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10 sats \ 6 replies \ @Lumor 4 Jun 2023 \ on: Discussion on Fedimint bitcoin
The blockchain and lightning protocols can't scale to serve the world population without some form of semi-custodial nodes. Fedi is promising.
One thing that would be great to fix is preventing the introduction of fractional reserves, where not all ecash tokens within the mint ecosystem are actually backed by bitcoin.
introduction of fractional reserves,
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See #188525
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Indeed 😔
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I don't believe the fractional reserve possibility of Fedimint can be fixed. When using Fedimint, you will always have to trust that k of n of the federation don't collude together to debase you or outright steal all the funds of the Federation.
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The federation should be able to publish a "proof of reserves" at some fixed time interval akin to exchanges. A merkle tree containing all the tokens might be very large, not sure if there's some private way of grouping them.. And then they would also publish signed UTXOs adding up to the same amount. Maybe have some "proof of funds" procedure like Hoseki if that calms people down. UTXOs could be moved/consolidated at the same interval to ensure that they aren't being "lent out" to someone else.
People's wallets could then verify their tokens exist in the merkle tree and that the UTXOs are correctly signed.
But yes, the guardians could go for a rug eventually. This just makes it harder to do up until that point of corruption.
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Very interesting!
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