Federated blind mints have attractive privacy, scaling, and security properties that are highly complementary to those of Bitcoin and the Lightning Network.
I originally became interested in blind mints while thinking about Lightning Network wallet usability issues. When Lightning works, it is fantastic, but keeping a node running and managing a wallet present a number of challenges, such as channel unavailability due to force closes, the unpredictability of the on-chain fee environment, the complexity of channel backup, and the involved and often subtle need to manage liquidity.
All of these problems are tractable for a skilled node operator, but may not be soluble in the context of self-hosted wallets operated by non-technical users, hereafter normies. If this is the case, then normies may have no choice but to use hosted Lightning wallets, compromising their privacy and exposing them to custodial risk.
Chaumian mints, also known as Chaumian banks, or blind mints, offer a compelling solution to these problems, particularly when operation is federated. Chaumian mints, through the use of blind signatures, have extremely appealing privacy properties. The mint operators do not know the number of users, their identities, account balances, or transaction histories. Additionally, mint transactions are cheap and can be performed at unlimited scale.
Mint implementations, typified by eCash, have hitherto been centralized, and thus, like all centralized, custodial services, expose users to custodial risk in the form of operator absquatulation and mismanagement. To fix this, mint operation can be federated, with all operations performed by a quorum of nodes controlled by different parties.
Despite these interesting properties, Chaumian mints have largely been forgotten. This post gives an excellent overview of the phenomenon. I believe that Chaumian mints are currently severely underrated in general, and in particular deserve consideration as a potential avenue for improving custodial Lightning Network wallets.
Compared to a naïve hosted Lightning Network wallet, a service operated as a federated Chaumian mint offers excellent privacy, usability, security, and scaling.
Privacy: Privacy leaks from a Lightning mint come in two forms, internal and external, when a mint operator or an outside actor, respectively, observes sensitive information.
Blind signatures protect against internal privacy leaks, making them a strict improvement in that respect over custodial Lightning wallets.
When compared to a single-user Lightning network wallet, Lightning mints also protect against external privacy leaks. If the activity of a single-user Lightning Network wallet can be observed, which is possible but non-trivial, all such activity is preemptively that of the owner of the wallet. However, similar to a standard custodial Lightning Network wallet, any observable Lightning Network activity of a Lightning mint is the aggregate activity of its users, who thus form an anonymity set. If the number of users, and thus the anonymity set size, is large, external privacy leaks are also prevented.
Usability: Compared to a self-managed Lightning Network wallet, and similar to a standard custodial Lightning Network wallet, Lightning mint wallets offer superior usability. A user need not be concerned with the details of node operation or channel management, and can deposit to and withdraw from their account with standard Lightning Network invoices.
Security: The security of a Lightning mint is weaker than that of a self-hosted wallet. A quorum of federation members can abscond with funds. However, compared to a standard custodial Lightning Network wallet, security is greatly improved. Additionally, federation members might be located in different jurisdictions, making the mint robust to regulatory interference. Furthermore, members might be entities with online reputations, such as anonymous Bitcoin Twitter users with an established history of productive shitposting, providing further assurances against mismanagement and fraud.
Scaling: Mint operations are extremely lightweight, similar to Lightning Network transactions, so scaling properties are similar to the Lightning Network itself. Additionally, users need not manage their own channels, so a well-capitalized federation can open channels efficiently, lowering the per-transaction channel management overhead.
Interoperability and market dynamics: Additionally, my hope is that such systems will be developed with a standardized protocol for communication between wallet interfaces and mint backends. This would allow users to use different backends with the same local wallet interface, encouraging competition in the market.
For more discussion of Chaumian mints and their applicability to Bitcoin, see fedimint.org. Elsirion, the author, is also at work on MiniMint, a federated Chaumian mint with Bitcoin and eventually Lightning Network support.
To close with a bit of speculation, I believe that Chaumian mints were never of particular interest or importance because they were limited to interoperating with the fiat currencies of the time. With the ascendance of Bitcoin, mints now have access to a powerful, decentralized, and uncensorable currency , made economical and fast by the Lightning Network.
I believe this layering of Chaumian mints on top of Bitcoin and the Lightning Network will, in the fullness of time, be demonstrated to be enormously powerful, and make Chaumian mints themselves worthy of renewed study and consideration.