Fedimint Uses Trust to Change Bitcoin Self-Storage – Bitcoin Magazine
This is a transcribed excerpt of the “Bitcoin Magazine Podcast”, hosted by P and Q. In this episode they are joined by Obi Nwosu to talk about the difference between Fedimint and Fedi and how Chaumian Mints can be used to onboard millions of people on bitcoin.
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Q: How did the idea for Fedi come about—what inspired you and the team to say, “Hey, this is the problem. How are we going to solve it? And then that’s how we’re going to solve it.”
Obi Nwosu: There is Fedimint and then there is Fedi. So Fedimint is this open source protocol, kind of like how Bitcoin is a protocol for the store or the value. Lightning is a protocol for transferring that bitcoin around at a low cost at high speed, and also increased privacy as a side effect. Well, Fedimint is a protocol for storing that value, protecting that value with incredible privacy in a way where you use your community to have each other’s back effectively. They work very well together. In fact, they are both layer 2. When your money is at rest, you store it in Fedimint, and when your money is on the move, you use Lightning. But the money is bitcoin under both of these.
It is the Fedimint protocol.
It actually had its roots – well actually, if you go way back in time we have Chaumian ecash and then 13 years or so ago with the invention of Bitcoin and then four or five years ago with Blockstream’s popularization of federation technology used for Liquid. When these things were combined, a number of incredible cypherpunks and cryptographers found that we can combine these things together and take Chaumian ecash – invented by David Lee Chaum in 1983, which was considered the catnip of cryptographers, some of the best form of privacy technology that exists. – combine that with the best form of money, bitcoin, which for the first time multiple people could hold, and confederation allowed you to sort of unite this Chaumian Mint with bitcoin as a backing money as opposed to the US dollar, which was David Chaum’s original attempt.
The work started three or four years ago and there were a number of projects running in parallel, but my now co-founder Eric Sirion worked on something called Fedimint. About two years ago Blockstream saw it, got really excited about it, started sponsoring him, and about a year ago I saw it when I was – and I didn’t mention this, I was running the UK’s longest running bitcoin exchange. At one point I had 70% market share of the UK, did the whole New York Stock Exchange club. And we were the first regulated exchange in Gibraltar, all that sort of thing. But that’s in the past now. But while I was selling that company, I was looking for a way to get people out of exchanges because I was increasingly concerned that there would be liquidity begetting liquidity, and there was going to be increasing centralization around exchanges.
I could see such an Orwellian future where there are half a dozen exchanges, each with a billion users with full visibility, as bad as having CBDCs (central bank digital currencies) by country because that’s where we end up if we just continue the way we are going. So we needed an alternative to custody of change.
Now the obvious option is first-party custody, ie do-it-yourself custody, but if you just look at the numbers and if you look at the attitude of the people we realize that with the best will in the world, you’re going to get 5% of the people , maybe 10% [doing] self-storage, but that still leaves 90-95% trapped in these exchanges.
So I was looking for a solution to get people off the exchange. I was at Hackers Congress last year. I ran into Eric. We had a conversation. I suggested some of my ideas. He politely told me why they wouldn’t work and then I asked him what he was working on. He told me about Fedimint, and he saw it as this incredible privacy technology, which it is, but with the exchange operator hat on, I realized that this was actually a solution to getting people out of exchanges – if it’s designed right. That’s where I started getting involved, I started cheerleading it and I talked about it at Bitcoin Miami. That led to Alex Gladstein asking me to go to the Oslo Freedom Forum to talk more about it.
I then met some of the bravest men and women I have ever had the opportunity to meet, who are human rights defenders and activists from around the world. You might have met, like if you come to Ghana, hope you were there, you will see Farida Nabourema from Togo, for example, Fadi Elsalameen from Palestine, Roya Mahboob from Afghanistan, who created the first Afghanistan all-women robotics team when women got not allowed to study and so on and so on and the list goes on. They all realized that the problems and challenges they had around the world, whether it was Latin America, Africa or post-Soviet regions of the world, although they seemed very different, and the authoritarian regimes that they were fighting seemed very different, they all had a common thread: these groups used weapon money and through high/hyper levels of inflation and many other mechanisms. They realized that if they wanted to push back against these forces, they had to be able to control their own money. So they weren’t Bitcoiners, but they came to Bitcoin because they needed to solve problems, but they ran into problems with scaling.
They wanted to roll these out to millions of people at a rapid scale in several of these regions. And what I realized there was that only Fedimint could do it. This was in May. It went away, Fedimint is an incredible open source protocol that we supported and allowed to organically grow, but I came back on June 1st, talked to – and now the co-founders have grown into myself, Eric and Justin Moon, another incredible soul. I explained what I had seen and observed and who I spoke to and we all agreed that we need to speed this up. And so Fedi was born. Fedi’s goal is to take Fedimint as the base protocol and to accelerate the adoption of bitcoin to billions of users in the coming years because we can’t wait. We have a technology that enables rapid deployment of bitcoin with incredible levels of privacy, high levels of security and direct integration with Lightning. So why are we waiting? There is no reason for that. And that’s where Fedi’s journey began.
