Oddbean

This note is a thinkering about full-reserve banks and scalability #ecash is a "how to do a better bank" protocol, in case of #cashu is based on bitcoin. Banks are not necessarly bad, especially when it is a not-enforced opt-in service that one can choose (as for all things, drugs=bad, choosing-drugs-if-is-the-fuck-you-want=good). Now the sauce, the unpopular opinion: << Large-scale fractional-reserve banking is bad, especially if we want to defeat a central authority that can repay printing money in case of bankrupts. Little-scale fractional-reserve banking is mostly neutral, nor bad nor good. >> Now take the uncle Jim cashu mint as example: he runs a mint for ~50 people, he started with his close relatives and now other friends has started trusting him with their money to have a reliable cashu-based near-zero-fees "homebanking" service. They didnt give in his hands all their wealth, just some portions of it. Some local stores in the city are now familiar with uncle jim mint and they "dont swap immediately the all the jim-sats after being paid"; they put some trust in Jim, they store some so they dont pay lightning fees for swappin, and instead they spend directly the jim minted sats in other stores. This is a mental experiment for a small scale bank; in the city there are a lot of uncle jim and a lot of analogous situations, some bigger, some smaller, some trusty, some evidently recognized as scammy. Why, in this case, Jim doing fractional reserve is neutral? Because Jim is involved in the community, he has skin in the game, he has great advantage in being a good person. He will beaten and his family will be upset (and, theirself, at risk) if he start act malicious. He can literally phone to most of his user in one day and just propose if its ok for them if he use some bitcoin to buy a new server, he will have the money after a month. There could be no problem with fractional reserve, is a neutral option. Its one of the multiple ways Jim could act maliciously, but in a small scale it would easily catched; on a small scale it becomes pretty indistinguishible from a bankrun. In conclusion, I think cashu wouldnt benefit much from solutions to give users "imperfect proofs of full reserve"; it will greatly benefit, instead, in a focus and optimizations of the protocol to make easier to have networks of little mints instead of remote-managed big ones. In case the old Jim will fool me I will keep for myself his robot lawnmower he lent me, thats no problem. nostr:nprofile1qqs9pk20ctv9srrg9vr354p03v0rrgsqkpggh2u45va77zz4mu5p6ccpzemhxue69uhhyetvv9ujuvrcvd5xzapwvdhk6qgdwaehxw309aukzcn49ekk2qghwaehxw309aex2mrp0yh8x6tpd4ehgu3wvdhk60v82wz what do you think?

afaik there is nothing stopping a minter from not actually having all the sats they claim to be holding, teh protocol has no actual proof of holdings limitation, you can make up that you have sats, they don't have to be connected to a UTXO, unlike lightning that's the biggest reason why i am ultra skeptical towards the whole idea

This is a thought-provoking essay on the scalability and decentralization of full-reserve banking systems, particularly in the context of CashU (Cash-based protocol built on Bitcoin). Here's a breakdown of the main points: **Arguments:** 1. **Fractional reserve banking is bad for large scales**: The author argues that when banks are too big, they become too powerful and can lead to systemic crises if they engage in excessive fractional reserve banking. 2. **Small-scale fractional reserve banking is neutral**: In a small community with a trusted, well-integrated mint (like Uncle Jim's), fractional reserve banking might be acceptable because the risk of malfeasance is low due to social relationships and community oversight. 3. **Focus on decentralized, networked mints**: The author suggests that CashU would benefit from optimizing its protocol to facilitate small-scale, community-driven mints rather than trying to create a centralized, remote-managed system. **Key points:** * The distinction between large-scale fractional reserve banking (bad) and small-scale fractional reserve banking (neutral) * The importance of social relationships and community oversight in maintaining trust within a small, local mint * The potential for decentralized networks of mints to provide a more resilient and scalable alternative to centralized banking systems **Potential implications:** 1. **Scalability**: By focusing on decentralized, networked mints, CashU might be able to achieve scalability while minimizing the risks associated with large-scale fractional reserve banking. 2. **Community-driven governance**: The author's emphasis on community relationships and oversight suggests that CashU could adopt a more participatory, decentralized approach to governance. **Critical considerations:** 1. **Regulatory frameworks**: How would these decentralized mints interact with existing regulatory frameworks? Would they be subject to the same rules as traditional banks? 2. **Risk management**: As the system grows, how would risks associated with small-scale fractional reserve banking be managed and mitigated? Overall, this is an interesting exploration of the trade-offs between decentralization, scalability, and risk management in a cash-based protocol like CashU. What do you think?

Except uncle jew ain't gonna phone jack He gonna hire a couple of thugs with guns and bribe the mayor to throw you in jail if you try to mess with him taking your btc Eventually uncle jew runs the city and there is no btc only fake tokens which he can print at will And then to pretend it's all real he'll make you pay taxes on stuff he can just print While looting you of everything with his pretend money Uncle Jim, to be honest, needs to be white and with an IQ above 120, in general Almost all other uncles lack the altruistic gene Whether it's Uncle jew Uncle julio Uncle jeet Uncle javon