KatherineBondAJK

Bitnodes showing large drop off of tor nodes

DevonStuartDYF

To me this looks like a hosted version of Shamir Secret Sharing. I get it that normies might find this comfortable.

But we as a community need to prioritise self sovereignty, and work hard on getting the message out there.

Spread your self soverign risk by using purpose built by tools like Shamir Secret Sharing.

https://trezor.io/learn/a/what-is-shamir-backup

Music

Do you support open source projects?

ZoeBell3J0

That the saying "time is money" (often [incorrectly](https://en.wikipedia.org/wiki/Time_is_money_(aphorism)) attributed to Benjamin Franklin) has all but lost its original meaning from around 1719 and that bitcoin will fix this - amongst other things...

ecash

I'm using Stacker News now more than ever.

VeronicaRoachQH1

New hat. I am back in the game. Need to try to beat 96 now. 

bitcoin

# Cashu (or Fedimint) vs Tether

Let's think about the difference between minting ecash at a Cashu mint and buying USDT from Tether.

When you send your sats to a Cashu mint, the mint issues you ecash tokens that are pegged 1-to-1 to the value of satoshis. You can give these tokens to anyone who will accept them. You can also ask the mint to trade satoshis back to you in exchange for your tokens (although you can't make them trade with you).

When you send your dollars to Tether, the company issues you USDT tokens that are pegged 1-to-1 to the value of a US dollar. You can give these tokens to anyone who will accept them. You can also ask Tether to trade dollars back to you in exchange for your tokens (although you can't make them trade with you).

While I have glossed over a lot of details (eg. Cashu mints can't stop you from trading the tokens to someone else, while Tether can; Tether tokens are issued on one of their supported blockchains while Cashu tokens are bearer assets), at this high level, the two are actually pretty similar.

Now let's look at how they describe themselves:

This is from [Cashu's FAQ](https://docs.cashu.space/faq):

> Cashu wallets leverage the Cashu protocol to communicate with Cashu mints to integrate with Lightning. Therefore, the mint is running the Lightning infrastructure and custodies the satoshis for the mint's ecash users. Users have to trust the mint to redeem their ecash once they want to swap out to Lightning.

This is from [Tether's webpage](https://tether.to/en/how-it-works):

> Tether only issues new Tether tokens when they are requested and purchased by customers who have followed our strict KYC procedure.

Note the difference: Tether users "purchase" tokens while the Cashu mint "custodies" their users' funds.

[Fedimint's FAQ](https://fedimint.org/docs/GettingStarted/What-is-a-Fedimint) uses the pretty much the same language as Cashu:

> A Fedimint - or "Federated Mint" is an implementation of Chaumian eCash with a federation of guardians to custody funds, instead of a centralized actor, and is natively interoperable with Bitcoin's Lightning Network.
> Custody & Redemption: Users can submit a request to deposit bitcoin, "pegging in", in exchange for fm-BTC eCash notes or use the fm-BTC eCash notes in their wallet in order to redeem on-chain bitcoin (note: users could also transfer out to themselves via the LN Gateway)

# Why can't you just buy ecash tokens?

No doubt you've heard different people in the space discuss (or argue) about whether protocols like Cashu and Fedimint are custodial. @TonyGiorgio's post [Fedimint is Self-Custodial](https://stacker.news/items/395461) and @calle's [comments](https://stacker.news/items/395461/r/cleophas?commentId=395627) are probably the best discussion I've found of the issue.

But this question didn't come up there. I think answering it might help people understand the risks and benefits involved with ecash on bitcoin. So here's an attempt to do that. 

# Ecash is not bitcoin

This may seem obvious, but ecash tokens are not bitcoin. To demonstrate this point, let's compare ecash to the Lightning Network.

If you pay me for one of the posters I sell in sats via Lightning, I have to run a Lightning node with at least one channel to receive the sats. I can unilaterally close this channel and return the sats to an onchain utxo in my sole control (as long as there are enough sats to cover the fees).

If you pay me for a poster in ecash, all I need is an ecash wallet to receive the tokens. But I cannot turn the tokens into sats unless I convince someone to trade with me (my ecash tokens for their sats).

Clearly, if you don't have a private key that unilaterly controls a utxo recorded in the Bitcoin blockchain, you don't have any bitcoin.

Therefore, in my view ecash is not bitcoin. It can be pegged to bitcoin, it can [interoperate with bitcoin](https://x.com/MaxAWebster/status/1793751544476954638), it can be useful to bitcoiners, but it is not bitcoin.

# Ecash is not custodial

Let's compare ecash tokens to a balance in a custodial wallet like Wallet of Satoshi.

If I use Wallet of Satoshi to generate a Lightning invoice and some nice person pays that invoice, what actually happens is that they send sats to a Lightning channel WoS owns and I trust WoS to update a spreadsheet they have that credits those sats to my account.

If I use a Cashu wallet to generate a Lightning invoice and some nice person pays that invoice, what actually happens is that the mint owners receive the sats in a channel they own and do some fancy math to issue an ecash token worth that amount of sats to my wallet. As far as users are concerned, this interaction in Fedimint looks almost the same (except the channel owned by the mint is controlled by a group of people in a federation, rather than a single entity).

Now let's compare the process of asking for my sats back:

In the case of WoS, I am pretty much at WoS's mercy. They can refuse to give me the sats or they can show me an incorrect balance or they can simply turn off their servers and walk away.

In the case of Cashu and Fedimint, neither one can stop me from trading my ecash tokens to another person (unless they shut down the entire mint), nor can the mint show me a fake balance. The mint *can* issue more tokens than the number of satoshis they have received, and they can shut down completely and walk away.

Custody means the custodian holds the asset and you can't move it without their permission. I suppose I could sell my WoS account to someone else but they would be trusting me not to sweep them and they would still need WoS's permission to move any of the sats out of the account.

Therefore: Wallet of Satoshi is custodial. Cashu and Fedimint are not custodial.

## TANGENT: Which asset are we talking about?

Hold up, wait a minute: *Custody means the custodian holds the asset*...which asset are we talking about here? The ecash mint isn't holding my ecash (proof is that I can give it to you and they can't stop me), but I did give them some bitcoin to get the ecash...so presumably they are holding that bitcoin. So here's the million dollar question: is it still my bitcoin?

This calls for another analogy.

When you buy a watermelon from a fruit stand, the merchant isn't custodying your money. They're trading a watermelon with you in exchange for some money.

When you give your money to a bank, they *are* custodying your money. They're not giving you something in exchange for your money.

The key differences are that at the fruitstand something is exchanged and at the bank I expect to be able to get my money back.

So which model better fits ecash mints? It seems clear that the reason I send sats to a mint in the first place is to get some ecash tokens *to use.* I may want to use them to buy watermelon or I may want to use them to zap my special internet friends on nostr. The idea seems to be that I will be able to spend my ecash tokens as ecash tokens. If the only way I can ever use them is to turn them back into sats, why give up the sats in the first place?

While my first instinct was to say that ecash mints are like banks, the more I think about it, the more they seem like a fruitstand. When I give the mint my sats I expect them to give me ecash. I want to be able to use that ecash to do other things, particularly, I want to use that ecash to do something I couldn't do with the sats. And I do not expect to turn my ecash back into sats. I think this means that I'm *buying* ecash from the mint and when I do, I give up my claim to the bitcoin.

And yet, as far as I can tell, the general understanding of what happens at a Fedimint or Cashu mint is not that they are selling me tokens.

# Is custody good for ecash?

I can think of four reasons why Cashu and Fedimint developers might have decided to describe what happens at a mint as "deposit/redeem/custody" rather than simply selling ecash tokens for bitcoin.

## 1. Keeping up the peg

Ecash tokens built on bitcoin seem to be a lot more useful if they have a stable value in relation to bitcoin. On the surface it seems like this is particularly true when they are pegged 1-to-1 to sats. It at least makes them a lot easier to reason about. So perhaps the deposit/redeem/custody language helps users understand (and have faith in) this peg.

Yet, I don't think introducing this confusion is necessary. Tether does not claim USDT tokens are actually dollars. Indeed, the value proposition comes from them *not* being dollars (you can use them in ways that you can't use dollars). Another example might be gift cards ([which I think have a lot of similarities with ecash](https://stacker.news/items/397764)): nobody is going around saying gift cards actually are dollars. It seems possible to peg one asset to another without demanding that everyone believe they are one in the same asset.

In my confusion on this issue, I've even spent some time trying convince myself that pegging an ecash mint to bitcoin might be like the fed's repo windows (you give the mint your bitcoin as collateral for a loan of ecash with the agreement that you will repurchase the bitcoin at some future date). 

## 2. Interoperability

Ecash developers are doing some incredible things right now. A lot of the magic comes from the fact that ecash balances interoperate with Lightning so seamlessly. Perhaps some of the desire to tie ecash tokens more closely to bitcoin by saying users deposit bitcoin with the mint comes from a desire to make it easy for a thousand mints to bloom. If mints sell ecash tokens, would we need to start thinking about exchange rates between mints and discounts based on the trustworthiness of certain mints?

## 3. Regulation

Selling tokens for bitcoin seems like the kind of thing that would attract the attention of regulators. If mints sell ecash tokens, a bunch of questions about taxes and reporting suddenly pop up. Do mints become exchanges? I don't think so, but the Lightning gateways that serve different mint ecosystems might be considered exchanges. The question though is are these problems smaller than the regulatory turmoil of being a custodian?

## 4. Association with shitcoinery

The Bitcoin ecosystem has an immune response to any other coin. I suspect that ecash would have had a hard time gaining traction in the space if they announced their protocol as a way to create new tokens and sell them to people for sats. Ecash developers are not alone in contending with this problem. Liquid (perhaps the most successful altcoin pegged to bitcoin) also tries to describe the [coins on Liquid as actual bitcoin](https://docs.liquid.net/docs/technical-overview) and not an altcoin:

> Liquid is a sidechain of Bitcoin that allows users of the Liquid Network to move Bitcoin between the two networks with a two-way peg. Bitcoin used in the Liquid Network is referred to as L-BTC, and each L-BTC has a verifiably equivalent amount of BTC secured by the Liquid members called functionaries.

The general understanding of the situation seems to be that if your coin pegs to bitcoin it can claim to *be* bitcoin. This is absurd to me. Bitcoin's value proposition is censorship resistance. All the various projects that produce a token pegged to bitcoin are giving up some of that censorship resistance (hopefully in order to gain something else) and it confuses people to claim that they are actually bitcoin just in another form. 

# Ecash is not a shitcoin

I don't think Liquid tokens are shitcoins. Nor do I think ecash tokens are shitcoins. Unfortunately, as I've been writing this, I haven't been able to come up with a very logical defense for why I believe this.

Here's my best shot at it: I am convinced that bitcoin is incredibly useful. It's money you can send to anyone anywhere anytime and no one can stop you. Not everything that takes advantage of this usefulness needs to be incorporated into Bitcoin itself. Ecash is also useful, but it becomes a lot more so when it gets pegged to bitcoin and interoperates with it. Cashu and Fedimint are both working on ways to establish this peg. Hopefully we will continue to develop new ways to minimize the trust such a peg requires. But useful things that further the mission of censorship resistant money seem to me to not be shitcoins. This gets into what is probably an entirely different post, so I'll stop here.

# Conclusion

There may be good reasons for calling what happens at a Fedimint or Cashu mint custody but they come with a price and they are not the only model we can use to understand these protocols.