Fedimint Development Update
Blockstream Research

Fedimint Development Update

Blockstream Team

Much has happened since we last wrote about Fedimint, an open-source federated e-cash protocol that Blockstream collaborates on. Fedimint is at experimental stage and makes security and trust-model tradeoffs while conferring some scalability, ease of use, and privacy benefits.

Blockstream collaborates on the Fedimint FOSS project towards new types of layer-2 solutions with different security and privacy tradeoffs. Fedimint's community-focused approach to custody introduces an experimental trust model that lacks auditability, but brings scalability and strong privacy.

Fedimint Overview

If you are already familiar with Fedimint, you might want to jump to the Updates section below; otherwise, let’s recap what federated e-cash is all about.

At its core, Fedimint uses similar federation technology to Liquid. A Fedimint federation is a group that jointly controls a Bitcoin multisig wallet and enforces certain rules on the funds inside. As long as a majority of the group is honest, the federation functions correctly. This additional trust and security tradeoff allows adding versatility to Bitcoin that would not be possible otherwise.

When comparing Fedimint and Liquid: in Liquid, you receive L-BTC when bridging bitcoin to an HSM dynamic federated peg. You can then transfer these L-BTC on the sidechain, unlocking Liquid’s advanced smart contracting features and the ability to swap with other Liquid assets. The Liquid Federation recently published an update on how the design of its federation confers security benefits and censorship resistance on the network.

Fedimint, on the other hand, does not have a blockchain. Instead, users receive so-called e-cash tokens, small pieces of data that represent the funds deposited into the federation’s multisig wallet. The upside of this technology is that it provides more privacy by default and is more scalable since there is no blockchain to verify. The downside is the new risks arising from the lack of auditability, and the risk that the majority of the anonymous federation operators could collude to take the tokens. To learn more about the privacy of e-cash systems, take a look at our previous article. Once minted, these e-cash tokens can then be transferred between users of the same federation or exchanged for on-chain bitcoin.

Since e-cash tokens can only be sent to users of the same federation, such a system would have strong centralization pressure. To counteract this and allow interoperability with the wider Bitcoin ecosystem, Fedimint also includes a way to send and receive bitcoin via the Lightning Network. Users of one federation can easily pay users of another federation or ones running their own Lightning nodes.

One of the most exciting features of Fedimint is that it does all this without requiring any changes to the underlying Bitcoin or Lightning protocols. It can be adopted with little to no friction, making Bitcoin and Lightning more accessible, scalable, and private by default.

functional components
Pete Winn illustrates Fedimint's five functional components (accounts, custody & redemption, backup & recovery, transaction processing, LN Gateway) and three user personas (Guardian, User, Lightning Gateway).

Development Updates

Rebranding MiniMint to Fedimint: The most visible change has probably been the renaming of the open-source project from MiniMint to Fedimint. Initially, Fedimint referred to the abstract concept, while MiniMint was the concrete implementation built by independent developers in collaboration with the Blockstream Research team. The dual names have been a source of confusion, thus a decision to unify the branding. It also has new branding due to the help from Skyler and the Bitcoin Design Community.

Gaining developer traction: The Fedimint open-source project, so far in 2022, has attracted many new contributors leading to an all-time high in project activity. This is most welcomed and will allow the project to become deployment-ready much faster. Summer of Bitcoin and other conferences played an important role in connecting with new developers.

Fedomint Contributions Graph

Integrating Lightning: At the time of the last Fedimint update, the Lightning integration was not more than a theoretical protocol idea. With the help of Justin Moon, who got heavily involved in the project after Bitcoin 2022, it finally became a reality. Fedimint uses Core Lightning’s plugin framework to build a bridge between federations and Lightning and also upstreamed multiple improvements to the new rust plugin crate in CLN.

Founding of Fedi: Finally, Obi Nwosu, Justin Moon, and Eric Sirion founded Fedi; a startup focused on building the first mobile Fedimint wallet and deploying the protocol to the world. They hope it will only be the first of many companies focusing on Fedimint, spawning a sprawling ecosystem around the core protocol other than Blockstream as an early collaborator on the open-source protocol R&D.

By now, Fedimint has all core user-facing features in place, and the goal is to release a signet demo soon, but there is still so much left to do:

  • Improving the resilience and performance of the consensus algorithm
  • Increasing test coverage
  • Building new and exciting experimental federation modules
  • Making the documentation more accessible
  • Integrating Taproot and ROAST

And much more.

If working with cutting-edge Bitcoin technology sounds exciting to you, please join the Fedimint Telegram channel, developer-focused Discord, and check out the GitHub repository!

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