Fedimints Could Be The Future Of Bitcoin Payments

Fedimints are a new way to transact Bitcoin. They are designed to make Bitcoin transactions more scaleable and private.

With Fedimints, Bitcoin users form federations, where trusted community members (guardians) manage the custody of Bitcoin. You could create a small Fedimint for your family members, or you could join a Fediment that has thousands of members. You can think of it as a cross between a community bank and a Facebook group.

Fedimints are fully interoperable with the Lightning Network, allowing users to move funds between their Fedimint and their own self-custody Lightning wallets. This ensures that users can still participate in the broader Bitcoin network while benefiting from the privacy and security of a Fedimint.

Fedimints use Chaumian eCash notes and blinded signatures to ensure that federation guardians cannot see individual transaction details, account balances, or the identities of users. This provides a higher level of privacy compared to traditional custodians.

Let’s say you join a local “federation” by downloading the Fedimit app on your phone and then scanning a QR code invite from your community. You send Bitcoin to the federation, and the Bitcoin gets secured by a multi-sig setup on-chain and then you are issued e-cash that you can use to pay people inside of the federation. Now you can use that e-cash to pay the local butcher, farmer, artist, or family member who is also part of the federation. Those e-cash payments within the federation are free and instant.

If your phone is offline, you can still pay people successfully using e-cash, since Chaumian e-cash is a bearer asset. Note that this e-cash can at all times be cryptographically proven to be fully backed by real BTC that is being held in that multi-sig address by the federation. At any point, you can ask the guardians to convert your unspent e-cash into Bitcoin and withdraw it to self-custody either through an on-chain payment or using the Lightning Network.