Understanding Fedimint & Federations

Hey Built on Bitcoiner,

You're well aware that Bitcoin's unique design is aimed to decouple money from the state, making it unstoppable currency.

However, the concept of federations has been known to raise eyebrows among the Bitcoin community. The key concern? They infuse trust into the equation in a potentially risky way. Take the Liquid blockchain: 15 companies form a federation to manage the peg-in/peg-out process of BTC on and off the chain.

Federations = bad? That's the common belief echoed in Crypto Twitter circles. But, my recent chat with Kody Low from Fedi has shed some light and offered a more nuanced take on the matter.

Here's a key takeaway:

Are you familiar with the contrast between second-party and third-party trust in federations?

Third-party trust is what most of us recognize. Think Liquid. The federation is composed of mostly faceless corporations or entities with which we don't have personal links.

On the other hand, second-party trust involves a closer relationship. Imagine a bowling league or a boy scout troop. You have personal ties with some entities within the federation.

Consider a scenario: You're leaving your wallet with someone. Your decision hinges on two factors: your trust level with that individual, and the potential benefit they could gain from betraying you.

The beauty of this is that it unfolds a spectrum of trust, one that varies depending on individual relationships and the perceived benefits at stake. This perspective gives a more complex, nuanced view of federations and their role in the world of Bitcoin.

This is at the heart of how Fedi and Fedimint think about trust assumptions. It moves into the realm of social consensus. You use the federated network you trust enough for a particular use case.

This is one item we discuss in the latest episode #117 on the Podcast.
 We discuss:

• How he become a Bitcoin developer

• Best places to learn to Code for Bitcoin

• Difference between Fedi and Fedimint

• What Fedimint can be used for

• What is a chaumian mint?

• What was just released with Fedi Alpha
  

Plus a bunch of other topics. Kody is passionate about this and it shows.

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That’s it. Let me know what you think of this episode.
Love yall!
-Jake