Seems interesting. But if the goal is privacy, there seems to be an important tradeoff here:

  • If you are part of a small fedimint group, your privacy is low because you can be traced to a small group of people

  • If you are part of a large fedimint group, the group becomes easier to target by authorities, and the pressure to comply with regulations would be much higher

Is my understanding correct? Curious to see where this goes, but i'm not really convinced about it right now

100 sats \ 0 replies \ @om 26 Jul

If you have a coin minted by a small mint and you want to pay with it, you'll probably use lightning and the payee will never know that you had a rare coin.

If a large mint is so reckless that it can be brought down by armed goons then some mafia would do just that. If it is stealthy enough that it doesn't have to fear armed goons then the pressure to comply with regulations is not that high anyway.

From what I understand, there is no way to tell how many people are part of any given fediment group.

Let's see if someone smarter than me can help me out: something that is not clear to me is what could each individual Fedimint provider offer to potential users to lure them into using their minted tokens.

If I understood a bit of the article correctly...

  • Some minted tokens might be more attractive than others... because the provider is seen as more reliable/serious/honorable?
  • There might be service level factors such as how fast their servers respond and uptime?

But what else?

And how would a profit-seeking Fedimint group charge a fee for their service? You provide them a 100 sats and get the equivalent of 99 sats back in their own mint?

2110 sats \ 0 replies \ @om 26 Jul

what could each individual Fedimint provider offer to potential users to lure them into using their minted tokens

  1. The user knows someone from the mint personally. This is central in Obi's view.
  2. The mint performed the trusted setup ceremony correctly and convincingly.
  3. For users that want the mint to keep their private key, geographical proximity because the user will have to go to half of the minters personally. Unfortunately, those users are going to suffer a lot when (maybe if, but most likely when) the regulators crack down on the mint. If the minters are gathering together at regular intervals to receive users who want to restore their keys, cracking down on the mint becomes much easier.
  4. For users willing to manage their private keys themselves, the opposite of geographical proximity. Ideally, one minter in US, one in Europe, one in China, one in Africa etc. Put other OpSec stuff in this category.
  5. Healthy cap policy. If there's no cap, there might occur a situation when the mint holds $1T and hundred criminal organizations are trying to rob it. If there's a cap, there might occur a situation when a user wants to receive $10 but can't because the mint doesn't want to mint anymore. Ideally there should be a cap but the amount of minted tokens should not be close to it.
  6. Stablecoin integration. Taro is mentioned in the article but it's barely started; RGB is already released although nobody understands it. But in principle there could be already stablecoins on RGB and lightning-integrated minted stable tokens. There is also USD-denominated BTC-backed tokens from Kollider but I'm not quite sure about those.
  7. Custom tokens. "The mint has pleasure to announce that at Bob's request we minted 100 BobCoins redeemable from Bob for 1 hour of his work per coin". This is very important for poor people who want to borrow but can't accept the risk of currency volatility (and I don't mean BTC volatility only). Obviously more important for small mints.
  8. Other bells and whistles. AMMs between BTC and stables. Lending. NFTs because why not. Some analogue of would be very nice for tipping.
  9. LN providers: the amount and quality of LN providers servicing the mint. It's best if their identity is not known since the mint doesn't have to trust its LN providers; but then it might occur that several LN providers are in fact the same person.
200 sats \ 0 replies \ @Majjin 26 Jul

I could see a lot of Fedimint providers acting like credit unions for a local area, university, industry, etc.

Loans done the correct way could be a source of income. Users can anonymously lock up a portion of their funds to earn interest. The Fedimint provider then loans out whatever is available from the pool of locked up funds. The Fedimint provider can do proof of reserves to ensure its users that they aren't rehypothecating their funds or engaging in fractional reserve banking. Like with most loans, now the users have to trust the borrower to pay the provider back. So these borrower would be subject to a lot of scrutiny.

Fedimint providers could charge a fee to businesses and make it free for individuals. Storing large amounts of bitcoin and/or providing inheritance services could also be subject to a fee or subscription.

Trust, network effects, and service performance/quality/interoperability seem to likely be the biggest factors which you already pulled out.

And how would a profit-seeking Fedimint group charge a fee for their service? You provide them a 100 sats and get the equivalent of 99 sats back in their own mint?

I'm the least clear on this. I suspect they could only reliably charge based on services they provide on top of the mint:

  1. the exchange of Bitcoin for tokens and vice versa, but other people could compete with them on that
  2. if they run contracts for people in the mint, they could charge a fee for that I suppose too

The mint can charge a fee for deposits, internal transactions and withdrawals. The guardians (FediMint jargon for federation members) can also operate the LN gateways and earn tx fees from them.

Interesting concept. Conceptually it makes a lot of sense, for the user type they seem to think is a primary user, and it’s a upgrade from custodial exchanges of today.

However , the trust issue is still sticky. This requires trusting “a guardian” or “tribal elder”, which in the sense of a small community (I.e. a local credit union) where everyone knows one another and trust is harder to violate, this works well.

But most people will use fedimints that are large organizations that they don’t know. Rug pulls will be everywhere until there is some form of trust built in (using LN?).

Small scale = ok, large scale = worst off than a centralized exchange

107 sats \ 0 replies \ @om 27 Jul

Fedimints are based on HoneyBadgerBFT protocol which can survive up to k traitors among 3k+1 nodes. For example, in a 7 node mint at least 3 nodes must turn evil in order to pull the rug.

A large mint is not a large organization in the same sense as a centralized exchange. A large organization may run just one node of a large mint, more than one would be too dangerous.

I'd take such a setup by organizations that have reputation to lose over a centralized exchange any day.

100 sats \ 0 replies \ @nout 26 Jul

You beat me by like 15 seconds... 😀

So I had to update mine to be the Twitter thread .