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1535 sats \ 1 reply \ @ek 21 Jan freebie \ on: Fedimint is Self-Custodial ecash
Beyond a financial network
  • Prediction Markets
Glad you mentioned prediction markets since I asked myself exactly this the past few weeks:
Couldn't a fedimint federation fedimint federation1 be exactly what I am looking for to solve the oracle problem in a way which requires less trust?
For example, @gunson mentioned here this:
Market settlement is going to be a very interesting problem to solve in future versions.
I wonder if you could nominate an npub (or have an m of n npub model) to agree on the outcome. Then anyone participating could:
  • Choose a market based on the npub they most trust
  • Vs. the market with most liquidity
Market settlement then only possible based on nominated npub signing a settlement message with their nsec.
So maybe I could just nominate a federation? In that case, I could also solve two problems at once: oracle and custody of funds.
Really looking forward to what you guys build at Mutiny.
I don't know enough about Fedimints yet to have an opinion but I have a feeling that Fedimints could be what Hal Finney talked about here with "Bitcoin Banks":
Actually there is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.
Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.
George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self-regulating.
I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as... well, as Bitcoin based purchases are today.
I could be wrong though.

Footnotes

  1. I still get hung up on the terms around fedimint similar to what @Car mentioned during a SNL episode. ↩
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328 sats \ 0 replies \ @ek 21 Jan
Cash from some banks may trade at a discount to that from others.
This is also exactly what you mentioned here:
One distinction I will stress here is that it will rarely be precisely 1:1. There should NOT be an expectation that an Ecash will ever redeem the exact amount of Bitcoin because of the fees involved. You can never go directly to the source to get the same amount of Bitcoin as you entered. The same concept can be applied to other layers, such as Lightning. A sat on LN is valued differently than a sat on-chain. This is important to understand the actual cost of Bitcoin ownership, the cost to control and manage capital in a blockchain, and how market rates will be determined.
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