Fedimint
Overview
Status
Mainnet
Type
Chaumian Ecash
BTC Supply
₿0
Fedimint is a module-based open source framework for building federated applications, which can be collaboratively managed by a group of trusted entities. The main application that is in production today is an open source federated Ecash mint. The construction of a Fedimint sees users lock their BTC into a federation's multi-sig, and receive a bearer Ecash IOU in return. The concept improves on the currently predominant form of third party custody, as the user has a socially known and trusted entity guarding their BTC; a concept that is termed “second party custody”.
Risk Summary
Users funds are managed by the mint operator
Users deposit BTC into a multisig to interact with a Fedimint. Users explicitly trust the signers, known as guardians, of the federations’ multisig to not steal their funds. If the mint gets hacked, becomes unresponsive or turns malicious, user funds can be stolen.
Users must select which mint custodies their funds
Users can choose between different mints to interact with. It is avised that users choose a mint that they trust and personally know the identities of the operators.
Tokens can be debased
Ecash notes represent a claim on BTC held by the mint operators. As such, there is the risk that the operators issues more Ecash tokens than bitcoin it actually holds. This can lead to Ecash tokens being unbacked.
Assessment
Asset Custody
Users funds are managed by a set of guardians
A Fedimint is operated by a number of guardians that custody users’ funds in return for issuing bearer Ecash tokens. If the mint gets hacked, becomes unresponsive or turns malicious, token redemption is at risk.
Core Technology Components
Chaumian Ecash
Chaumian Ecash enables a Fedimint to create and redeem IOU notes that represent claims on bitcoin. Ecash uses blinded signatures. This shields users’ balance towards the mint and ensures the privacy of transactions.
Federations
Fedimint categorizes as a “federated Chaumian Mint”, jointly operated by multiple trusted entities(referred to as guardians) via a multisig setup.
Lightning Swaps
Fedimints enable Lightning interoperability through LN gateways. A guardian or even any user of a federation can run a lightning node and pay and accept lightning invoices on behalf of users in the federation. This is particularly useful as Fedimint users don't need to be online to accept lightning payments.
Use Cases
Private Payments
Fedimints enable anonymous payments through the use of blinded signatures. The mint is unaware of transactions made by the users or their respective account balance. The mint can only establish a link to a users’ onchain address when pegging in and out of the mint.
Second Party Custody
Fedimints enable users to deposit their Bitcoin with a federation of trusted “second” parties” (e.g. family member or community leader). Federated community custody may be preferred by some users over the prevailing third-party custodial model.
Low fee transactions
Fedimints provide low transaction fees for users, as a mint is a central entity and transactions do not require Bitcoin blockspace. Fund deposits can either be done via an onchain deposit or via the Lightning Network.
General Purpose Smart Contracts
Fedimints can support any arbitrary computation. Federations supporting application modules like borrowing and lending protocols, and stablecoins, are possible.
Knowledge Bits
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