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333 sats \ 21 replies \ @k00b 15 Jun freebie \ on: Fedimint vs Liquid bitcoin
Transparency. The upside to Liquid using a blockchain is that you can see most of what's going on. I don't know much about Liquid, but I believe this prevents them from inflating L-BTC or doing some kind of fractional reserve. Ecash mints have no such audit-ability.
History. Liquid is less prone to overhyped claims because whatever is claimed should already be possible or have happened. Given how new fedimints are we mostly have to extrapolate what fedimints can do from the features. Liquid's federation is also more worthy of trust given they have a longer history of being trustworthy.
I agree that fedimints make different tradeoffs, some of which are beneficial, but whether that amounts to something superior remains to be seen.
If you had to store $1000 in one or the other for the next two years, which would you choose? As is, I think most people would answer Liquid, and because Liquid's properties favor a storage use case slightly more (transparency and what not), that might always be true. I imagine some Fedimints will gain a lot of trust over time, but without public guardians who stand to lose something if they cheat, I'm not sure I'd trust a fedimint to store my money more than I would Wallet of Satoshi or an exchange. Ultimately, I think fedimint's use case, as it is today, favors a kind temporary private money storage - which we desperately need to make up for lightning's current shortcomings.
Thank you for sharing your thoughts.
Transparency. The upside to Liquid using a blockchain is that you can see most of what's going on. I don't know much about Liquid, but I believe this prevents them from inflating L-BTC or doing some kind of fractional reserve. Ecash mints have no such audit-ability.
Yes, the auditability of the money supply is an important factor and liquid currently has an edge here. I have heard dr calle mention different ideas on how to implement something like this on an ecash protocol and the currently most promising would involve something along the lines of periodically moving the funds of the federation to a new address, so that it became apparent if something is missing.
History. Liquid is less prone to overhyped claims because whatever is claimed should already be possible or have happened.
I agree with you here, Liquid definitely has the Lindy effect on its side, while all Fedimint assumptions so far are mostly theoretical / experimental.
I imagine some Fedimints will gain a lot of trust over time, but without public guardians who stand to lose something if they cheat, I'm not sure I'd trust a fedimint to store my money more than I would Wallet of Satoshi or an exchange.
My knowledge is also still limited here, but is that always a given that the guardians of a Fedimint are private? I assumed that it depends on the choices of each mint and therefore imagined that we would also see Fedimint federations of similar size / reputation as the one behind liquid. However I see how a fedimint of this size would also come with severe privacy restrictions (e.g. requiring kyc accounts) due to regulatory constraints.
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Do you believe liquid is trustworthy just because of their Blockchain? You mention fedimint with public members would be more trustworthy yet liquid's functionary members are not public.
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On this page:
https://liquid.net/
If you click "Member Details", federation members are all listed, and there is the picture of each member on the board (among which the board deciding of membership changes in the federation):
https://liquid.net/governance
So I think we can fairly say the federation members are public.
However it looks like the block-signers subset is not identified. And I didn't find this info on mempool.space either, whereas for Bitcoin we know which pool created a block.
And since the federation members are dynamic and can apparently leave at any time, the web page could be outdated at the moment we speak. I don't know how often the page is updated.
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There is a difference between liquid members and liquid functionary members. It's intentionally confusing. The public list is are just partners allowed to peg out.
The people running the network are nowhere on there to be seen and they're the "guardians" in liquid's case.
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I just checked again and I think what you call guardian is what on the Liquid network is called block-signers, like the miners on Bitcoin. And the watchmen are those who are responsible for managing bitcoins on a multisig. I don't think there is confusion about this.
However indeed the list of block-signers and watchmen, although I assume is in the list of functionaries looks like hidden. I will ask on their community group.
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no the list is not public, the functionary operators of the federation can decide for themselves whether to be public about it, for example Nym is a public operator.
watchmen and block signers are currently the same 15 set
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I don’t use Liquid. These are all relative statements not absolute ones like “liquid is trustworthy.” The more black a black box is, the less I trust claims about what is going on inside of it.
I didn’t realize they weren’t public (which is consistent with “I don’t know much about liquid”), but presumably Blockstream knows all the members? So they are known to someone, and while it doesn’t make them trustworthy, it does make it theoretically possible to hold functionary members accountable for bad things if Blockstream wishes to hold them accountable, right?
I’d be more interested in your thoughts on these tradeoffs than mine. Is fedimint better than Liquid in every possible way?
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I didn’t realize they weren’t public
This is very commonly the case when I ask the question. People assume it's public and that it's more trustworthy as a result, even if they have no idea who it is themselves (because it's not actually public). Only last week did one just get announced as a functionary member (Nym), other than that, they're unknown to the public.
In fedimint's case, you can see the bitcoin locked to the multisig and you can see the outstanding ecash issued. Fedimint can be ran by anyone, so the trust assumptions can go from none to very great (depending on who is the federation in relation to the user, it could be family), and that's better than Liquid unless you're related to adam back. It also has an open gateway structure and everyone is allowed to withdraw out, which is better than Liquid which only partners can withdraw from the federation.
So yes, I believe fedimint is better than liquid in every possible way.
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Have you used Liquid?
Why do you hate Adam Back?
Fedimint is better in every possible way because I am unbiased
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If the Fedimint is run in solo mode you could be rug pulled as well. In the case of Liquid there are quite a few ways to peg out. Through Boltz, BTSE, Sideswap and others. In this case to me Liquid feels less risky.
By using Fedi I didn't see anyway to verify by myself how many guardians there are (it could be a limitation of the application they provide and/or my misconception as well).
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In the case of Liquid there are quite a few ways to peg out. Through Boltz, BTSE, Sideswap and others. In this case to me Liquid feels less risky.
How does the presence of multliple swap services reduce the risk of Liquid? In the threats I can imagine for Liquid, e.g. them freezing your assets or liquid getting hacked and L-BTC losing its value, you would also not be able to redeem your bitcoin through these services.
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Because it is required that two third of them all decide together to freeze our assets. So the risk is diluted. I assume that by "them" you refer to the watchmen who manage the keys for Bitcoin in the multisig.
Personally I would be more worried about assets such as USDt "frozen" than about L-BTC.
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Because it is required that two third of them all decide together to freeze our assets. So the risk is diluted. I assume that by "them" you refer to the watchmen who manage the keys for Bitcoin in the multisig.
I think we are talking about different things here. What I was saying is, that if two thirds of the federation members decide to freeze your L-BTC, additional swap services will not help you, because in any case you would not be able to send your frozen L-BTC to the swap service.
Personally I would be more worried about assets such as USDt "frozen" than about L-BTC.
With USDt you mean USD-Tether, right? The threshold to asset freezes is certainly higher for a federation like liquid than for tether, but on the other hand if I look at how fast most companies tend to proactively comply when shit hits the fan, I don't think its so much higher either.
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11 out of 15 signatures
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How do you know liquid isn't actually being ran by just one person?
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I don't know. Maybe by using Wireshark on my Liquid node to vaguely capture traffic and try to vaguely find who might be the block signers if I can capture the right traffic from a peer.
That being said if we can minimally agree the information from Coin Telegraph and mempool.space is correct, at least you have proof there was 1 block signer in Japan:
https://cointelegraph.com/news/liquid-network-block-production-resumes-following-transaction-processing-issues
At the end of the day for any community there is some trust involved. 1-2 years ago I got rug pulled by Fiatjaf around 80-90 sats in a telegram group. Given that there is at least a good track record for Liquid since 2018 I feel confident we may not be rug pulled. That being said to my friends I recommend them Bitcoin, not Liquid or Fedi.
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You mean the entire federation is controlled by one person or colluding?
That seems impossible.
Let’s pretend it’s controlled by one person. So what?
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Good point
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This comment aged poorly
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Good analysis @k00b
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