mint and changed into a new token? I thought this is how they avoided double spending. If so, you can never actually spend your ecash anywhere but at the mint. Just like you can't spend a closed loop gift card anywhere but at the store that issued it.

The hard part is defining what service you are prepaying for when you enter the mint with your btc.

181 sats \ 2 replies \ @kr 23 Jan

thanks for writing this.

I’m not very well versed in Fedimint or Cashu yet, but would love to hear @calle and @TonyGiorgio share where they agree/disagree with your view.

627 sats \ 1 reply \ @Scoresby OP 23 Jan

I think the real understanding that I came to was that the major benefit that ecash provides is that the mint can't freeze your tokens. That is something that the other protocols can't provide (and therefore could have a market).

0 sats \ 0 replies \ @kevin 23 Jan

235 sats \ 0 replies \ @Scoresby OP 4h I think the real understanding that I came to was that the major benefit that ecash provides is that the mint can't freeze your tokens. That is something that the other protocols can't provide (and therefore could have a market).

Yeah... they can just rug you 😂

100 sats \ 2 replies \ @SqNr65 23 Jan

I've started to think that Chaumian e-cash was a marvelous improvement over the shit rails that fiat had when the digital age dawned, and failed because of the permissioned nature of fiat. It would have made fiat way better for a digital world.

It can be implemented on Bitcoin beautifully because of its permissionless nature, but the benefits seem lost on a money that is already freely programable, natively digital and which has other technologies that make it fast cheap and efficient already on top of it.

I mean, what the hell do I know haha smarter people than I seem to think it's the holy grail of Bitcoin tech but idk.. I don't see it

0 sats \ 1 reply \ @Scoresby OP 23 Jan

Well, on chain doesn't really work for small payments, especially when fees go up (and fees ought to go up as more people use it), and lightning is pretty great, but to use it in a self-sovereign way you have to manage channel liquidity at the least, which maybe not so many people are willing to do, so we are stuck looking for something else to plug in to bitcoin so we can zap a stranger for their dank memes.

100 sats \ 0 replies \ @SqNr65 23 Jan

Honestly the liquidity thing is the main benefit I see with ecash, it's pretty great, but I don't think the tradeoffs are worth it. I think there are already better solutions in the works that address the liquidity and on chain footprint concerns that don't bring in a risk of debasement.

I think the ecash crowd, whom I admire greatly, hasn't really understood the full importance of the debasement issue. If there is a chance of debasement, no matter how small, to my mind, it becomes an inevitability. This tradeoff for me is categorically unacceptable under any circumstances regardless of the benefits. It's just too important and too big of a temptation for any person or federation in the long run. The idea is to make Bitcoin the final money, the last one. That means taking into account the next thousand years, not just the next hundred.

I hope the ecash people continue on their path tho. This is an avenue well worth exploring and who knows...

Anyways, loves your post man, thanks

50 sats \ 1 reply \ @sagars209 24 Jan

I thought Fediminit cannot produce more tokens than then bitcoin they have, and in contract thought liquid cannot but in theory it can... its seems i was wrong

0 sats \ 0 replies \ @Scoresby OP 24 Jan

The mint guardians can publish the addresses where they hold btc, so that can be verified, but only the guardians know how much ecash they have issued. So you can't verify liabilities to check against reserves.

With liquid, you can see the addresses where they hold the btc that has pegged-in, and I'm pretty sure you can run the equivalent of gettxoutsetinfo on a liquid node to verify how many coins have been created (didn't actually look this up, just remember reading it somewhere).

50 sats \ 1 reply \ @lechiffre 23 Jan

Great write-up.

However, gift-cards are the wrong analogy inasmuch as they are generally only good at the issuer, although you may find occasional pockets of gift-card exchange for value outside the merchant/retailer.

A better analogy, although one that is less familar to contemporary audiences, is company scrip. [1]

Company scrip was widely used in Factory towns in the developing US around the time of the industrial revolution. The company issued money replacement was accepted widely throughout a community in exchange for goods and services, but wouldn't be useful in the next town over, for instance.

I should probably write an essay about this given the recent interest in federated Chaumian ecash...

[1] https://en.wikipedia.org/wiki/Scrip#Company_scrip

10 sats \ 0 replies \ @Scoresby OP 23 Jan

You should definitely write that essay. I'd read it.

30 sats \ 0 replies \ @JesseJames 23 Jan

So basically any giftcard can be rugged, you saying?

30 sats \ 0 replies \ @anon 23 Jan

This is great. I think of it in a simmilar way.

0 sats \ 0 replies \ @SaToSHiWoMaN 10 Feb

Yes good 👍

0 sats \ 0 replies \ @anon 26 Jan

Thanks

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