Fedi’s Bitcoin Federations Could Onboard Next Billion Users, Says CEO

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Long-time bitcoin advocate Obi Nwosu aims to make mass adoption of the leading cryptocurrency a reality, with the goal of achieving that goal through his new Fedi project.

But how exactly? By something called “Federations”.

These provide communities with an independent way to take control of their money, data and digital lives while protecting each member’s privacy and autonomy, he said.

This is a great experiment, Nwosu told Decrypt at last week’s BTC Prague. The first version of Fedi, Fedi Alpha, was released last month at Bitcoin Miami, and you can still join it. The next step was to show that it works very quickly, so now there is a second federation, which is BTC Prague.

BTC Prague, in Fedis terminology, is an ephemeral federation, which means that it is only temporary and will disappear within a set period of time. This short-lived federation was set up in such a way that any money not withdrawn would actually be donated to a charity chosen by the conference organizers.

In the case of the BTC Prague federation, it was also an opportunity to test Fedi Alpha, the advance version of the federated operating system, where conference participants were offered exclusive features such as access to the event schedule, sending sats via Lightning Network, and the ability to broadcast messages in a chat.

“I don’t know the numbers, but there are around 6,000 people in BTC Prague who will want to download the app,” he said. “It shows you what we can do with simple events. But taking all possible use cases, it can add up to 1 billion.”

Built on an open-source protocol called Fedimint, Fedi aims to create community-driven banks that seek to help communities store Bitcoin and data together and simplify transactions between members by outsourcing custody to guardians. that users personally know and trust.

Calling these trusted relationships “second-party custodians”, Fedi thus offers a compromise between the convenience of custodial storage and the autonomy of self-custody, with an option to withdraw funds to a self-custodied Lightning wallet by the users.

The next big phase is a full production version where it’s very easy to download the app and create a federation, Nwosu said. In the coming months we will also try to show how easy it is to extend the functionality of a federation, and so we hope to have a very large number of what we call independent Fedi Mods applications that tutors can deploy during setup create a federation.

Integrate a billion people

While conferences and other events, according to Nwosu, are a very powerful use case of what federations are capable of, he firmly believes that this is just the beginning and that the project can easily integrate the proverbial billion new users.

How many hundreds of millions go to conferences, festivals, events, concerts and all those temporary gatherings every year? And there is normally an application that is really badly designed. And you download it and never use it again, Nwosu claims. Here though, you are joining a Federation for one thing, but in the end you still have a working platform that becomes a bitcoin wallet and still has a use.

Plus, it can lead you to other things, and you can continue to use Fedi to set things up for your community or maybe for your business, he said.

Fedi Federation for BTC Prague.

Communities are specifically where new users can be onboarded, especially as the cost of on-chain transactions increases more and more, the CEO of Fedi said.

People switch to Lightning first, but the costs keep rising. And then you will realize that doing a channel rebalancing is also expensive. We’ve seen this recently, he said, referring to the reshuffling of balances in payment channels that Lightning nodes perform to continue routing payments.

He further explained that since the costs for a channel rebalancing are generally the same whether that channel is used by one person or a million people, that means if you have a federation of 10,000 people, the costs are shared among these 10,000 people.

That’s why federations work even in hot markets, because all your costs are split. Let’s say you have 1,000 users and a transaction of $10, so instead of one person paying $10 to rebalance, you have one person paying $10 divided by 1,000, or 0.1%, Nwosu said.

In addition to this, since federations use Fedis eCash notes the implementation of digital cash invented by Dr. David Chaum, it also helps to scale transactions as any transaction made within a federation does not even touch Lightning.

The Fedi offer for companies

According to Nwosu, these Federations can also be attractive for companies, because companies are also communities with a common interest or a common goal.

“Right now, if companies want to keep their Bitcoin, they usually use third parties to do it because it’s hard for them to do it themselves and there are people trying to make it easier,” Nwosu said. to decrypt. But companies also have complex requirements, and if they create a federation, they can, for example, entrust the management team with the guardianship of the Federation.

Federations can also give companies whatever spending controls they want.

They can say, well, this department can spend that much or make a certain payment. All of this can be added as anyone can write programs for Windows or for your iPhone. You can also do it for a Federation, Nwosu said.

According to him, companies may also need other environments, such as integrations with accounting systems or tax systems with back-office systems, and due to the extensibility of the elements, it will be easy for developers third parties to provide these integrations.

We are already talking to people to do it, but we will not do it ourselves, Nwosu said. We’re building the platform, but over the next year we’ll be talking to multiple developers around the world to make them aware that there’s a whole new platform they can build on and provide services.

What about Fedis’ business model? According to Nwosu, it’s quite simple.

Fedimint is an open-source platform that allows people to create their federations, and each time a transaction takes place, we add a small additional fee, he said. And I’m pretty sure now that people see this happening in a successful model, they’ll make competing products. Just as there are multiple web browsers or multiple operating systems.

The fee charged by Fedi will be very reasonable, Nwosu added, saying we can use that money to make the experience incredibly good.

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