Subnostr

I think it might be useful distinguish between multiple use cases and threat models for Bitcoin as a medium-of-exchange and acknowledge that these are being served by different architectures.

1. C-2-C payments

2. B-2-B payments

3. B-2-C payments

It seems to me 1. requires trust-minimization and high privacy. This use case is currently being served by LSP based self-custody Lightning wallets. And also by Cashu/Fedimint though these do leverage local trust and social incentives to share UTXOs.

For 2. and also in partially for 3. I think federations like Liquid leverage trust between businesses. So not on a local/private level but on a corporate level. Trust relationships in business can also be viewed as a type of social inventive structure to scale UTXOs but these are more abstract. So it makes sense that these federations have more members and I hope we will see more than one competing with each other.

I’m still wrapping my head around Liquid, so I need to give this more thought. But it seems useful to reason about it that way.

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Discussion

Nick Slaney 1y ago

How do you have a trust relationship with liquid key holders? (Who are they?) There is not much difference between liquid and fedimint / cashu and in some ways rug risk is worse, with Liquid having $220M assets under management.

If you want to trust your funds to an entity as a business to maximize fee efficiency, you’d want to make sure you know exactly who is custodying your funds and how (this is how we got banking licenses in the first place). That trust trade off is potentially on-chain fees for the entire bag.

tank 1y ago

FWIW I would personally trust the Liquid Network over a bank any day, especially for payments. But anyone can make that decision for themselves and their business.

Don’t forget as a US citizen you are speaking from a position of privilege. There is an underserved market that can’t get a bank account easily. Digital nomads and global small businesses is one of them. As a “foreign resident alien” (or whatever the IRS calls me) it’s hard to get a business bank account for my LLC. US banks see you as a compliance risk, not worth their time. So I have to use fintechs like Wise that don’t offer FDIC insurance. I’ll def take Liquid over holding any funds there.