Fedimint is a community custody protocol that allows you to more easily store your bitcoin with the people that you trust, whilst still being able to transact in a private way.

This isn’t a new concept, it already happens either with physical money in communities around the globe or in Bitcoin - some of you might have the experience to assist friends or family members with custody.

We know the best custody is self custody, but we believe that 2nd party custody with a simple product is better than 3rd party custody. We believe removing bitcoin from exchanges into the hands of communities will be a significant win for bitcoin.

We understand this is a first step on the journey of many to understand the importance of custody in general and adopt Bitcoin in a safer manner. That’s why guardians are assumed to be trusted parties in the community otherwise you would be unwise to place your bitcoin with them. So it isn’t like a bank or an exchange, but a collaborative form of custody.

A key point with Fedimints is to understand that we are building for a world where there will be thousands to millions of collaborative Fedimints - decentralising the custodians. Each will have different trust models based on your relationship to the guardians of those federations. Larger federations may be useful for more private transacting and smaller federations would be more appropriate for custody of funds, we expect there will be a design space to explore here.

Current custody models used in bitcoin provide the custodian with full visibility of the individual's balance and transaction history. We believe one significant improvement which can be made here is to use Chaumian eCash to ensure that the custodian does not have visibility of the balance or transactions of its members.

When referencing backup the guardians only hold an encrypted shard of a master key which can be used to get access to funds. The guardians cannot reconstruct this key. They can, however, assist the member of the federation in retrieving this key so that they can decrypt it. Once decrypted they can recover their funds without further assistance from the guardians.

Fedimint isn’t Liquid, but has some similarities. One way to think about this would be that Fedimint is a software platform that makes it simpler to deploy many federations as opposed to one federation in the liquid model, decentralising the custodians.

Finally it is worth describing the relationship between Fedi and Fedimint. Fedi is not Fedimint, itself but a company committed to building on and educating about Fedimints as a platform. We don’t take any custody of federations funds, these will always remain with the communities supported by a federation.