What Bitcoin Did

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Fedimint & the Future of Bitcoin Custody with Obi Nwosu

Peter McCormack

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Fedimint & the Future of Bitcoin Custody with Obi Nwosu - WBD551 Peter McCormack

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Obi Nwosu is a co-founder of Fedimint and a board member for Jack Dorsey’s and Jay-Z’s ₿trust. In this interview, we discuss how Fedimint builds upon various innovations to create community Bitcoin banks, with the aim of fully realising Bitcoin’s potential to bank the unbanked.

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In 2018, Bitcoin Magazine asked Andreas Antonopoulos to reflect on 10 years of Bitcoin. He remarked that not everybody needs Bitcoin; “the real impact of this technology is on the other 6 billion: the unbanked, the underbanked, the politically oppressed.” Whilst Bitcoin has the utility to help those living outside of the financial system, in its current form it still lacks the functionality and scalability to adopt the majority of people who, as Andreas stated, really need it.

Bitcoin has multiple constraints, but a principal issue is expecting the unbanked to be able to self-custody. The answer to this problem lay in work undertaken by one of the original cypherpunks. In 1989 David Chaum created Digicash. Despite the venture eventually failing, decades later it helped pave the way for Bitcoin, and, now it is the basis for Fedimint.

Chaum’s innovation was to create blind mints: digital banks where communities can deposit and utilise digital dollars, and where the custodians have no access to any of the user data. But it was a chance meeting between Obi Nwosu and Eric Sirion at a hackers congress in Prague last year that dusted off Chaum’s work and give it new life, with the aim of opening up Bitcoin to the masses. As a result, Fedimint was born in 2021. It attracted the sponsorship of Blockstream.

Fedimint operates outside of the Bitcoin blockchain, and the idea is that the custody will be managed by trusted members of a community. Custodial risk is reduced through the ability to have such mints federated, where the operation operates as a multi-sig. Obi believes that after the provision of decentralised censorship-resistant money and payments, Fedimint is the third pillar of Bitcoin. It offers the real opportunity to scale Bitcoin into a global currency.

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00:01:17: Introductions
00:07:33: From Coinfloor to Fedi
00:11:33: Federated mint solution for custody
00:15:51: The third pillar of the Bitcoin ecosystem
00:22:49: The evolution of chaumian mints
00:26:54: Setting up a Fedimint
00:33:55: Using a Fedimint, and integration with Lightning Network
01:02:23: Regulations, and security risks within federations
01:07:22: Risk of Bitcoin getting stolen
01:23:34: The spectrum of trust, and a step towards self-custody
01:34:54: Physical security for the federation guardians
01:40:27: Privacy implications of Fedimint, and blinded signatures
01:44:33: Establishing and growing Fedimint
01:48:32: Final comments

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