What is Fedi Bitcoin?

Description

Fedi is a private superapp that integrates chat, money, and more, designed specifically for communities and their members. It’s built on Fedimint, a privacy and scaling solution for Bitcoin that is compatible with the Lightning Network and utilizes Federated Chaumian Ecash.

Before Fedi, your options for storing Bitcoin were limited: you could either keep it on a centralized service like an exchange, third-party Bitcoin custody provider such as Casa, or a custodial wallet, or you could opt for self-custody by storing it in your own wallet. Fedi introduces a new option—community-led custodianship of Bitcoin funds—as an alternative to these traditional methods.

Differences between Fedi and Fedimint

While Fedi and Fedimint are closely related, they serve different functions within the ecosystem:

• Fedimint: Fedimint is the underlying protocol that enables federated e-cash mints. It is a community custody protocal. It focuses on providing the technical infrastructure that allows for community-led custodianship of Bitcoin. Fedimint ensures that Bitcoin can be held and transacted with enhanced privacy through a federation of trusted community members.
• Fedi: Fedi is the application built on top of the Fedimint protocol. It provides a user-friendly interface for interacting with Fedimint mints. While Fedimint deals with the backend technology, Fedi focuses on the user experience, making it easy for anyone to use Bitcoin in a private and secure manner.

What Problem is Fedi Solving?

Fedi addresses several critical issues in the Bitcoin ecosystem:

• Privacy: Traditional Bitcoin transactions can be traced on the public blockchain, compromising user privacy. Fedi, leveraging Fedimint, offers enhanced privacy by using federated e-cash mints that obscure transaction details.
• Custodianship: Holding Bitcoin securely can be challenging, especially for individuals who are not tech-savvy. Fedi allows communities to act as custodians, reducing the risks associated with individual custody and making Bitcoin more accessible to a broader audience.
• Accessibility: Many people find existing Bitcoin wallets and custodial solutions complex. Fedi simplifies the process, making it easy for anyone to store, send, and receive Bitcoin.

How Fedi Works

Fedi operates by connecting you to federated e-cash mints managed by trusted community members. It leverages a network of independent entities known as “Fedimints” to offer custodial services for Bitcoin while preserving user privacy and control. Think of Fedimints as decentralized banks working together to provide a seamless Bitcoin experience.

As a Fedi user, you hold a balance in your Fedi wallet made up of “e-cash notes.” These e-cash notes represent a 1-to-1 claim on Bitcoin that is securely stored on the blockchain. The notes are “blinded,” meaning they are cryptographically protected, so even the system operators can’t see the details of the transactions, ensuring your privacy and security. These claims are linked to Bitcoin that has been “pegged” into the Fedimint, a federated Bitcoin custody system. Essentially, you can spend these e-cash notes as if they were Bitcoin, knowing that they are backed by actual Bitcoin held in reserve.

Through Lightning Gateways, you can use your e-cash to send and receive Lightning transactions. E-cash is the most efficient way to pay another member within your federation, offering privacy-preserving, bearer instruments that support unique payment methods not possible with Bitcoin or Lightning.

Fedi currently supports two native e-cash payment mechanisms: Chat and Animated QR Code. In Fedi’s native Matrix chat, a wallet icon allows you to send e-cash as a push payment or request it from your contacts by username. You can also use an animated QR code to transfer e-cash, or simply copy and paste the e-cash string into the receiving wallet. The animated QR code is recommended for its ease of use, particularly for transacting between two air-gapped devices, even if the sender is offline.

One of the key features of e-cash is that it’s a bearer instrument, meaning the e-cash notes are physically stored on your device and can be transferred to someone else who can reissue them with the Fedimint to complete a payment. Fedimint’s reserves are held in on-chain Bitcoin: users deposit Bitcoin through an on-chain “peg-in” transaction and receive e-cash notes of equivalent value. These notes can then be redeemed with the mint to withdraw Bitcoin, which is sent to the user’s specified receiver address.

On-chain deposits and withdrawals can be made directly within Fedi wallet via the Send and Receive buttons, by flipping to “Bitcoin” from “Lightning” using the arrow at the top of the screen. However, due to higher fees associated with Fedimint on-chain transactions, it is generally recommended to use Lightning Gateways or e-cash transactions, except for extremely high-value transactions.

Fedi aims to enhance Bitcoin’s scalability and transaction speed by utilizing the Lightning Network and other layer-two solutions.

It’s not necessary to have in-depth knowledge of eCash to use the Fedi app. The app aims to be user-friendly, so basic usage doesn’t require technical knowledge of eCash. The app is designed to abstract away much of the complexity, allowing you to use it for everyday transactions without needing to dive deep into the underlying technology.

Here’s a simplified overview of how it functions:

• User Registration: You sign up on the Fedi app and connect to a local Fedimint federation.
• Deposits and Withdrawals: You can deposit Bitcoin into the federation, which then issues e-cash tokens representing the deposited Bitcoin. You are able to send e-cash to other Fedi users or convert it back to Bitcoin for withdrawal.
• Transactions: You can send and receive e-cash tokens within the federation. These tokens can be redeemed for Bitcoin at any time, maintaining their value.
• Privacy: Transactions within the federation are not recorded on the public blockchain, ensuring enhanced privacy. The use of blind signatures and asymmetric keys further protects the identities of participants, preventing unauthorized parties from linking transactions to specific individuals.

Fedi Features

• Encrypted Chat: Securely message, send, and receive money through Fedi’s encrypted chat feature.
• Phone Top-Up & Data: Easily top up your phone, add data, and stay connected.
• AI Assistant Access: Get access to popular AI assistants directly through Fedi app.
• Bitcoin Acceptance Finder: Discover where Bitcoin is accepted using integrated tools.
• App Integrations: Integration with apps like Bitrefill, BTC Map, Stacker.News, Geyser Fund, Stakwork, and the Bitcoin Company and more.
• USD Balance: Protect your funds from Bitcoin price volatility by maintaining a USD balance.
• Fedi Mods: Independent apps that can be deployed by guardians to tailor the community experience. Fedi Mods interact with your money and data through open standards like WebLN and Nostr.
• Lightning Gateways: Users of a Fedimint who also run lightning nodes, acting as lightning service providers to other users of the Federation in exchange for ecash.
• Fedi for Business: Empower organizations to independently safeguard and manage their funds within a federated system.
• Global Employee Remuneration: Keep your funds locally without the risk of local or remote third-party failures.

Fedi Use Cases

Fedi expands the use cases of Bitcoin by enabling communities to manage and store Bitcoin collectively. Here are some key use cases for Fedi:

• Savings Groups: Fedi can be used by informal savings groups or village banks, common in many parts of the world such as chamas, stokvels, paluwagan, and susus, to securely store and manage group funds in Bitcoin, reducing the risks associated with traditional cash-based savings methods.
• Community Custody: Fedi allows communities to pool their Bitcoin resources and manage custody together. This can be especially useful in areas with low financial literacy or where individual custody might be too risky or difficult. A community elects trusted members to form a “federation,” which collectively manages the Bitcoin on behalf of the community.
• Micropayments and Donations: Communities can use Fedi to manage and distribute micropayments or donations. For instance, a local charity could use a Fedi federation to collect and distribute funds transparently and efficiently.
• Resilience Against Censorship: In areas where governments or other entities may try to censor or restrict access to financial services, Fedi provides a way for communities to maintain financial autonomy and resist censorship.

Fedi App Supported Languages

The Fedi app currently supports multiple languages. It aims to be multilingual, allowing users to choose their preferred language for the interface and communication. The supported languages include English, Spanish, French, Bahasa, Portuguese, Juba Arabic, Ikirundi, Kinyarwanda, Soomaali, Kiswahili, Arabic, and Amharic.

Is Fedi Safe?

Fedi is an open source app that prioritizes security, but like any digital platform, it’s essential to understand the risks and take precautions. Fedi uses a unique security approach called federated custody, where your Bitcoin is held by a group of trusted community members, known as guardians, rather than a single entity. This distribution of responsibility makes it harder for hackers to target and steal your funds. Additionally, Fedi uses multi-signature wallets, requiring approval from multiple guardians to access funds, adding an extra layer of protection. Privacy is also a key focus for Fedi, which incorporates technology like Chaumian eCash to safeguard your financial information.

Fedi allows you to set up a personal backup, which includes the common 12-seed phrase backup as well as a PIN. Additionally, you can set up a social backup, which involves recording a video that will be converted into a private wallet backup file. Social Backup simply helps you recover access to your wallet with your community’s help. You can share these videos with designated guardians. Federation Guardians, within the Fedi community, verify your identity and facilitate access to funds.

While Fedi offers a higher level of security than traditional custodial services, it’s still not as secure as self-custody where you hold the private keys to your Bitcoin.

One of the primary concerns is the need to trust a group of guardians who manage and control the custody of funds. Although users are strongly advised to only join Federations whose Guardians you know and trust, if these guardians were to collude or be compromised, users could lose their Bitcoin. This reliance on a small group also limits users’ control over their funds, as they must trust the guardians rather than having direct control through self-custody. x

Furthermore, the use of Fedi could attract regulatory scrutiny, especially as it becomes more widely adopted, potentially exposing guardians to legal risks in jurisdictions with strict regulations on Bitcoin custody. Lastly, there is a risk of mismanagement by the guardians, whether due to inexperience or poor decision-making, which could jeopardize the funds within the federation.

Fedi Bitcoin App: The Future of Bitcoin Community Custody

Fedi Bitcoin represents a significant advancement in the Bitcoin ecosystem, addressing key issues of privacy, community custodianship, and accessibility. By leveraging the Fedimint protocol, the Fedi app provides a user-friendly solution that empowers communities to manage Bitcoin securely and privately. As Bitcoin continues to evolve, innovations like Fedi will play a crucial role in making it more inclusive and user-centric.

Traditional custodial solutions, such as centralized Bitcoin exchanges, often require users to trust third-party entities with their funds. This creates a barrier for many individuals, especially those from underdeveloped regions or with limited financial resources.

Fedi addresses this issue by providing a decentralized custody solution that allows users to share the responsibility of managing their Bitcoin funds with trusted community members. This approach not only increases security but also promotes collaboration and empowers communities to take control of their financial futures.

One major drawback is the app’s learning curve, which may deter some non-technical users from fully utilizing its capabilities. Furthermore, the AI Assistant behind Fedi is not free; you must deposit sats to access its services.

Furthermore, Fedi’s model may face scalability challenges, particularly if the number of users within a federation grows substantially, potentially straining the system and the guardians’ capabilities. The setup and management of a Fedi instance require technical expertise, which may not be accessible to all users or communities, limiting its adoption among non-technical users. Dependence on the internet is another limitation, as regions with unreliable internet access may find it challenging to use Fedi effectively. While Fedi presents an innovative solution for Bitcoin custody, these potential downsides must be carefully considered.