Ecash has become a hot topic in recent years. Ecash is a protocol which can be implemented today, without any changes or alterations to the Bitcoin protocol.
Cashu’s ecash protocol has been gaining traction on the edges of the Bitcoin ecosystem. This is because it allows you to develop an application without having to wait for Bitcoin to change. Cashu wallets are becoming more popular on platforms such as Nostr. Inter-mint settlements across the Lightning Network make them a good alternative to Lightning wallets like Wallet of Satoshi.
Ecash will likely become a popular part of the Bitcoin eco-system, Cashu has in particular been extremely successful at encouraging many compatible implementations.
Cashu has a detailed plan of an ecosystem that is built on the protocol. This will help address the issues with ecash’s trust model, and also the needs of specific use cases. The vision of the Cashu eco-system is described below.
Blind Tokens
All ecash protocol’s core is the blind signature system. The mechanism allows for a centralised entity to securely process electronic cash payments.
Users must first generate a random number. The actual token is created. The token can only be held by the person who generated it. It’s not enough to generate random values. Anyone can do it. It is the responsibility of the operator to sign and notarize each token.
If they can see the token, they’ll know for whom they signed and will be able to tell who paid when another person comes to redeem their token. In order to address this problem, the user generates a second value randomly, called a blinding number, before the mint notarizes a token. Binding factor is basically multiplying token value by blinding value.
This is then given to the mint for signing. You are now faced with the problem that the mint only signed the blinded version of the value and not plaintext. You can reverse the process used to blind a token and the underlying cryptography to undo the signature.
It leaves a signed plaintext token value. The mint does not have any idea who, when, or why it was created. This is ecash (get it?) in a few words.).
The Small Local Mints
Cashu’s goal is to provide a lightweight and lean protocol, which is simple to use, integrate and build upon. This vision is of an ecosystem consisting of many small, localized mints that are all connected via Lightning Network. Developers envision a much larger number of small operators and smaller mints, rather than focusing on the large ones with their network effects that allow token transfers directly between users. This would incentivize the concentration massive amounts bitcoins in fewer trusted counterparties.
The users can then rely more on the operators they know and trust. Lightning allows this because you do not have to convince anyone to accept tokens issued by your mint. Instead, simply redeem tokens to allow users to get tokens for their mint.
This strategy tries to make use of Dunbar’s Number, which is the number of people with whom someone can have an emotional relationship.
Mint Discovered Over the Nostr
The new Nostr protocol, which is part of Cashu’s ecosystem in the future, plays a major role. It encourages the use of local mints that are trusted by the people who live nearby. Nostr relies on users’ identities to be tied to the cryptographic key they hold, which ensures that only them and no other person can send out messages using their identity.
Nostr uses social media as its primary application. The combination of the key-based identification scheme and the webs trust concept, which is an ancient cryptography principle, creates a solid foundation. Cashu uses this feature to help users discover possible mints.
Anyone using Cashu that supports the Nostr feature will be able, with their key, to locate mints and see which mints other people who they trust and have interacted with, use. It can help them make informed decisions about which Cashu mints they should trust with their money, rather than guessing blindly and hoping to avoid getting burned.
This reputational network of trust becomes stronger over time as more mints come online and more users with Nostr identities use them. The users will be able to filter out any malicious mints and only choose the honest and trustworthy operators.
Use Multiple Mints
A market based option system based on a wide range of mints is built upon the foundation of an ecosystem that offers users a choice of options. However, things could be even more advanced. Multiple mints can be used by a single person.
A user’s balance can be spread over multiple mints. Using a multipath variant, they can send a payment via the Lightning Network with chunks of payment coming from the many mints that the user has balances at. It allows you to spread the risk that comes with having your money stored at a custodian across a number of different ones, and still be able to pay people who are using varying mints.
It is possible because the mints run customized software. This allows a mint only to partially pay an Lightning invoice. Other mints with funds can pay the remaining invoice. The payment is successful as long as all mints successfully route their payments to the destination.
Lightning nodes are also customizable, allowing users to further customize their Lightning. Receive a 10% discount A payment made to several mints. Each mint that receives funds may issue its own invoices, whereby the user receiving the money controls the release of preimage. The user may release their preimage as long as all participating mints receive the routed HTLC.
Combining this scheme with Nostr’s discovery protocol and the associated webs or trust, it can improve security for users.
Program the Money
Cashu tokens can be programmed with script functionality in the same manner as a bitcoin UTXO. Cashu can encode scripts before notarizing the token, so that the mint is unable to see it. When the tokens are redeemed later on, the mint may refuse redemption if the script conditions haven’t been met.
Cashu implements an lock script to public keys, which requires the signature of the public key specified to redeem the coin. The tokens can be locked so that only the owner of a certain private key is able to redeem them. The token cannot be redeemed by anyone once it has been minted.
You can use this to make secure payments even if the receiver has no internet connection. Once they have verified the signature of the mint, they will be able to redeem it even without internet. The recipient can accept the token as payment, knowing that they will be able to redeem it at a later date.
It adds some complexity as the sender must lock in tokens for a particular recipient if that person does not have internet access at the time of purchase. People often don’t have a clear idea of how much money they’ll spend, so they may end up spending too much.
But scripts can be used for many different things. Tokens may require signatures from either a public key or a person after a specified time period. It’s similar to an HTLC. Cashu also defines a token script that is an actual HTLC.
The scripts people use to lock Cashu Tokens can grow arbitrarily as time passes and new uses are sought. In the future, I think this will be a powerful feature of the protocol. This could include escrow, multisignature, smart contracts, etc. Cashu can enforce all script conditions, including Bitcoin.
The Big Picture
It is a fact that people use custodians. This is something they have done for years and it will continue to be the case regardless of whether non-custodial options offer more flexibility. Self-custody is a complex issue that many people cannot or do not want to handle.
Cashu wants to revolutionize the way users interact with custodial solutions. Cashu is a service that offers users privacy, flexibility, and resistance to censorship.
Cashu’s goal isn’t to create a new currency. “scale Bitcoin” Instead of using custodians to provide custodial service, we want to create a private and improved system. It is my opinion that this goal has great potential in the future to benefit these users.
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Source: bitcoinmagazine.com
