One of the problems in making bitcoin ( BTC ) a worldwide currency is the difficulty that underdeveloped countries have to access hardware. Fedi’s new radical proposal for bitcoin custody could enable billions to participate in the international community at a very low cost.
This is a problem that bitcoin has to deal with: A decentralized, revolutionary currency, which plans to create a new economic world without the control of any state governments, but those most in need of an economic revolution are often not able to access it.
To give an example, let’s say that the Central African Republic did research on the feasibility of adopting Bitcoin as a legal tender in 2022. It found it very difficult when only 11% use the internet.
Even if billions of people all over the globe don’t intend to mine bitcoin directly, the truth is that bitcoin is safer inside a hardware wallet.
Without this hardware, a person’s bitcoins would need to be stored elsewhere and could be subject to fraud and theft. Although bitcoin is revolutionary due to its trustless nature, self-custody and other benefits, it could be difficult to convince skeptical investors to invest in bitcoin. It’s worth taking the risk.
Fedi, their new Fedimint system (short for Fedimint) have been making big waves in the international Bitcoin community. They propose to completely change the way asset custody works worldwide. Fedi’s custody system was inspired by the ‘Chaumian mint’ concept, which dates back to the dawn of internet cryptography. In this model, a central entity called an’mint’ (or ‘bank) would issue anonymized IOUs for certain collateral assets.
The mint operators are protected by a cryptographic protocol that makes it impossible for them to know who has redeemed an IOU and what collateral they might have. This idea was never realized before cryptocurrency.
Obi Nwosu is Fedi’s CEO, and co-founder. He described the process of how this plan was revived into the idea of a federated bitcoin mint. He hopes to see it scaled up to provide services for people all over the globe. This type of asset custody differs from self-custody where the user manages their bitcoin. It is also distinct from third-party custody where bitcoin is entrusted as a type transaction to a corporate entity.
Fedimint is a second-party custody system that Nwosu describes as Fedimint. This means trusted community leaders act as the main gatekeepers over a pool bitcoin with multisig verification of transactions. The community members are able to control how bitcoin is disbursed from the custody device. This ensures that no one can alter the funds of another individual or collective.
Although this radical solution is not yet ready for prime time, Fedi has many factors in place to make it a success. First, this protocol will be integrated with the Lightning Network, as it is likely that there will be large volumes of small transactions.
Lightning Network’s decentralized nodes system and bitcoin microtransactions make it an ideal platform for powering such a system worldwide. Nwosu also has the ‘privilege and honor’ of working with some the most accomplished and prolific activists in the world. He has specific people available for outreach in Eastern Europe and Latin America. These geographical regions could prove to be very fertile for the next generation Bitcoiners.
Combining ideas from early cryptography and the demands of a global, dynamic bitcoin economy may be the catalyst needed to disrupt the entire world and bring billions to bitcoin. Fedi and its protocol still have a lot to learn. They hope for a rollout by Q3 2023. However, the $4.2 million of seed money that has already been accumulated will give Fedi a solid start.
While a world where untold millions of new Bitcoin users are dependent on the Lightning Network due federated mint protocol is unlikely to be realized for some time, the potential for Bitcoin and the entire globe are enormous.