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100 sats \ 21 replies \ @justin_shocknet 21 Apr \ on: Cashu vs Fedimint bitcoin
Cashu is effectively an API for connecting to a remote node, which is aligned with Zeus having long been the go-to wallet interface for self-hosted nodes.
Federations on the other hand are a hoax/scam, there's still a central gateway and single point of rug despite the deceptive marketing. These Fauxderations only appeal to shady operators wishing to obfuscate who the custodian is/was, the kind of orgs that have bigger problems to solve right now since their USAID money got rugged.
Federations are scam or fedimint is scam? I don't get it. I had Fedimint tokens in the past when I was playing with and haven't see them disappearing. Are the Fedimint developers scammers? I don't understand.
What is USAID abbreviation for? What does it have to do with Fedimint or federations?
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Both, federation is a term used by scammers in the context of Bitcoin, there's no such thing. There are multisigs but that doesn't make custody federated, Liquid for example... you don't know how many parties are needed to collude to rug you. All they need to do is turn off the gateway, or one party could hold several keys in the multisig.
Fedimints themselves, as of recently, aren't even multi-sig. The mutiny incident where people lost access to their sats was from a single member going down.
Just because you are issued shitcoins that represent claims on Bitcoin doesn't mean the Bitcoin is federated, Fedimint tokens are inherently worthless shitcoins with a promise that you might be able to redeem for Bitcoin from a centralized gateway.
The Fedimint developers are Blockstream, purveyors of affinity scams like Liquid they claim to be an L2, and have seemingly burned hundreds of millions in funding that came from god knows where on products that's only function is to obfuscating custodians.
Fedi is a product based on Fedimint, their scamming was even more overt, taking the Blockstream model and attempting to apply to to smaller NGO "communities"
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Isn't cashu the same (on the relevant points you said, I am ignoring the rest)?
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Cashu doesn't pretend to be Federated, so in that way it's not scammy. It's custodial tech, which is fine if transparent.
Cashu is simply retarded on a technical level, that's better than being a scam though.
The knock on Cashu is that it's overly complex and the only appeal it has is to virtue signaling privacy larps that think you can get privacy from a custodian.
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I appreciate the criticism, I'm trying to understand this ecash space to see if there is really something to it or if it's just smoke.
I will play devil's advocate and challenge some of the arguments I read from @justin_shocknet.
Even if their current version doesn't support multisig which I'm not sure is true or not, is there any technical limitation stopping it from happening? If not it will probably happen over time, even it's a fork.
My main question is how the federation would be formed with a healthy sample of people who are unlike to collude later? If there is a group creating a wallet like Minibits and they also operate a mint, even if federated I think the amount of trust deposited in a group who are probably close to each other makes it unappealing to me.
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You could have a multisig storage where members cooperate to emit redemptions
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You could eliminate the API single point of failure with a neutral comms layer like Nostr that uses identity keys to get signatures from members (chain only, not applicable to Lightning)
Where it gets technically impossible is you still need to have a master or a multi-master election that coordinates those signatures. The FROST stuff relates to simplifying this, but I don't see how it solves it completely as there's still bi-directional coordination required which means a single point of failure. Failover scenarios from that get complex and gameable and therefore fragile.
It's less about can the custodians run away from each other with the coin, in as the system much stops you from redeeming your shitcoins for sats.
There's no way to redeem via Lightning in a federated way given the nature of channel construction, so MoE justifications mentioned elsewhere are bunk. If you can afford to MoE on chain you don't benefit from a custodian at all.
people who are unlike to collude later
Using the Liquid example which is allegedly distributed among large business with their own reputations to protect, you still have to trust that is the case and that the keys are distributed and only distributed in the way they claim.
Since it all boils down to trust at the end of the day, you may as well trust a single entity whom you can hold accountable. If you don't want all your eggs in one custodial basket, spread your eggs around to multiple baskets, not some rube goldberg machine alleging multiple custodians are holding your single basket.
Federations exist for no other reason than to offer is deniability to the custodian, there is no added protection for the user at all.
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Woah there. Hol' up one sec.
I wanna talk about your second paragraph about Federations being a "hoax/scam". I don't have a strong opinion on it, but it's a subject I've wanted to have a discussion about for a long time. So, let me give a bird's eye view of my position so you can help show me where I'm wrong, if you do disagree.
I think Federations can be incredible for the future of scaling Bitcoin. They are a very tricky thing to get "right", but that doesn't make them a scam. They are easy to abuse and mis-use... but that doesn't make them a scam. They are a tool. If we utilize them properly, they aren't a hoax/scam.
I think your kind of messaging is probably why this incredible technology isn't taking off.
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scaling Bitcoin.
Only if, to be intellectually consistent, you'd also say that ETF's scale Bitcoin.
Custodial solutions are not "scaling".
doesn't make them a scam
If you tell people that their Bitcoin is safer in your system vs other custodians based on a false premise, that's scamming.
this incredible technology
You've missed the point, there's nothing incredible about it. It's a hoax, custody is not federated, it's no safer or any more distributed than an SQL database.
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Only if, to be intellectually consistent, you'd also say that ETF's scale Bitcoin.
To be "intellectually consistent," you should have mentioned that you can't withdraw bitcoin from your ETF while you can from a fedimint.
edit: I already regret this comment since I don't actually have a horse in this game. Just wanted to point out that there's still a big difference between ETFs and fedimints.
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He already tried that gotchya, SoV vs. MoE... sub ETF for Wallet of Satoshi if you like.
A database is a database.
Even at that, at least ETF's open up the collateral use-case, I can spend from an ETF to a Lightning gateway ... which is all fake L2's do ... without without actually selling any claims to Bitcoin thanks to margin.
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WoS could be rug-pulled by a single malicious developer or CEO.
In a Federation, potentially hundreds of well-known, local community members would have to collude to rug-pull the community's funds. No single person could. Not even 10 people colluding could if it's a 20/100 multi-sig.
These are very important nuances.
Look, I'm only trying to push back on your calling Federations outright "hoax/scams". If you think Federations are scams, WoS is 100x worse! Yet, you seem to think there is no difference between them.... no nuance at all. ETF's and centralized companies like WoS are very different from Federated Mints.
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Fedimints have already rugged people, by just a single member going down.
If WoS rugs you you know who to blame, mints exist to point fingers.
There's nothing that requires collusion, they have a single point of failure. Get that through your head, it's a scam, there's no protection via distribution. You've been lied to.
Two quick things:
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There are different categories of scaling. ETF's scale Bitcoin as a savings tech, but they do not scale Bitcoin as a MoE. Federations scale Bitcoin for both use-cases. I'm very interested in scaling as an MoE because I view it as an existential threat to Bitcoin if it cannot scale in this category.
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Saying that a properly setup Federation is akin to an SQL database is disgustingly misguided. If the federation is setup well, no single person has unilateral transactional power. It's just a multi-sig setup where potentially a hundred people have 1/100 keys. It's 1000x better than traditional banks, while giving the people the same conveniences as traditional banks. Nothing beats self-custody, but I think Federations can be an incredible middle-ground tradeoff for the average person living paycheck to paycheck anyway.
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It doesn't scale it as an MoE either any more than Wallet of Satoshi (SQL database) does, the IOU passes through a Lightning Gateway. Lightning is the scaling layer, not the mint.
no single person has unilateral transactional power.
That's where you're wrong, kiddo.
Fedimints aren't even multisig last I checked, just promises of FROST maybe at some point in the future... even so, for Lightning, there's inherently a single spender because channels are only 2:2
There's also the issue of a single gateway API point of failure that only needs to be taken down to rug your shittokens.
(Ark is also a scam for many of the same reasons)
the average person living paycheck
You're not even debating the tech at this point, just virtue signaling about poors... pathos is at the top of the scammer playbook.
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I think we have different ideas of how Fedimints work. I haven't audited the code, so I could be wrong. But from my understanding your comment that "Lightning is the scaling layer, not the mint" is not correct, and could explain our disconnect.
Lightning works on the edges of mints, to connect them to other mints or other sovereign LN nodes. There could be hundreds of LN node operators within the mint. They get paid in the mint's ecash whenever someone uses their node to route payments to the outer world. But within the mint, ecash is the database layer. The raw Bitcoin held inside the mint is held in a multi-sig setup where potentially hundreds of people hold a single key in offline, cold-storage. Those people could collude to rug pull, and that's why I'm so interested in the social element to this, because there are infinite social-layer ways it can be done. Similar to how banks prevent executives from stealing funds.
So, that's my understanding
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You hold the idealized scammer marketing version you want to be true, I hold the actual technical reality version.
If scaling MoE is your thing, there's Lightning on the protocol level, and custodians on the aggregation level. End of story.
Mints are neither, they're just inefficient databases sold by scammers attempting to distinguish themselves from other databases.
The shittokens are no different than any database record in that all you have is HOPE that someone will exchange you sats for it.
You realize that just because something has technical tradeoffs you don't agree with doesn't make it a scam? It's like you'd label UDP a scam because it doesn't have packet delivery guarantees.
A common scenario for Fedimints is in places where there is not a sufficiently developed legal system where you can seek legal redress against a custodian. The idea is that if the custodians are amongst a group of people it's less likely they'll conspire together. Whether this will happen in practice is another question but there's no scam here.
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Can you read? This has nothing to do with trade-offs, it simply doesn't do what it claims to. Hense, its a scam.
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