Oddbean new post about login | logout eCash is a custodial but very private way to send a “bearer instrument” (like cash) back and forth, but (unlike wallet of satoshi) the custodian doesn’t really much about who transacts with who, or for how much, thanks to the cryptography involved. With Cashu, it’s an eCash protocol, but instead of representing dollars (which is why the first eCash experiments failed), a Cashu token’s value is pegged to Bitcoin, and the custodian (“mint”) presumably hold exactly the right amount of Bitcoin in relation to the value of the Cashu notes they have issued. Happy to answer questions if unclear; I’m still learning this myself 🤙
as always you’re always teaching me something new perfectly 😭 thank u sm
🫂🫂🫂 so welcome! love u fren 🤙
@Sarah SoupBox [Zap.Cooking] the meanin of mint! Does this help answer your question?
let me read it when i get settled in at home after work, thanks so much!
A mint could be anyone, from a single developer or small startup offering a Cashu wallet app, to a national bank holding Bitcoin in reserve and issuing eCash tokens o their clients. The latter is probable, in a hyperbitcoinized future where on-chain Bitcoin transactions are prohibitively expensive for the average user, meaning that opening a self-custodial Lightning channel is similarly cost-prohibitive, and so we implement an eCash workaround that allows users to operate on a Bitcoin standard and stack “eSats”. Mutiny Walley offers this already, so that a new user with no Bitcoin can receive zaps and begin accumulating micropayments, until they’ve earned enough that opening a Lightning channel with those funds is actually rational.
Couldn’t a mint just rugpull everyone working with it? Or perform fractional reserve operations?
Yes. And yes. Rugpull: it’s still a custodial service. Consider Wallet of Satoshi or Alby, two popular custodial Lightning services. eCash delivers a specific benefit over these services by dramatically improving the users’ privacy. But one still must be aware of the risks of not holding your own keys. Fractional reserves: this is a risk with any custodial service, especially when you get into using a medium that represents the thing held in custody (cash to gold) rather than making daily withdrawals/transactions in the asset itself. As with above, a custodial Bitcoin service (without eCash) could still do this; banks can do this. Some do. But the option exists for demonstrating proof that the assets in custody are a 1:1 ratio to the tokens issued. How that would work is definitely beyond my technical knowledge, but my understanding is that it’s possible. So - tradeoffs, as with everything, but arguably better tradeoffs than existing alternatives. Hope this helps 🫡
How could those risks be mitigated?
Rugpull: shared/federated custody (see fedimint) Fractional reserves: published proof of reserves — I don’t know if/how this would work in a provable way. But I believe it’s possible…