3 sats \ 7 replies \ @Scoresby OP 23 Jan \ parent \ on: Fedimint and Cashu ecash are gift cards ecash
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.
reply
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.
reply
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)
reply
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.
reply
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
reply
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.
reply
I'm trying to fix that: https://gist.github.com/callebtc/ed5228d1d8cbaade0104db5d1cf63939
reply