Obi Nwosu discusses how the Fedimint protocol can scale Bitcoin while preserving privacy.
In the recent episode of the Bitcoin Standard podcast, host Saifedean Ammous was joined by Obi Nwosu, the CEO of Fedi, a company utilizing the Fedimint protocol to create a new e-cash implementation on Bitcoin that's interoperable with Lightning. The conversation delved deep into the origins, principles, and potential of e-cash, particularly focusing on the Fedimint protocol and its application for scaling Bitcoin in a way that preserves privacy and enhances economic decision-making.
E-cash, first conceptualized by David Chaum in the 1980s, was a revolutionary idea for digital money, offering properties such as privacy and offline transactions. However, its dependency on a central mint was a critical flaw. Fast forward to Satoshi Nakamoto's Bitcoin, which inspired the realization that e-cash could be backed by a decentralized asset like Bitcoin and operated by a federation rather than a single trusted party. Fedi, as a company, champions the Fedimint protocol, providing a solution that aims to scale Bitcoin by removing on-chain transaction links but also offering significant privacy advantages.
The integration of e-cash and the Fedimint protocol within Bitcoin's ecosystem presents a promising solution to the scaling and privacy challenges faced by the network. As Obi Nwosu and Fedi continue to push the boundaries of Bitcoin's potential, their work may herald a significant shift in how communities interact with Bitcoin. As the landscape of Bitcoin continues to evolve, the applications and implications of Fedimint and e-cash will undoubtedly be a topic of ongoing discussion and innovation.
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(03:11) more confidently hello and welcome to the Bitcoin standard podcast Our Guest today is OB nosu Obi is the CEO of fediman a new e-cash implementation on bitcoin that's interoperable with lightning I think this is a very interesting scaling uh project for Bitcoin and I've spoken about about it to Obi a few weeks ago in uh seol in South Korea where we were there together both for a conference and I thought it would be great to bring him on here so we could discuss it further so Obie thank you so much for joining us
(03:44) thank you thank you very much and uh just one thing to clarify I'm I'm the CEO of fedy but uh we but I'm a big big fan of the protocol fedt and fedy um is a company that uses the fedy Min protocol in in our suite of uh or software yeah I mean I obviously knew that I justy of course of course no I did not know that but it's it's good that you clarified it yeah but we'll clarify it more here yeah so yes so let's just get straight into it tell us uh more about this first of all uh tell us about the
(04:21) background of uh ecash what is ecash and how does fetty uh move this thing forward and integrate to lightning okay well yeah let's start all the way back to uh 1983 1982 where David Cham one of the uh um grandfathers of of Cipher Punk and digital money came up with this idea um called Blinded signatures it was was a very simple way of being able to um sign something without knowing what it is you're signing so you can sign it and know that you've and you can prove You' signed something without actually um
(05:01) seeing what you were signing sort of almost like a zero knowledge um signing um and he realized that this concept was enough to make a digital money um and this was way ahead of its time because you remember back in well if you can you probably can't but in 1983 um computers were very basic um and so the idea already that there will be a concept and a need for digital cash was way ahead of his time and he created something called digicash which was the world's first digital money uh it has incredible properties it has the ability
(05:37) um and this was based on ecash um it has the ability to be fully private it has the ability to be sent in certain circumstances without an internet connection as long as there's some level of um trust or with with the parties it it was very simple very scalable um it operated the way that most people think Bitcoin operat op Ates the first time they hear about it I.
(06:04) E each you have a series of little notes digital notes and you send the notes from one person to another in the same way you would send cash it had one um fatal weakness though it relied it trusted it relied on the trust of one single party one single mint um or almost like this sort of bank or mint and that continued um now he still had some very early success um he had conversations with Microsoft for example um and they were going to install um ecash on and digicash on every single version of Microsoft Windows 3.0 at one point so if it wasn't
(06:45) for a breakdown in negotiations we would have ecash on every single version of Windows today um this was in a much more innocent times before so much AML and kyc came into the world and so it made sense cash was the predominant form of money why not have a digital version so but for various reasons the company didn't succeed generally because although he was an incredible inventor um he may not been so good in terms of um business um and fast forward um until 2009 and Satoshi Nakamoto um launched um Bitcoin the
(07:27) world's first money that um was basically near on trustless and actually even before that in the end of 2008 he released the white paper where he explained the idea of Bitcoin and it was quite interesting because even in the first few days after the launch of the white paper people were already commenting that um for this to scale to Global use that the use of chamian ecash on top for Bitcoin would be a sensible way to go um now you fast forward again until a number of years ago a number of Cipher punks um and cryptographers were
(08:13) realized that instead of backing eash by a bank you could back it by Bitcoin and there were a number of projects there was one called scrip um and scrip 2 and there was another one called fedy minint um and this was invented by um a guy called Eric Syrian um and he thought that you could use Bitcoin but remove the single point of weakness that was with the original ecash I.
(08:43) E the trust in any one single party one single mint and you could Federate the mint similar to the way liquid federates um control or Axis or multisig address federates access to to a Bitcoin address and instead of backing it by cash you back it by Bitcoin the hardest money ever made um it was a difficult project but he was an incredible engineer and he built Fint um um blockstream um were one of the first to see the potential of this and they were the first to um fund the project further and then um in I was fortunate enough to meet him uh I had
(09:24) just finished selling my um Bitcoin exchange I ran the UK's longest running Bitcoin exchange for decade and I helped him promote it grow it and we eventually started a company and we are where we are today yes so I mean when you think of this digital ecash in retrospect sounds like a great idea but it's almost one of it's almost seems like clearly this can't work without Bitcoin because it you look you look at how it works and everything is smart and it seems like it's a really good idea but as long as you live in a world of
(10:01) Fiat then it's sort of self-defeating right because ultimately you're relying on the central party that's going to be um basically holding the Fiat and it's going to be assigning it and so it's it it ends up being a little bit like one of those uh blockchain projects that's trying to that's like one of these you know Bank centralized blockchain project like one of these JP Morgan chains or all of these um projects where they have all of these extreme you may remember R3 and all of these I do yeah and and and
(10:37) and I mean those things were kind of ridiculous because they were trying to do these U blockchains but it's really what do you think about uh what do you think about what uh ecash was without Bitcoin it's sort of unworkable it needed Bitcoin for it to work wouldn't you agree I I think I mean that's what got me excited about it I was um i s I was running this exchange I ran for eight eight and a half years or so um and I ran it a long enough time to realize that exchanges are very powerful things
(11:10) but um it became clearer and clearer that we needed to find ways to get people off exchanges the the gold standard the Bitcoin standard is to self custody but after years of trying to get people off exchanges um I realized that it was going to be hard to get everybody off to begin with and you need to start the Journey um and I was looking for ways to get people off and and I decided to sell um my exchange was a profitable business um but um and focus on this and while doing that I I started looking at different solutions I had some ideas and
(11:48) um I went to an event in Prague in fact I I've just come back from Prague now um and it was called hackers Congress in Parell police parallel parallel Society um which is this sort of um really famous in crypto um and Cipher Funk circles location in Prague and I and I asked around for different ideas I suggested some of my editas and by pure luck I bumped in this guy Eric Syrian um he's incredible engineer but very introverted and I I explained um some of the ideas I was thinking about he very politely explained to me why none of
(12:28) them would work and I'm very grateful he did because it it saved a lot of time and then I asked him what he was working he explained fedt and this was he described it as this incredible protocol has been around for nearly 40 years at that point now over 40 years um but it had these two fatal flaws one was the Reliance on a mint a single mint and the other was less more subtle but actually the more powerful was the Reliance on the US on on fiat currency those are the two relian and so what you're building
(13:07) on top um of these foundations was a very powerful and flexible technology but the foundations were were flawed um so with the invention of Bitcoin you could replace the money with the hardest money ever made so that resolves one and the most important but also because of bitco coin for the first time ever a money could be held or any asset could be held by at Distance by multiple people at the same time jointed and separately that was not possible before the concept of multii and multisig um Bitcoin was Bitcoin was the first
(13:50) creation of that if you think about that you could say well I could have let's say I had four how can I reduce the risk of one mint I know what have four mints and we put a quarter of the money into four but you haven't resolved single person owning you've just split it into four different people but each one still fully owns one quarter of the money or you could have one of these things you see in the movie where you have a bank vault where you have free keys needed to open it but the free key holders have
(14:22) accessed the keys but the vault is still in the bank the bank still has full custody of the Vault you know so some so you haven't act you have the illusion of free people holding access to it but you don't have actual the reality of joint ownership but with multisig which was invented um and came out within a year or so of the invention of Bitcoin you can now have an asset which literally is owned jointly by multiple people and that meant that the mint could be Federated finally so you could have hard money and a Federated
(14:59) mint and so you could fundamentally improve upon um in two key ways upon the original protocol and um as a result fed Min was created backing by Bitcoin was already a great start um but backing by Bitcoin and federating the mint as well was even better both made possible by Bitcoin and so when he realized this um he worked and and other people worked as well on the fedy Min website you look at the history and we always think it's really important to credit where people have gone before um it's part of the
(15:35) Integrity of the Bitcoin Community to do that um and stay humble but and so fedy wasn't the first person to do this it was first project scrit and scrip two uh by I think about a year ahead but they they didn't continue and and um Eric kept going kept going he got s saw um seen by the guys at blockstream and they funded it further he kept going um until he had a working prototype and in back in 2021 there's a tweet of him actually um buying the proverbial cup of coffee with ecash on over lightning um and and
(16:16) it's kept going since then I I got involved and then many other people got involved because and this is now one of the most active projects in the Bitcoin ecosystem there are several dozen contributors to the project um it's being used in countries around the world and uh um and we've now separately formed a commercial organization to support and grow fedin but we're not the only ones Mutiny and others are supporting the fedit protocol and so we're really really excited about it okay so can can you give us a little
(16:51) bit more of a Hands-On explanation of how this works uh from a user's uh perspective um let's let's may maybe we begin with ecash in in general then we uh focus on fim yeah so let's talk about ecash in general um so there's different users in the system there's the people who are running the mint and then there's the people who are using it as a user of the mint so as a user of the mint um you can think about the concept um similar to the concept of imagine you go to a Fairground um and the fairground has
(17:30) rides and stalls where you can buy stuff and you're going with your family um but in the fairground they have their own tokens all the rides have their own Fairground tokens yeah and um you can only they only accept those Fairground tokens for every ride every game every store and you can but you can but as long as you use have those tokens you can use those what you do is you go to the entrance and you have your cash um and it could also be in this case Bitcoin and there's a kiosk at the front and the kiosk effectively is a mint that
(18:11) you give them your Bitcoin or your um your cash um and they will give you an equivalent number of Fairground tokens and that and the fairground tokens with the ecash and then within the confines of that ground that's basically cach but it's only cach that can be used within within that um within that context and so that's the basic operation of a mint where the mint will exchange your physical cach for the the ecash and you can use it within within a context or within a community now where blinded
(18:51) signatures come in is um it allows you to do the equivalent of going to the to the kiosk and imagine that the kiosk the windows have been blackened over so the kiosk operator cannot see who's providing them the cach and who they're providing the the tokens to and that's what the blinding operation allows you to do so you then will Pro deposit your Bitcoin and you would receive back um ecash but this time around because the screen is blackened over I it's been blinded the the kiosk operator has been
(19:27) blinded or they've been given a blindfold they don't know who they don't know who they've given the ecash to and then once you have the e-cash with in the um Fairground you can buy food of it you can go on rides you can take your money and give some of it to your kids or to your partner um if your kids go off and go on a ride and one of the other their friends is low on on tokens they can share some of their tokens around and it's easy to in it the fact that all of that movement is completely
(20:02) invisible to the kiosk operator the mint operator so the combination of the fact that um these tokens being beer instruments within the confines of the um of the um community and the blinding the the cryptographic blinding meaning that the token the issue of the mint is not even aware of who they are giving the tokens to and who's giving them the the um Bitcoin you have full privacy in a very very simple and and easy to understand way and at the end if you have any um tokens left you can go back to the kiosk and give them the give them
(20:42) the tokens and and they will return to you the same amount of of Bitcoin again because it's a blinded operation they don't know who they are actually returning the uh providing the Bitcoin for and who's provided them the eash it could be if if 10 people visited it could be the same person visiting 10 times or it could be 10 different people and even if it's only 10 visits to the mint that doesn't tell them how many people actually are holding ecash because that person could one of those people could take their $100 worth of um
(21:18) or 100 100 SATs worth of of of ecash and split it up amongst a 100 different people so they have one set each there's no way that the mint will know so that's the experience for the user the experience for the mint is um a simple process of um not be of receiving Bitcoin and providing the same amount of tokens or receiving tokens and providing the same amount of Bitcoin and the final scenario is receiving tokens and giving back new tokens so giving change like you go to a a bank and you ask for change I've got $100 bill but can you
(21:58) give me 10 $10 bills instead so those are the three operations that the mint needs to do and they just need to perform those after they've done those exchanges the interactions beyond that are fully peer-to-peer so when I want to take some of my tokens and give it to you I literally just give you the tokens you don't need to involve the mint which is why it scales because there's no link between the the interactions between the mint and the actual transactions that happen with within the within the
(22:31) community you could do one trade of one of for for um say $50 worth of bitcoin for ecash and then that ecash could be traded around a million times and then one trade back none of that touches the mint so there is no scaling limit between ecash and the mints yeah so this seems like it's um striking two birds with one stone a scaling and B privacy right it's scaling privacy yes it the scaling is basically you have in a world of multiple um Bitcoin mints you have no scaling limitations um because as you said you can do one trade in and
(23:20) you can do a billion transactions and one trade out there is no onchain footprint um and by virtue of removing that link between transactions and um the the minting or destroying of minted coins because when you receive the the tokens back you destroy them and give back the Bitcoin um by removing that link you automatically just as an accidental byproduct get incredible levels of privacy yes okay so then how does uh how does this uh work with lightning so this is again an incredible insight and I haven't got on to the downsides which we
(23:59) should get on to as well because it's really important there's there's no lunch we can do that first if you want to to um yeah so because there because I just want to make sure because it sounds incredible and it is really powerful simple protocol but even in um the context of Bitcoin okay the money backing it is now the hardest money out there which is a massive Improvement um and now you no longer need to trust one single entity um you can Federate that and trust multiple you with the power of
(24:31) multisig the mint can be actually four or seven or 10 or or even more we've seen some people have seen up to 40 people and and you have a multisig of all of those signing together to accept Bitcoin and and and um release tokens or the other way around to release tokens and sign it together and as long as the majority of them are honest then um you can be sure that going to get your Bitcoin your Bitcoin back or it will mint correctly and they won't be able to print more Bitcoin however a majority being honest in a multisig is better way
(25:13) way better than trusting one but it's it's nowhere near as good as this trust minimized hundreds of thousands potentially of Bitcoin node operators and Bitcoin miners um working in this um permissionless way where anyone can join or leave the network which is what makes Bitcoin so special so it's on this spectrum of trusted where you're trusting one single entity often a stranger um and then the other Spectrum where you're trusting no one if you run your own Bitcoin node then you can verify the
(25:51) blockchain yourself without having to trust anyone if you so choose um a multisig of four four to 40 people is is in the middle of those two it's way better than one but it's it's not as good as as fully trustless so we've moved along the Spectrum but you still you'll still have some level of trust and that's just so important thing to understand um where it comes to lightning um even to go into and out of of of a mint you have to you have to use real money and ideally hard money by energy um but that money would have to
(26:33) be transmitted to and transferred to the mint if you were to do that on chain in a world if you're thinking at scale in a world with [Music] um billions potentially of people using Bitcoin bitcoin's onchain fees could be quite high and even if that transaction is happening infrequently it will still be pretty limiting to do that on chain chain if you use lightning as the mechanism to deposit in and out that solves this problem because it allows you to reduce even the cost of settling are you moving money into or out of of
(27:11) the mint down to a significantly lower cost it also makes it much much faster instead of having to wait 10 minutes before I can start spending money in this Federation I just have to wait a few seconds for a lightning transaction to happen sometimes a fraction of a seconds so just in terms of a practical user experience you would want to use lightning as the predominant way people will send money into and out of these federations um if I want to pay for a service from services like bit refill or I want to zap someone on nosta um that
(27:48) service will not necessarily be in your Federation in your um ecash mint Community but the lightning Network allows you to act as this connective tissue that connects all of the Bitcoin space together at lightning speed at very low cost and so from a users point of view even though they have ecash within that Federation they can pay a lightning invoice as if they had their own self custodial lightning wallet and the experience is the same if anything it can be more reliable because the um costs and complexity of managing the
(28:25) lightning Network are shared across the entire community so it can be more well capitalized you can have people it may even be economically viable to have a team working on providing that connection if the community is large enough which is not the case if you're running your own self custodia wallet for yourself you you your you're your judge jury and executioner I see okay so um how do you see this um continuing to grow in scale moving forward what is your vision for how this is going to be implemented so I guess my vision is not
(28:58) a very very new vision because it was stated 8 to n days after um the Bitcoin white paper came out and again just under two years after the Bitcoin white paper came out by howy that um for Bitcoin to scale your um it makes sense for there to be um tens of thousands if not hundreds of thousands of these they call them Bitcoin Banks or Binks we call them fedy mints um um and they might be different types some will be custodial banks in the forms of the coin bases of this world and so on and maybe when banks at some
(29:39) point in the future have permission to custody the Bitcoin they will offer it and that has its own trust that's the most trusted because you're trusting a single entity even if it's an organization at the end of the day it's run by a CEO and everybody in the organization supposedly when they say jumps is how high so it's a centralized structure um but fedy mints will be this sort of interim structure where um you have a group of people who are trusted within your community or you know or
(30:07) you've had some web of trust mechanism to determine that you're comfortable holding with them um and then at the Other Extreme you'll have people who are educated enough affluent enough um and sophisticated enough to self- custody um and hopefully over time self- custody gets easier and easier and easier so more and more people fit that sort of Ideal um scenario but this is going to be a spectrum and I expect that a large percentage of these end nodes will be fedy some small percentage will be these
(30:42) centralized parties like exchanges and Banks and then hopefully the largest in terms of nodes will be self- custodial wallets um for the people who have made it through to that point yeah and I think this is the the this is just natural I think a lot of people have this misconception in their mind that um either Bitcoin gives everybody their own private Central Bank and that allows them to conduct onchain transactions every time they want to buy a coffee or it's failed or it's failed completely and it's a little bit like saying
(31:18) Aviation has failed over the last 100 years because it's still not giving us teleportation so we've gone from riding donkeys to supersonic flight that's a huge Improvement it would have taken you years to travel across say Africa now it takes you a few hours that's not nothing it's a huge and enormous Improvement but if your definition of success is that it has to be uh teleportation or else dony win then you're going to be stuck with stuck with donkeys because I don't think we're
(31:57) getting portation anytime soon and I think this is really the case with Bitcoin there is the it it would be nice if everybody could have their own onchain transaction for every single thing but realistically it can't really happen we can't have this enormous amount of um redundancy where everybody in the world records everybody else's coffee transaction because a you don't need that level of security for your coffee transaction it's entirely entirely feasible to trust somebody in the processing of this payment and then you
(32:30) know settle your account with them at the end of the month you trust them to uh hold your money and pay or they trust you to settle your account at the end of the month it's a profitable business relationship for both of you and they're likely make it and if it's only for pocket money then you know yeah it's not foolproof and they might rug you but everything in life involves trusting people you trust your laptop maker that the laptop is not going to blow up you trust the airplane you trust your
(32:58) restaurant and you don't trust them because you just think they're good people you trust them because you realize there are incentives involved and that and efficiencies yeah and efficiencies and the alternative is you're not going to have a laptop if you wanted to make it yourself in order to trust everybody so I think people need to be realistic about Bitcoin in this regard we've got currently capacity for half a million one million transactions a day that's not enough for a neighborhood in a big city uh that there
(33:27) are many many more transactions taking place in the world and it's just never going to be the case that all of these transactions are going to fit on chain so that doesn't mean Bitcoin fails because what matters ultimately is is Bitcoin decentralized enough for it to continue to work successfully without being compromised doesn't have to give you your coffee on chain in order for it to work I think this is the thing it would be nice and of course there's a lot of you know um Purity sign in where
(33:59) people just want to appear like they're internet tough guys and so they know you know we will not accept any solution that doesn't allow me to uh trustless buy my 99 cent coffee without having to trust anybody in the world except the coffee maker it's not going to happen ultimately there are trade-offs involved and the onchain transactions are going to continue to be the most valuable transactions they're going to command the highest transaction fees but everything everything else is likely going to offer tradeoffs in terms of
(34:33) security trust and reliability and speed and scaling and transaction fees and people need to be realistic about this and I think this offers a very interesting U set of tradeoffs that I think likely will appeal to a lot of people and I think U yeah the the analogy like the donkey versus teleportation uh to take a to take another one probably lesser humorous but it's also an interesting way of thinking about it is uh um transportation in terms of wheel Transportation um or just mass transportation versus personal we have
(35:11) the ability um to travel personally you can if you can afford it VI your own car um there's a big investment but then you have the ability to drive by yourself um now there are people who share transportation and they might share their car or their their larger car with a number of people in the family um or you go even further and you have buses um and you go even further and you have trains which transport multiple people but the people who have chosen chosen to use a train or a bus are delegating some
(35:48) trust to the to the driver of the the conductor and Driver of the um of the bus or the operator of the train um but you wouldn't say Transportation or wheel Transportation failed because they exist it's it's this is lower cost it's more efficient and there are benefits of using those systems but you have the option to go to self driving driving yourself not self-driving we're not going into Tesla but driving yourself if you so wish um and and that means that the technology of Transportation has
(36:25) that optionality but I do think that um when it comes to buying the proverbial cup of coffee there's a reason why Eric made his first transaction a cup of coffee um because almost like the the third of uh I believe it was the third of uh October 2021 is effectively in my mind sort of ecash coffee day if You' put it into because I think buying cups of coffee um for most people won't happen on the main chain because the C because the onchain fees will be several orders of magnitude probably more than
(37:00) the cost of the coffee and it probably won't happen very frequently over lightning either it will probably happen in ecash um because that will make sense for that now if you are paying for I don't know something that could cost a round of shopping in a department store for clothes Etc or your weekly shopping you may choose to pay that any e cash or lightning and if you're buying a house or a or a major investment you may do that on chain you know because it's it's because of the nature of the
(37:37) transaction but you probably don't need the same security guarantees for a cup of coffee that you need for buying your house yeah exactly so um H how is progress going with your um with your attempt to to or I mean before we move on to that do you want to talk a little bit more about uh these tradeoffs or um how you see these playing out do you have anything more to add on that no I've seen I've seen we we discussed the main tradeoff and there and there are many ways to mitigate that um because that's the biggest tradeoff um and if
(38:10) you try to you can try to avoid this there are other people who are attempting to scale Bitcoin and the way they're trying to do that is to still retain as much of this trust's nature uh of um Bitcoin as possible but you always run into scaling limitations if you if you you have significant increases in complexity and at the end of the day you have a five 10 maybe 50x increase in in in transaction througho but for a massive increase in complexity um so much so that if we think about lightning which is an incredible protocol and is
(38:50) now being used um and it's relatively simple protocol it took seven years or more to get to the State rate is actually being used and reliable so if you're starting now with a protocol that's several orders of magnitude more complicated than lightning then realistically you're going to have to wait probably that long if not longer um for it to potentially give you a 10x increase when what we really need is a 10,000 X increase and that only can come from removing this um link but then there is some element of trust so it's
(39:25) important to think about the end State when you're when you're deciding you want to increase transactions but on the ecash side there are things we can do to reduce the risk um one is recognize that there's some level of trust that's being required and therefore put a lot of effort in deciding determining who you trust so there are protocols built on nosta um um that were championed by the guys at Mutiny we think is really cool idea where we use noa's web of trust to help determine um which mints you can trust or not um
(40:01) there are protocols as well to which uh Eric originally talked about uh over about a couple of years ago where um the only way to know if any form of custodian is solvent is to do a run on the bank so to for everybody to leave that's the only way you know so there could be mechanisms to have automated runs on the bank where everybody at some random time does a mass exit to another Federation and as the Federation doesn't know when that's going to happen um they they always have to be on their toes and
(40:39) and and again that can help keep them honest and so we can take these approaches to reduce the risk um to know of a bank solvent um there are mechanisms to help provide cryptographic proof of reserves to some degree but remember because this is perfectly private they're always limited um runs on the bank um and mechanisms to trust cter bodies a big part of of of fedy Min and what we recommend at fedy is to um know your not kyc but kyf know your friend know your family know your Federation so find mechanisms either
(41:19) through webs of trust or personal contact to identify who are the people who are holding the keys especially if they're in a local community and they're they're physically local to you um that also that physicality just like the physicality behind Bitcoin the fact that is backed by actual energy if you have a physical Community where the custodians are actually physically proximate to you then you can always if they tried to do something walk up to them and you know physically um um question them as to why
(41:55) they're not um doing what they're supposed to supposed to be doing um so that that again at this hyperlocal level where you'll have mints around the world becomes possible even though the lightning network still gives you access to the to to the global uh economy most transactions in most people's lives are local their food they buy locally their accommodation is local their transport by definition of themselves their own body is local these these make up the majority of expenditures for most people
(42:26) on a day-to-day if you want to buy your Netflix subscription that goes over the lightning Network and if you want to buy a house you buy that in Bitcoin but your day-to-day transactions will be local and so we expected these mints to be hyperlocal the syllabus for my new online economics course principles of economics is now available on safe.
(42:46) com the course will take place over 18 lectures each based on one chapter from my new book principles of economics which will be available for free as an ebook for everyone registering for the course course lectures will be released once every 2 weeks on Mondays starting on the 25th of September 2023 and will be available in video and audio format live discussion seminars will be held once a week on Thursdays at alternating time slots 12 hours apart to ensure Learners can attend from all over the world I'm happy to announce that I have
(43:19) set up my new publishing house and online book store the safe house which will be publishing and delivering the best Bitcoin and Austrian economics books worldwide in hard cover audiobook and ebook formats go to the safe house.com to buy my latest book principles of economics as well as the Fiat standard and the Bitcoin standard and now I'm also publishing Fiat food Matthew lak's amazing investigation into how inflation ruined our diet and health and I'm also publishing Lynn alden's broken money her masterful exploration
(43:49) of the failures of the Global Financial system and how Bitcoin fixes it this is a bitcoiners Bookshop so the books are printed in beautiful cloth heart cover made to last with an ice colored dust jacket on top go to the safeh house.com and get yours now yeah and I think this is just inevitable that people are going to trust people that are around them uh no matter what Bitcoins uh scaling limitations are it's inconceivable that every person is going to be running their own Noe there are children out there there are old people out there
(44:23) there are people that aren't very comfortable uh running all of those things and that's fine these people aren't just out there uh in a world uh you know in in in a dark World on their own left to offend for themselves they have families they have children they have parents they have uh friends and family and they live together in small communities in which there's repeated interaction so your neighbor can't just rug you because then everybody else in the neighborhood is going to well I mean
(44:52) no I mean you come straight out of the womb and I guess you're supposed to you're already be creating 12w seed well I mean if you can't do it then obviously Bitcoin has failed if you can't do it out of the W clearly we might not we might as well not bother and stick to the Federal Reserve because that's clearly workable for everybody because just trust the US government I mean uh and actually to your point in the world of AI we're going to see increasing I don't want to make this an AI discussion but it's it's
(45:23) again if you extrapolate um the I idea of what is true uh online um is going to become more and more apparent it's already the case that you shouldn't trust what you see online but this is not a truth that is apparent to everybody um in a world of deep fakes becoming increasingly easy to make um you when the first story of some kid at school posting a lewd picture or a lewd video of their their um school teacher doing something gets public and gets um gets talked about by mainstream media well you know
(46:05) what every other kid in every other school is going to do the following day they're all going to do it and at that point um will will people will the penny will drop and people will realize that if something is um intermediated by a screen you cannot actually trust it this this I I might be OB or I might be you know um um you know Janet um who's you know from you know um bosana who's pretending to be Obi you can't really know um we can guess that the technology hasn't got there right now but within a
(46:43) year or two it will get there and the only and I I would posit that that will lead to a return to physical communities physicality is the solution whether it's some money um um with with Bitcoin and the combination of that and then you you you can expand that globally using public private key encryption um Etc but you start the base the root has to be physicality meeting someone in person forming a web uh forming a a connection that you have provably made using public private key encryption to sign transactions proving that you've met and
(47:24) then you extend that through your web of trust so protocols like Noster and others can extend that so if I meet someone online who I've never met in person I can look at the connections between them and myself and form a view of how much I trust them um but but the core root there will be encryption and the physical world and and I think um understanding that will drive back this this need for communities trusted communities just to be able to operate with in in this posttruth world um and I so I think then the idea
(48:05) of these fedom mins that are built up around communities as well will make even more sense and the idea of money that's backed by some physical force of energy again will just start to make more and more common sense to more and more people yeah I think so and I think this is really uh once you start understanding there are inevitably going to be these kind of uh trust Solutions then the scaling problem of Bitcoin begins to seem a lot more tractable so initially when you think hang on a second this is only half a million
(48:39) transactions a day or a million transactions a day but we have 8 billion people there's no way this is going to work then you remember well if every couple of hundred people are congregate around one node and that's entirely feasible I mean you know the 150 is the donear number that's a number of a a small community where everybody knows each other and everybody can have a relationship with one another and so if you get every 150 people on One node you've already reduced the scale of the the you've already reduced the magnitude
(49:12) of the scaling problem enormously and then you you when you think about the ability to open Lightning channels that also increases it so then not it's not just that everybody uses a node and then they all share in their own uh onchain transactions they open a lightning Channel Once or two three four five lightning channels and then they can transact with everybody in the world at a much much lower cost and then as you said the physicality I think is is is a great uh is a great idea I'm a big fan of open dimes and they're uh you know
(49:45) coin kite are one of the sponsors of this podcast uh I'm a big fan of these things every time I want to orange pill somebody I want to give somebody a gift of Bitcoin I'd like to give them open dimes and it's occurred to me once that open dimes are an incredible way of scaling Bitcoin because we could get to a point where um you could start making physical open dimes that are that are um that show their denomination so this is 1,000 SATs and it's a USB like the open dime and it has a thousand SATs on it
(50:16) and then that just becomes a form of money that people can use physically because they trade with one another and then they can check the validity anytime they want to exchange it and now you've got a bearer ass and then think about how many transactions you can build with those beer assets for uh all your day-to-day trade where things don't need to go through onchain transactions and then you could think about what you could do with these Bearer assets where you could have them uh with the custodian and then the custodian can
(50:45) issue um paper money backed by these Bare Assets and then you're even adding more and more uh opportunities for scaling yes of course there are trade-offs involved and there is trust involved here but it's still a solution that's going to be workable for a lot of people I think yeah I think I I'm a big fan of um Rulo and and open dime um and uh I think you you've hit the nail on the head open dime is is is and ecash are conceptually very similar effectively the mint in open dime is is um coin kite effectiv they're they're
(51:26) minting these although it's slightly different because with open dime you can it comes empty it's um and um the you can add your own um you you can add your own Bitcoin onto it but if if the scenario you said um it were to transpire then it would come pre-installed with a certain amount of Bitcoin um this was done with the cacious coins you know whenever you see a picture of Bitcoin they show this coin and and it's got the Bitcoin symbol on it um many of those are cacious coins which um were pre-installed pre- deposited
(52:04) they a hardware wallet that you can you can peel off the scratch the the um um fluorescent not fluorescent the iridescent um um sticker at the back and it will show you the private keys and then you can install that into a wallet and spend the money um but if you receive one of those and you see that hasn't been tampered with um then you can be comfortable that and you can check online if you want to the balance you can be comfortable it's holding a certain amount of Bitcoin and it's acts but conceptually intuitively for a user
(52:41) it's very very understandable this is a th sets and it's on a coin and if I give it to you you now have the Thousand sets and I don't have the F sets all the other person needs to do is check that it hasn't been tampered with and and they can and they can um proceed um but once you see that you realize there's no real scaling limits to that if if there were a million of those coins and a million different people at the same second gave their coins to a different person then you would have you just did a million
(53:14) transactions in a second and you could there were there was no scaling limitting because each transaction happened peer-to-peer ecash is the same property once you have the the ecash on your phone it literally is files on your phone so if there's a billion people in the planet who had ecash and just by coincidence the same second they chose to give it to a billion different people then in that one second you did a billion transactions and there was no problem because each one was a peer-to-peer transfer file locally um
(53:50) and no other system has that scaling um property it does mean though there is some level of trust but again the Privacy properties actually help to um reduce that trust because it is not possible for a mint to be able to say you um you safe I have um certain amount of um ecash and I'm going to invalidate your ecash I have to invalidate I have to invalidate everybody's e-cash or debase every body's ecash or no one's I cannot um surgically um attack one person even though I i' I've been responsible for
(54:36) minting or redeeming everybody's ecash within that mint and so that means that the stakes for the mint are much higher if they are going to do something they have to again because it's Federated they have to do it as a majority second um if if they were to do something they have to do it if people have been joining um federations where they trust against friends and family or people who are in their network of trust so they have to spend social capital and finally um they could be physically proximate as
(55:14) well so there's some physical risk to them if they were to do this if you combine those three things together there's a lot of disincentives and remember if they don't do anything and if they just um keep their their computer because it all this runs automatically like a Bitcoin node so then if they keep their computer fed and water with of internet and electricity they have the potential to have um many benefits from being a guardian um without doing much work so the effort to benefit is very low the effort to
(55:48) collude and cause um damage is very high and if you've chosen trusted Guardians the risk to those Guardians is very high as well yeah it's very interesting okay so how's uh how's progress going so i' I remember you mentioning in SE that you guys have been U working with some U small communities all over the world trying to um get them started on this tell us more about these experiments and how they're going yeah so um so so there's fedy Min and Freddy so fedy Min is now one of the
(56:20) most active projects in the Bitcoin ecosystem uh it's got 40 plus contributors um it's now very very stable very reliable it can support um single um user nonfed unfederated mints for for small amounts if that's what you so wish to do um obviously you don't have the benefit of being Federated and it can support federations of four or more tested up to 40 people which is the which is the Bitcoin standard is the is the the recommended way to to operate because it's the it's the lowest risk
(56:57) and and it continues to be worked on more and more features added all the time but it's a very very very very reliable protocol already and in Fetti um is one of a number of companies and we're seeing more which have chosen to use this as a base for a Bitcoin wallet in our case we call it a community super app because it not only does it have the fedy Min protocol to provide the custody elements it also has lightning integration to access the lightning Network um obviously Bitcoin because the basee money is Bitcoin and it also has
(57:31) integration with things like nosta um for social connection and login and Matrix for communication within the app so that's been built um we're now at what we call fedy Bravo which is like the beta version and coming we're working towards when fedy is ready and it will no longer have um a postfix it would just be fedy um the community super app now fedus well is a company that works with communities around the world uh we we offer it to communities everywhere but our initial Focus are some of the most disempowered and so
(58:11) there Community we're working with communities in Africa from Togo to Uganda and South Africa communities in Latin America multip from Surinam to Mexico to many other locations there in Southeast Asia Indonesia Philippines and Beyond and and Beyond these as well we work in two different ways in one we try to make available a suite of software and knowledge and support so that anybody can self-help and download and set up fedy mins themselves and use the fedy app or use an alternative wallet that supports fedy mint so that's that's the
(58:57) bottomup way and the other way is we work strategically um especially in the initial stages with a number of um significant NOS that focus on humanitarian and human rights defense um to work with them um to and the communities they deal with some of these communities and organizations are very large they they deliver aids to Millions tens of millions in a couple of cases over a 100 million people per year now we're not going to roll out to all of those people day one but we're already working with them in trials in
(59:32) some of these communities and the feedback we get in these really difficult environments where people where use of Bitcoin and lightning and fedy mins and ecash is not is not a choice it's they have no other options uh or the options are incredibly expensive or dangerous for them to use or they don't exist and so so given that we want to start we want to start where Banks and Apple pay and um and um venmo and so on are don't exist um all the options there are just very expensive because we expect that it's easier to
(1:00:14) find traction there if people have a problem they don't say well I'm going to switch back to ven mode they say I'm going to talk to you until you fix my problem because I because if I don't have you then I have nothing so so we get incredible feedback a lot of that has fed into the product which I think has led to the result of a product that's actually quite intuitive and easy to use and there's a long list of more feedback um and demands and and insights that they're giving us which we're only
(1:00:44) too happy to receive which again feedback to us so um we're already s say operating in many countries around the world um where we're top down working with these communities and the number of communities where fedy Min is where they're bottom up there's no way for us to know just like Bitcoin we have no way to know where people are running fedy mins because it's an open protocol anybody can download that anywhere that could be in a 100 countries or in 50 I don't I I just don't know um and that's the exciting
(1:01:14) thing about working on an open open protocol yeah that's fantastic um well usually we begin with talking to the guest about themselves but I thought this time it was uh a little bit more interesting to get straight into it so now I want to talk about you tell us a little bit about you and how you got into Bitcoin and what got you down this Rabbit Hole so far uh so I well I'll go back before Bitcoin um and right back to my background I was so I was conceived in Nigeria I was born in the UK um so I was
(1:01:47) a child of Two Worlds I um so when I grew up I would constantly be going backwards and forwards between Niger IA which is global South um and I was relatively affluent my family there but still was it was Global self subsaharan Africa and UK which is a Bastion of the West and um what I would see is my this direct correlation between friends and family and direct cousins in Nigeria as they grew up and their lives and then me growing up in the UK and then some cousins who were growing up in the US and it was very
(1:02:31) interesting even just visually your financial outcomes you'll see that the people who in the West in the UK would do way better than the people in same intelligence same background same genetics the people in in Nigeria and I'm talking about 10 50 times better and then you'll see the people in the US would do 20 30% better same genetics same background um and I and so you could start to see even in my young mind there's some correlation between the wealth of the country and the proximity to US dollar and so on and the success
(1:03:07) you have but you also even saw it physically my direct cousins who were in Nigeria were about a foot so 30 cm shorter than me on average they were like in the low five foots well most of the people in the UK were the low six foots but then you see the people in the US Direct cousins and they all like 6'3 to 6'5 they were a little bit taller than me you so it correlates in every single outcome both physically health and financial outcomes so it made me realize that I work really hard and uh and so on but a lot of My Success if not
(1:03:43) the majority was just where I was born you know and how close I am to now I realize how close I'm to Dollar milkshake so so I so I started gaining this um awareness of the um the inequality of outcomes due to financial results um Financial settings now I believe that you know if you work harder and then someone than the next guy or the next girl then you should benefit from that but this felt wrong to me that just because of where I was born I somehow had a leg up or a foot up over someone else and and also had a
(1:04:19) dysfunction others um the other thing was I was a geek I was into Tech from a very very young age um I was building neuro networks in secondary school um I studied um computer science and cognitive science in University and I was in tech for most of my career um so 2011 came along and a number of people told me about this Bitcoin thing it was actually two or three people within a few weeks of each other mentioned Bitcoin to me and they thought they saw it and immediately thought Obie would like this because it was it both it both
(1:05:01) um um hit my geek muscle because it was this really cool technology and also it was about this new form of Mer meritocratic money I would call it Freedom Finance the way I would describe it and so yes they were right I I was very interested I bought a little uh I had a business at the time that I was I was focused on um so I didn't pay too much attention but because I thought this was great technology but and the idea and philosophy were amazing but I don't know if this is going to um you know be able to survive against you know
(1:05:37) the all powerful states and so on um two years went by 2013 and my soon to be co-founder of my previous company The Exchange came up to me um and um suggested that look there's this Bitcoin thing he recently got into it and maybe we should set up a Bitcoin exchange in the UK because there weren't any real good ones at the time and I looked at Bitcoin is it still around I looked at it and it was now worth a lot more than when I bought in 2011 and it was still around so you still this incredible idea um incredible
(1:06:15) technology incredible philosophy and it had staying power it had antifragility which was the thing that I hadn't seen before and I thought okay well let's give it a ago it was a very at that point it was very easy to set up a bigon exchange you just had to not be Crooks and not be corrupt and so he just said why don't we just set up an exchange and we'll just run it well uh and that's it we set up this exchange it went on to be the UK's longest running Bitcoin exchange we were the first um to do
(1:06:49) something called proof of reserves cryptographic proof of reserves um and we had an unbroken record from the the beginning of the of the exchange for eight years doing monthly audits of our reserves and trying to name and shame other exchanges to say why they why we as a you know small to mediumsized at the end a mediumsized exchange could could manage this whereas these very large exchanges seem to give continually give excuses why it was so difficult for them to do um and so we we eventually sold the exchange um but as a said as
(1:07:26) time went on I became clearer it clearer and clearer to me that we were failing in our ability to get people to self- custody we literally unlike most exchanges the incentives are for you to not make people self- custody so you'll say that you're interested in it but you pay lip service to it a few um really really try to get people to self custody um but the majority don't we were one of the few that really tried I would literally beg some my um users and I would try to have I would try to randomly meet meet um we
(1:08:02) had hundreds of thousands of users but I tried to randomly meet um um users and and get to know them and one woman just one of the actual points that led me to think I've got to sell and find ways to get people of exchanges was this really StreetWise um mature um Jewish woman and uh still very good friends now to this day I just check in to see what she's doing and so on but she um one point I I said well why don't you self custody I've been trying for like a number of years to get to self custody
(1:08:41) and she goes look Obie I I get Bitcoin and know I well I'm not technical but I've now over the years understood it it makes makes sense to me as this saving asset and so on but um you know the reality is I I understand why you should self custody but the reality is I trust you more than I trust myself and I was like okay wow okay and then I asked the question who do you trust more than you trust me and she goes well my son was the one who suggested that I use you guys and at that time if he said I join
(1:09:17) I should join Wibble wubble exchange I would have just follow these advice so I guess implicitly I trust my son more than I trust you and that was the spark of the idea that Community could be something that would be and friends and family could be if you gave them the power of of a simple way of of custody um that provides an experience that simpler than using Exchange but was run by your friends and family that might just might be something that could get a number of these people who want to self- custody um but off exchanges and start
(1:09:56) that Journey towards self- custody and that that was a NB of the idea obviously the technology that would allow it to happen I wasn't aware of at the time but lat today I know that about a year or two later after I sold my exchange and was looking I was at hacker Congress that I met Eric and he explained fedy and I realized this was the technology that could provide an experience that was better more private more scalable but the user experience is actually easier than the user experience of using uh an exchange you to join an exchange
(1:10:30) you have to fill in lots of forms and scan different things Etc it can take a while to use a fety Min you scan a QR code and you have signed up you know um no emails no phone numbers and so on instantly in there and the people that you trust the most and you and that care about you the most are the ones who are custody for you and so I'm really excited about that it doesn't obviate the need for exchanges for some people they they may trust a stranger a curlyhead guy in the Bahamas um more than they trust their friends and family
(1:11:07) and other people will and many people will and should trust themselves more more than than other people who are not them um and so there there's options for all but this is I think a really interesting addition to that that space of of of opt of custodial option yeah absolutely I I I think it is uh I think you're correct paval has a question for you is there an economic incentive for Guardians to run the mint is it run like a profitable business or is it like a nonprofit organization how do you see this
(1:11:41) unfolding so um there are it can be um run as with an economic incentive that is possible um people and actually um there there needs to be a very small fee maybe one sap per note potentially um for any public Federation if there is um if it's if it's public you you are open to the potential for dos where people can just Min and redeem Min and redeem and not do anything with it um so charging a small amount um proof of work effectively um Bitcoin and satos effectively um quanti proof of work you can charge a small amount or you can
(1:12:28) there are alternatives that are very meant to protocol are working on where instead of charging money you can you can force them to perform a proof of work task to to receive so you can choose they can either perform some work or they can pay a SAT and so but that will mean there's a even in that case a small Revenue amount but that would just basically cover costs but you could choose to increase that so as a fee but the the option that we um recommend for communities or families is to not use Financial Capital but Social Capital I.E
(1:13:04) you don't charge for the service but it's relatively inexpensive to run a a federation um um could be run on four raspberry pies and you can pick up a Raspberry Pi for under $50 um and it uses up a very small amount of of Internet bandwidth minimal um and a very small amount of electricity can run on a USB chip so you're sort of you're talking about internet and B requirements of a a smartwatch you know and the cost will be $50 so it's it's near to free to run um but you are gaining the social capital
(1:13:43) of supporting and helping your friends and family which in in you may already be doing as an Uncle Jim they if they're asking you if you have your if someone is holding Bitcoin and then they have their private keys and they are giving it to a friend or family to have a back of their keys that person is also the custodian of their keys already and they do that for free but that person they are trusting not to run off with their keys and if they split it up between two or three friends and family well those
(1:14:11) two or three friends could collude so you have the same challenge already um and people are doing that regularly around the world for free the other benefit is economies of scale um you if you're self- custody your own Bitcoin and you're using the lightning and you're in a self- custodial way um you're going to incur costs for channel rebalancing um opening channels closing channels um for manage for buying Hardware wallets and so and managing your keys there's a cost to do that if you have a fedt then those costs can be
(1:14:50) amortized across your family or community so if there a community of a thousand people and you amortize those costs equally then your costs for running and operating lightning node and self custody get divided by a thousand let's say instead of one you have four people in a mint then it gets multiplied by four divided by th000 that's still a 250 one over 250X of the cost so if it was costing you $50 a month is now costing you 20 cents a month you know so so that's the other benefit that you save the cost because you're sharing the
(1:15:28) cost across people excellent all right um anything else you want to tell us about fedy well about fedy um I said we um are a working on getting to the point where we're fully going to release we had fedy Alpha that came out um um last year early on this year we had fedy Bravo and fedy when fedy is ready it's it's that's what we're working actively towards um we are just a really exciting team we just came back from Prague um and just only um two days ago I believe we we hit the 2-year anniversary of fedy as a company
(1:16:15) and now we have you know fedy people in all around the world um because the nature of the company is not just the software but we we really believe that you need this physical connection physicality is the key physicality of Bitcoin physicality of communities and and networks of trust starting from a physical base and physicality of us as an operations so what makes us unique is that we have people on the ground in laam in Southeast Asia in Africa um and over the coming and Beyond um and over the coming years um we hope to hire um
(1:16:55) in fact we we plan to hire hundreds of people um in Middle East in post Soviet Europe um as said and Beyond um and what they will be doing um these Fredy nights as we call them um will be locating communities um educating communities and supporting them so they act like this form of decentralized Genius bar but what's really cool about that is that um because FY the app is this super app this community super app it doesn't do it by itself it uses Bitcoin it uses lightning ecash it uses nosta and other
(1:17:35) decentralized Technologies like um Matrix for chat in um in future like um decentralized AI Etc um but it also allows you to Showcase other apps within the Bitcoin ecosystem that makes sense for different communities so different communities can pick and choose from a from a board um from a board of different apps that are out there that are already exist in the Bitcoin ecosystem and make them available to their community in one simple app so the users in the community don't have to go off and find bit refill and find BC maps
(1:18:12) and find bolts or or whatever the Azteco or whatever the service it may be they can see it simply in one place um and they then get supported by us this decentralized Genius Bar who can say for your community I think you need bit refill I think you need Azteco or in your case I think you need um whatever other services that you need um and so instead of every single company in the Bitcoin space trying to hire their own Global sales force and marketing and support Force we effectively act like that for them we have no intention to
(1:18:46) build our own competing product of these we we just want to find the best and then promote them to the users in this one holistic way and then give them the benefit of feedback from the users as well which is for us we've already seen in our app is priceless um and so we win by ensuring the entire Bitcoin ecosystem wins and that's where you're going to see the second part of fetty over the coming years this sort of on the ground Salesforce for Bitcoin very nice we've got another question here um paval is
(1:19:20) asking can you talk about how social backup or social recovery works oh that's a that's a very uh um that's someone who's been looking heavily at Freddy mint and Freddy to ask ask that question which is really cool so this is again a very cool feature um there's so many features behind the scenes which we don't get always a chance to talk about but um when you one of the key challenges with um Bitcoin for people who are less sophisticated so on is even people who are sophisticated is how do I back up the keys for for my
(1:20:01) my Bitcoin or for my money um and um often it comes down to you get 12 or 24 words 12 is currently quite common um words that you have to remember and so on but then the question is well what do I do with those 12 words where do I store those safely um if I give it to my my partner um or a friend how do I know they don't just stick it on a on a fridge magnet on their fridge you know my security becomes the lowest common denominator amongst the security of the friends who have backed up my keys I could be keeping mine in a fort knock
(1:20:38) but if my friend has a backup and I keep it under their their pillow then I haven't got very high security um so that's the norm and we support we support the norm backup where you can take the keys and recover all your eash with 12 words however we have another option because you have communities that you're are a part of you can Leverage The Power of your community to help back up your keys um so because remember these are people that are already trusting with some of your your Bitcoin anyway um and the way
(1:21:14) this will work is that um you can um take your 12 words and cryptographically break it up into Parts where each part cannot be used to determine any of the words but if you take enough together you can Recon your words you can then pass those different parts to the different Guardians where and they will store they will store those parts locally now there's a little bit more to that to make it really simple all we ask to uses to do is record a video of them saying the words fety it's a it's a two second
(1:21:55) video that video isn't actually sent to the Guardians so the Guardians don't get to see the video but um the video a fingerprint of that video is attached to to the passwords and the passwords are encrypted as well so even though the Guardians are holding the passwords for you it splits up across them and they don't know who they're holding it for and they can't decrypt it and you're left with a file which contains your video of you saying the word Feddy and this password and it's all and this all
(1:22:30) happens with a click of a button you say Feddy and then out pops this file and the backup of your keys are sword now that file doesn't contain your password but it contains the key to unlock your password so you can store that um anywhere you want you can send it to yourself by email you can send it to some friends anywhere now fast forward a year you lose your phone and you want to recover with social backup you find this file and you download the fety app and then you will initiate social um recovery and what it'll do is say well
(1:23:10) upload this file it will upload the file it will then use the use the image and the video to send to the different Guardians and by the way this all happens automatically the actual Guardians don't have to do anything here they're just sleeping or chilling um and the Guardians can then compare the video with you you walk up to them and say I want to recover my keys and they say is this video of you saying Freddy the same person the person in front of me if it is then they will return their part of your key you go up
(1:23:43) to say three of the four Guardians and as long as you get enough people returning the parts of the key you can now recover so this is a long explanation but the user experience is very simple I want to back up my my keys I record the word fedy and I'm done and I want to recover I just go up to three of the Guardians and I just walk up to them scan a QR code they check that the video and that's the first time you seen a video matches and if they say yes it does I receive the different parts of my key I reconstitute my my password and
(1:24:16) this actually is quite interesting again going back to Ai and deep fakes um I predict we already saw new story from a few months ago where a bank I believe it was a bank lost 20 million because they were went on a video call and there was a deep fake of one of the junior employees asking the senior team to release um an amount of money and but it was it was AI generated um we we're entering a world where the this the standard processes by which banks and finance instiutions used to recover um your keys or not just
(1:24:56) Banks any um organization Facebook Microsoft and so on involves at some point when they're in De involves getting onto a video call and you showing a passport or a video well we're going to get to a point where those sort of mechanisms are going to break down in the face of deep fects and Ai and so the only way you will be able to verify someone is who they say they are is to meet them physically in person but over the last decade or so we've systematically shut down all local branch offices and so on so those
(1:25:34) mechanisms don't exist anymore so again um just by in accident because this was invented um social backup was actually first implemented before chat GPT um the original chat gbt came out and everybody started getting really excited about AI um and it's been work with working with communities with this since before fedy Alpha even um but by coincidence it happens to be deep fake proof because until we have Androids that look and feel and sound exactly like human beings um you have the ability to meet someone
(1:26:12) in person when you have these hyperlocal fedy mint communities very nice all right well um I guess this is all I have anything else you want to tell us no it was it's always a pleasure um it was great hopefully we'll have some Korean barbecue again one day soon but no the only other thing I would say is just to to find out more about fedy mint and ecash in general you should go to fed.
(1:26:45) org um to find out more about fedy um the company that's one of the companies working on fedy mint and other protocols go to fedy Fed doxyz excellent yes and we'll be sure to post these links on the show notes Obie thank you so much for joining us and for your time and I really wish you all the best thank you very much safe cheers man take care bye byebye [Music] oh
