Thread

Do I have to redeem cashu in the mint I got it from? Or can I use any mint? #asknostr

Hal F!!

Hal wrote about Bitcoin banks before Satoshi had invented merged mining. It was the obviously simple scaling solution, but they continued to develop and build. Bitcoin banks will suffer the same fate as gold-backed banks. The solution is multiple "medium-size" blockchains. So instead of 10GB blocks on L1, we have ten 1GB sidechains + 1MB L1, secured by Bitcoin miners and cheap enough for businesses to run full archival nodes. The rest of us can use SPV wallets (and still run a full L1 node), which are massively better than custodians.

LN fit better in the idea. Cashu is more like vouchers.

LN is part of it (and a rail that Cashu uses too). Cashu mints are like banks. They accept collateral (Bitcoin) and issue tokens (vouchers / “bank notes”) for that collateral. They “could” conceivably be fractional, and as Hal rightly said, people may trust/value tokens from one mint less than another.

Think of it like casino chips, if you have chips from the Venetian casino (says Venetian on the chip) you can't cash them out at the Bellagio casino and vice versa. Have to cash the chips out at the casino that shows on them.

Casino is fine But I am not going to use cashu then

Is this why Michael Saylor and other companies are buying up Bitcoin? So they can eventually act as Bitcoin banks and then probably issue their own cheap substitutes for people to use as money, so that we're back to the same problem we have now, only that the fiat will be controlled by corporations instead of governments?

I need to draw out how banks can still have a role in finance so that people can really understand how financial networks scale. Cashu mints are layer 3 credit instruments that beed layer 2 infrastructure before any of that is possible.

🧡🧡🧡 nostr:nevent1qqsf8w22yaq8yel76q2cr4k7vecj325f9e0z34dvjln7d8rp2ttph0gpzemhxue69uhhyetvv9ujuurjd9kkzmpwdejhg4kja0a

Many forms of Bitcoin banks will exist. Single-issuer chaumian ecash mints will be one of them, but I'm going to be personally using models that distribute trust instead of centralize it, like federated models, either in e-cash or in something like liquid. Electronic bitcoin IOUs from single issuers face the same issues as custodial lightning providers. And because of this, they should only be used for pocket change, in my opinion.

What am I missing ? Why do we need banks? What is the purpose of exchanges? Soft wallets? Hard wallets?

This is the worst explanation to sell cashu. Sell it like a traditional bank is bs. Little merchants or big companies can use it to sell their vouchers as cashu ecash, very good use case and better than talk this is a bank with bills, bs.

You do realise that David Chaum’s original eCash concept was designed for traditional banks to use, right? Cashu enables both use cases and many more. You can’t “sell” all use cases at once because each audience has different needs. This post simply highlights how Cashu enables Hal’s prophecy.

Welcome to the new era of free banking... Saylor and the other treasury companies are accelerating Hal's vision via the back door. The key difference is that shenanigans can't be hidden behind a centralized money printer any more. In Hal's vision, the "banks" will clear/settle on layer 1, where there is no way to hide. If a particular bank issues excessive notes, other banks will demand redemption, forcing it to maintain adequate reserves. Competition and the need to maintain trust will therefore discourage bad actors (per Selgin), as there is no safety net against absolute scarcity. Bank runs in bitcoin are the ultimate FAFO.

You can still get rugged by a federated mint. Federation offers a false sense of complete security. Your key point is valid though - bitcoin allows self sovereign "savings", for which custodial solutions are no better than traditional banking.

piss off scammer

Cashu is actually a L2 scaling solution. It's easy to think it's L3, because it implements another L2 (Lightning), but it could also use on-chain to settle for large amounts... or even some other payment mechanisms.

Maybe.... RN, the treasury companies are trojan horsing bitcoin adoption into the traditional banking model. Shenanigans are inevitable in the transition away from central banking as we scale to accomodate 8 billion people. But slowly slowly catchee monkey.

You can only redeen in the mint you got it from... or you can melt your token and transfer it elsewhere (eg via bolt11 to a lightning address / invoice).

What melting means?

minting = depositing bitcoin and getting an ecash token in return melting = cashing in a token and withdrawing bitcoin from the mint

I wonder if they're something better than minting and melting? If you melt a dime you get a little clump of copper and nickel that certainly isn't worth 10 cents (maybe half?). It's no longer money. And melting just intuitively sounds devaluing. But with Cashu to Lightning it's still Bitcoin, still money, still transacts on tap. "Withdraw cash" and "deposit cash" seems much cleaner to me. The real bank is the Lightning Network, Cashu mints are just the tellers. In fact if I could remake the whole metaphor that's how I'd do it. Instead of mints there are tellers, with the footnote that cash you withdraw from a certain teller you can only deposit back to that same teller. Call it the picky teller metaphor.

Ok I see But what if I don’t trust teller to be there if I want to withdraw? Hell, I don’t trust myself Plus if you give me cashu minted at your teller I suddenly need to trust that he will be there. That’s surprisingly complex. And what if the cashu you gave me you received from yet someone first?

>But what if I don’t trust teller to be there if I want to withdraw? Word will get around to avoid that teller. That's a rug teller! And this is the whole reason for the debate about rankings, audits, etc. >Hell, I don’t trust myself On that note do any of us trust ourselves not to lose some actual cash from our pockets from time to time, to say nothing of Cashu? >Plus if you give me cashu minted at your teller I suddenly need to trust that he will be there. Yes! That's how it works! He is the only one you can deposit it back to the bank with. Whether that's fine or not fine is another story, but the picky teller metaphor does at least help illustrate that this is the case. >And what if the cashu you gave me you received from yet someone first? Depends how it happens. Person A could have gotten it from one teller (Tommy), then given it to person B, then person B deposited it back to the bank (also Tommy) then had a cigarette, then went to another teller (Janet) and took the same amount of cash out again, then gave it to person C, who would then have to give it back to Janet. Or person A could get it from Tommy, then it bounces around offline through a bunch of people, and whoever wants to cash it at the end in has to go back to Tom. Importantly, the cash will always be in an envelope that says "This is from Tom" or "This is from Janet" so everyone knows.

Thank you That’s a lot to digest

No worries. Moral of the story is that if you can’t find a teller that you trust and that your friends trust too then probably it's best not to ever withdraw cash and just do money transfers via the bank (Lightning network). But if it turns out most tellers are nice people and always there for you, and it's easy to avoid those that aren't, then it's probably not a worry, go get that cash, it's very convenient to use

I don't want to get into a big thing here but cashu cannot use anything but layer 2 because the system is a credit function (Layer 3). Layer 1- Asset Layer 2- coupon/"currency" Layer 3- credit Cashu uses a minting function which is necessarily a credit based system. Holding asset and issuing a coupon redeemable for the asset is not how cashu is designed because of the asyncronous transactions. Cashu holds a coupon and issues outstanding credit against that.

"Need" is a big word but banks help create the the structure that connects local commerce to regional and global markets. It's totally possible in the absence of banks but the functions are much harder to do by individuals.

I agree, and I am not under the illusion that fedarated models offer complete security. But I wild be willing to store much more value as L-BTC as I would in Cashu or Wallet of Satoshi for example. Even when I run my own lightning node, I can rug myself. 😁

You seem to be making up your own definition of the Layers 😜 But even within your definition, Cashu tokens are a "coupon" or "currency" - because they are a bearer asset, pre-funded by bitcoin (via minting)... which is redeemable on demand by melting back to bitcoin. In the generally understood definition of Bitcoin layers, Cashu is a Layer 2, because it is a protocol built on top of L1 core to improve scalability, transaction speed, and functionality without altering the L1 code. The fact it integrates with Lightning doesn't change that, the same way that Liquid integration with Lightning doesn't make it L3 either. A Cashu mint COULD conceivably mint and melt directly to the L1 chain. It doesn't currently for speed of settlement, but it could. NUT-04/05 are flexible in that regard. L3 doesn't really exist for Bitcoin - it is the "application layer" - for DApps like you'd find in ETH or SOL.

I am not sure where you are pulling the layer definitions from but these are monetary terms not digital asset specific ones. Money scales in layers Layer 1: The bearer asset with the express purpose of storing value. Layer 2: The coupon/ currency that is redeemable for the bearer asset on demand from the coupon issuer. (In the case of Lightning the issuer is either the party or counter-party) Layer 3: The credit token. This historically is where loans and financial stress is added to the lower layers upon calls to redeem. Because the credit tokens by definition create more tokens than assets outstanding. These are based on reputation and trust to create more value than held in the credited currency. I know that cashu can be minted to layer 1 but it is less secure than lightning so, It is not used that way. Issuing cashu tokens on lighting is creating credit tokens redeemable for lightning/liquid which is then redeemable for bitcoin. There is nothing stopping a mint from issuing more credit that lightning held and redemption is based soley on the reputation and trust in the mint. Cashu is credit.

The Bitcoin "layers" are networking protocols, not financial layers as you define them: L0 - Internet protocol stack L1 - Bitcoin protocol L2 - Bitcoin scaling protocols L3 - "Applications" (DApps) Cashu tokens are ecash (digital currency), not credit. They’re bearer assets backed 1:1 by Bitcoin on Lightning, not debt-based tokens. Over-issuance by a mint is a trust issue, not a protocol feature - like Coinbase mismanaging Bitcoin wouldn’t make Bitcoin credit.

Lol, okay. Again, I am referring to money not some tech bro 4 layer burrito. These layers (I am referring to) apply to gold (L1), Dollars (L2 [prior to 1971]), and treasuries (L3) as well as Bitcoin. As far as the trust, if you CAN do something, people WILL do that. I never said it was a feature. I am explicitly saying it's a bug. Because of the previous trust issue, it can't be claimed that they are 1:1 backed precisely because of the ability to over-issue.

Dollars prior to 1971 were bearer assets like Cashu tokens. Directly redeemable for the underlying asset (gold) on demand. Yet dollars prior to 1971 could also be fractionally created, and were. History is littered with bank runs, even in the gold standard era. And yet, by your definition, the pre-71 dollar was a L2 "currency". There is no difference with Cashu. It's L2 by your definition.. Enjoy the rest of your weekend.

> And what if the cashu you gave me you received from yet someone first? A Cashu token is a bearer asset, so whoever has a copy of it can spend it (unless it is locked to you). So if someone gives you a token, you should "receive" it to your wallet asap. When you do this, your wallet will send it to the mint, and the mint will invalidate it and issue you a brand new tokan. That way, if other people have a copy of the old token, it is already "spent" on creating you a new one.

The metaphor comes from the minting and melting of physical coins. You deposit bitcoin and the Mint mints you a physical token (coin). You melt that coin (it no longer physically exists) to get back your bitcoin.

It falls apart because bitcoin on lightning is still a coin, in every relevant sense. It’s not ore.

A bearer asset is not redeemable for anything. That's the definition of an asset. An asset IS the thing. So, you keep using that term incorrectly. As far as fractional printing of dollars to gold reserves, yes currency doesn't preclude over-printing. But cashu tokens are not redeemable for the asset like dollars were. They are redeemable for lightning which is THEN redeemable for Bitcoin. Cashu is more akin to (pre 1971) somone depositing dollars to a bank in exchange for credit to be spent outside of business hours. You can then redeem the credit for dollars, THEN redeem those dollars for gold. Again, anything above the first layer is not an asset, it is a liability.

Curious your thoughts nostr:naddr1qvzqqqr4gupzpwgv8jm36e358cq3qn2unt0hmvzaxejnk9mqrlum9m464qd7v7prqqn8wefddejk2epdw3hj6arpd34j6ctzda6hgttrv9eksafdwfjkwatvv96xjmmwskq8h7

I think you've done a great job mapping out the landscape and dilemma for mint operators. One recent development which may help clarify the regulatory situation in the longer term is the NUT-22 Blind Authentication Token. This allows a mint operator to restrict use of the mint to authorized people... this allows, for example, a mint to KYC people at the on/off ramps, but keep privacy at the level of in-mint transactions. This would be much like a bank only issuing and redeeming notes to depositors they know, but not knowing the movement of the cash otherwise.

You didn't want to start a "big thing", but keep doubling down. So kudos for that - but your underlying assertion is still wrong. I'll have one last go at explaining, in case it's a semantics issue, but otherwise we're done. "Bearer" = denotes ownership by possession. "Asset" - thing of value. Can be cash/cash equivalent or even credit. Bitcoin private keys are an example of a bearer asset (NYK-NYC). They’re not the Bitcoin itself—they’re the proof of ownership and control over it, held by possession. Not a credit or liability. Lightning *is* Bitcoin. Not credit. Not "backed" anything. The on-chain Bitcoin is locked in an HTLC in the Lightning channel. Only the accounting is abstracted. If a mint closed the underlying Lightning channel, they would then unlock and receive the bitcoin on-chain according to the accounting. The abstraction of Lightning is simply a protocol, not a separate asset. Cashu on Lightning is therefore a 1:1 Bitcoin-backed asset. So your dollars → credit → gold analogy is just plain wrong.

Nice, that could be a useful basis for cooperation with some of the more reputable regulators out there. I'm thinking of putting together an Intro to Cashu deck for a few of the more promising regulators in Asia to test the response in person, if you know of anyone else doing the same please let me know, happy to coordinate.

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Money is like a river. Money is never lost. It flows from the loser to the winner. And guess who controls the river? The fucking banks. So, no thanks.

Thanks for the contact. I'll decline. I've only just recently joined Nostr. Haven't been on any social platform since 2020. Happy to chat with you on Nostr. I think I had a look at Simplex during a catch up about XMR. I could be wrong though. I read a lot of stuff.