Privacy and Trust
Fedimint gives you strong financial privacy, but it's important to understand the trust model and its trade-offs.
The Privacy Model
Fedimint uses Chaumian eCash — a cryptographic system where the federation blindly signs your eCash notes. This means:
- Guardians cannot see your balance.
- Guardians cannot see your transactions.
- Guardians cannot link who received an eCash note to who redeemed it.
This is a fundamental improvement over third-party custodians like exchanges, who can see everything you do.
The Trust Model
Fedimint is an explicit trust model. You are trusting the guardians of your federation not to collude. Here's what that means in practice:
Custodial Risk
A majority of guardians could theoretically collude to steal the federation's Bitcoin. This is why it's critical to know your federation — join federations where the guardians are people you have strong, pre-existing relationships with.
The social incentive is powerful: guardians who steal from their own friends, family, or community face real-world social and personal consequences that go far beyond any technical protocol.
Debasement Risk
Guardians could theoretically issue more eCash notes than there is Bitcoin backing them. The federation's consensus mechanism and auditing tools work to prevent this, but it remains a trust assumption.
Regulatory Risk
Depending on jurisdiction, federations operating in non-commercial contexts among friends and family are often exempt from financial regulations. However, this is an evolving area.
Lightning Gateway Risk
When you pay a Lightning invoice through a gateway, you're trusting that gateway to complete the payment. Multiple gateways can operate within a federation, giving you options.
Know Your Federation
The golden rule of Fedimint: know your federation.
Join federations run by people you trust — family, close friends, respected community members. The closer your relationship with the guardians, the safer your funds.
You can also be a member of multiple federations, perhaps with different strategies:
- Family federation: Higher trust, used for longer-term holding.
- Friends federation: Wider anonymity set, everyday spending.
- Community federation: Larger group, used for local commerce.
Fedimint is a voluntary system. We hope that an honest accounting of the trade-offs helps you make the best decisions for your own risk profile.